<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
--- 1934
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Fiscal Year Ended May 31, 1997 Commission File No. 0-5813
Herman Miller, Inc.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S><C>
Michigan 38-0837640
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
855 East Main Avenue
PO Box 302
Zeeland, Michigan 49464-0302
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (616) 654 3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.20 Par Value
---------------------------------
(Title of Class)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X .
-----
The aggregate market value of the voting stock held by "nonaffiliates" of the
registrant (for this purpose only, the affiliates of the registrant have been
assumed to be the executive officers and directors of the registrant and their
associates) as of August 4, 1997, was approximately $2,271,116,618 (based on
$49.25 per share which was the closing sale price in the over-the-counter
market as reported by NASDAQ).
The number of shares outstanding of the registrant's common stock, as of August
4, 1997:
Common stock, $.20 par value--46,114,043 shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 1, 1997, are incorporated into Part III of
this report.
<PAGE> 2
PART 1
Item 1 BUSINESS
(a) General Development of Business
The company is engaged primarily in the design, manufacture, and sale of
furniture systems and furniture, and related products and services, for
offices, and, to a lesser extent, for health-care facilities and other uses.
Through research, the company seeks to define and clarify customer needs and
problems existing in its markets and to design, through innovation where
feasible, products and systems as solutions to such problems.
Herman Miller, Inc., was incorporated in Michigan in 1905. One of the company's
major plants and its corporate offices are located at 855 East Main Avenue, PO
Box 302, Zeeland, Michigan, 49464-0302, and its telephone number is (616) 654
3000. Unless otherwise noted or indicated by the context, the term "company"
includes Herman Miller, Inc., its predecessors and subsidiaries.
(b) Financial Information About Industry Segments
A dominant portion (more than 90 percent) of the company's operations is in a
single industry segment-the design, manufacture, and sale of office furniture
systems and furniture, and related products and services. Accordingly, no
separate industry segment information is presented.
(c) Narrative Description of Business
The company's principal business consists of the research, design, development,
manufacture, and sale of furniture systems and furniture, and related products
and services. Most of these systems and products are coordinated in design so
that they may be used both together and interchangeably. The company's products
and services are purchased primarily for offices, and, to a lesser extent,
health-care facilities and other uses.
The company is a leader in design and development of furniture and furniture
systems. This leadership is exemplified by the innovative concepts introduced
by the company in its modular systems known as Action Office, Q System, and
Ethospace. Action Office, the company's series of three freestanding office
partition and furnishing systems, is believed to be the first such system to be
introduced and nationally marketed and as such popularized the "open plan"
approach to office space utilization. Ethospace interiors is a system of
movable full- and partial-height walls, with panels and individual wall
segments that interchangeably attach to wall framework. It includes
wall-attached work surfaces and storage/display units, electrical distribution,
lighting, organizing tools, and freestanding components. The company also
offers a broad array of seating (including Aeron, Equa and Ergon office
chairs), storage (including Meridian filing products), and freestanding
furniture products.
The company's products are marketed worldwide by its own sales staff. These
sales persons work with dealers, the design and architectural community, as
well as directly with end users. Seeking and strengthening the various
distribution channels within the marketplace is a major focus of the company.
Independent dealerships concentrate on the sale of Herman Miller products and a
few complementary product lines of other manufacturers. Approximately 74.4
percent of the company's sales (in the fiscal year ended May 31, 1997) were
made to or through independent dealers. The remaining sales (25.6 percent) were
made directly to end-users, including federal, state, and local governments,
and several major corporations, by either the company's own sales staff or its
owned dealer network, Coro.
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The company's furniture systems, seating, storage, and freestanding furniture
products, and related services are used in (1) office/institution environments
including offices and related conference, lobby and lounge areas, and general
public areas including transportation terminals; (2) health/science
environments including hospitals and other health care facilities; (3)
clinical, industrial, and educational laboratories; and (4) other environments.
New Product and Industry Segment Information
During the past 12 months, the company has not made any public announcement of,
or otherwise made public information about, a new product or a new industry
segment which would require the investment of a material amount of the
company's assets or which would otherwise result in a material cost.
Raw Materials
The company's manufacturing materials are available from a significant number
of sources within the United States, Canada, Europe, and the Far East. To date,
the company has not experienced any difficulties in obtaining its raw
materials. The raw materials used are not unique to the industry nor are they
rare.
Patents, Trademarks, Licenses, Etc.
The company has approximately 109 active United States utility patents on
various components used in its products and approximately 72 active United
States design patents. Many of the inventions covered by the United States
patents also have been patented in a number of foreign countries. Various
trademarks, including the name and style "Herman Miller," and the (TM)
trademark, are registered in the United States and many foreign countries. The
company does not believe that any material part of its business is dependent on
the continued availability of any one or all of its patents or trademarks, or
that its business would be materially adversely affected by the loss of any
thereof except the "Herman Miller," "Action Office," "Aeron,"
"Ambi," "Ergon," "Equa," "Ethospace," (and (TM)) trademarks.
Seasonal Nature of Business
The company does not consider its business to be seasonal in nature.
Working Capital Practices
The company does not believe that it or the industry in general has any special
practices or special conditions affecting working capital items that are
significant for an understanding of the company's business.
Customer Base
No single dealer, excluding the company's owned dealer network, Coro, accounted
for more than 3.0 percent of the company's net sales in the fiscal year ended
May 31, 1997. For fiscal 1997, the largest single end-user customer accounted
for approximately 7.4 percent of the company's net sales with the 10 largest of
such customers accounting for approximately 13.0 percent of the company's
sales. The company does not believe that its business is dependent on any
single or small number of customers, the loss of which would have a materially
adverse effect upon the company.
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Backlog of Orders
As of May 31, 1997, the company's backlog of unfilled orders was $203.1
million. At June 1, 1996, the company's backlog totaled $156.6 million. It is
expected that substantially all the orders forming the backlog at May 31, 1997,
will be filled during the current fiscal year. Many orders received by the
company are filled from existing raw material inventories and are reflected in
the backlog for only a short period while other orders specify delayed
shipments and are carried in the backlog for up to one year. Accordingly, the
amount of the backlog at any particular time is not necessarily indicative of
the level of net sales for a particular succeeding period.
Government Contracts
Other than standard price reduction and other provisions contained in contracts
with the United States government, the company does not believe that any
significant portion of its business is subject to material renegotiation of
profits or termination of contracts or subcontracts at the election of various
government entities.
Competition
All aspects of the company's business are highly competitive. The principal
methods of competition utilized by the company include design, product and
service quality, speed of delivery, and product pricing. The company believes
that it is the largest publicly held office furniture manufacturer in the
United States. However, in several of the markets served by the company, it
competes with over 400 smaller companies and with several manufacturers that
have significantly greater resources and sales. Price competition remained
relatively stable in 1995 through 1997.
Research, Design and Development
One of the competitive strengths of the company is its research, design and
development programs. Accordingly, the company believes that its research and
design activities are of significant importance. Through research, the company
seeks to define and clarify customer needs and problems and to design, through
innovation where feasible, products and services as solutions to these customer
needs and problems. The company utilizes both internal and independent research
and design resources. Exclusive of royalty payments, approximately $25.7
million, $24.5 million, and $31.3 million was spent by the company on design
and research activities in 1997, 1996, and 1995, respectively. Royalties are
paid to designers of the company's products as the products are sold and are
not included in research and development costs as they are considered to be a
variable cost of the product.
Environmental Matters
The company does not believe, based on existing facts known to management, that
existing environmental laws and regulations have had or will have any material
effects upon the capital expenditures, earnings, or competitive position of the
company. Further, the company continues to rigorously reduce, recycle, and
reuse the solid wastes generated by its manufacturing processes. Its
accomplishments and these efforts have been widely recognized.
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Human Resources
The company considers another of its major competitive strengths to be its
human resources. The company stresses individual employee participation and
incentives, and believes that this emphasis has helped to attract and retain a
capable work force. The company has a human resources group to provide employee
recruitment, education and development, and compensation planning and
counseling. There have been no work stoppages or labor disputes in the
company's history, and its relations with its employees are considered good.
Approximately 545 of the company's employees are represented by collective
bargaining agents, most of whom are employees of its Integrated Metal
Technology, Inc., and Herman Miller, Limited (U.K.) subsidiaries. As such,
these subsidiaries are parties to collective bargaining agreements with these
employees.
As of May 31, 1997, the company employed 7,108 full-time and 317 part-time
employees, representing a 2.1 percent increase in full-time employees and a
35.4 percent decrease in part-time employees compared with June 1, 1996. In
addition to its employee work force, the company uses purchased labor to meet
uneven demand in its manufacturing operations.
(d) Information About International Operations
The company's sales in international markets primarily are made to
office/institution customers. Foreign sales mostly consist of office furniture
products such as Ethospace and Action Office systems, seating, and storage
products. The company segments its internal operations into the following major
markets: Canada, Europe, Latin America, and the Asia/Pacific region. In certain
other foreign markets, the company's products are offered through licensing of
foreign manufacturers on a royalty basis.
At the present time, the company's products sold in international markets are
manufactured by wholly owned subsidiaries in the United States, United Kingdom,
Mexico, and Italy. Sales are made through wholly owned subsidiaries in
Australia, Canada, France, Germany (prior to sale), Italy, Japan, Mexico, the
Netherlands, and the United Kingdom. The company's products are offered in the
Middle East through dealers.
In several other countries, the company licenses manufacturing and selling
rights. Historically, these licensing arrangements have not required a
significant investment of funds or personnel by the company, and, in the
aggregate, have not produced material net income for the company.
Additional information with respect to operations by geographic area appears in
the note "Segment Information" of the Notes to Consolidated Financial
Statements set forth on page 42. Fluctuating exchange rates and factors beyond
the control of the company, such as tariff and foreign economic policies, may
affect future results of international operations.
Item 2 PROPERTIES
The company owns or leases facilities which are located throughout the United
States and several foreign countries, including Australia, Canada, France,
Germany, Italy, Japan, Mexico, and the United Kingdom. The location, square
footage, and use of the most significant facilities at May 31, 1997, were as
follows:
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<TABLE>
<Caption
Location
Square
Owned Locations Footage Use
------------------------- ------- ------------------------------------------
<S> <C> <C>
Zeeland, Michigan 749,000 Manufacturing, Warehouse, and Office
Spring Lake, Michigan 777,700 Manufacturing, Warehouse, and Office
Holland, Michigan 355,000 Manufacturing, Distribution, and Warehouse
Rocklin, California 343,600 Manufacturing and Warehouse
Roswell, Georgia 220,000 Manufacturing and Warehouse
Holland, Michigan 216,700 Design Center
Holland, Michigan 200,000 Manufacturing and Warehouse
Grandville, Michigan 214,800 Manufacturing and Warehouse
Holland, Michigan 233,500 Manufacturing, Warehouse, and Office
Leased Locations
-------------------------
Zeeland, Michigan 393,300 Manufacturing, Warehouse, and Office
Chippenham, England, U.K. 102,100 Manufacturing and Warehouse
Stone Mountain, Georgia 84,500 Manufacturing and Warehouse
Mexico City, Mexico 59,400 Manufacturing, Warehouse, and Office
</TABLE>
The company also maintains showrooms or sales offices near most major
metropolitan areas throughout North America, Europe, the Middle East,
Asia/Pacific, and South America. The company considers its existing facilities
to be in excellent condition, efficiently utilized, well suited, and adequate
for its design, production, distribution, and selling requirements.
Item 3 PENDING LEGAL PROCEEDINGS
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. As a result of its audits, the GSA has asserted a refund
claim under the 1982 contract for approximately $2.7 million and has other
contracts under audit review. Management has been notified that the GSA has
referred the 1988 contract to the Justice Department for consideration of a
potential civil False Claims Act case. Management disputes the audit result for
the 1982 contract and does not expect resolution of that matter to have a
material adverse effect on the company's consolidated financial statements.
Management does not have information that would indicate a substantive basis
for a civil False Claims Act case under the 1988 contract.
The company is also involved in legal proceedings and litigation in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
company's consolidated financial statements.
Item 4 SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended May 31, 1997.
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ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to Executive Officers of the company is as
follows:
<TABLE>
<CAPTION>
Year Elected an Position with
Name Age Executive Officer the Company
<S> <C> <C> <C>
James E. Christenson 50 1989 Executive Vice President, Legal Services
Andrew C. McGregor 47 1988 Executive Vice President, President, Herman Miller Choices
Gary S. Miller 47 1984 Senior Vice President, Product Services
David E. Nelson 67 1996 Chairman of the Board
Christopher A. Norman 49 1996 Executive Vice President, President, Miller SQA, Inc.
Michael A. Volkema 41 1995 President and Chief Executive Officer
Brian C. Walker 35 1996 Executive Vice President, Financial Services, Chief Financial Officer, and Treasurer
</TABLE>
Except as discussed in this paragraph, each of the named officers has served
the company in an executive capacity for more than five years. From February
1995 to May 1995, Mr. Volkema was president and chief executive officer of
Coro, Inc., and prior to May 1993 to September 1994, was president and chairman
of the board of Meridian, Inc. Mr. Nelson was vice president, customer support,
at Asea Brown Boveri. Mr. Norman has served as the president of Miller SQA for
the past five years. Mr. Walker was the vice president of finance for Herman
Miller, Inc., from May 1995 to March 1996, vice president of finance and
management information systems of Milcare, Inc., from July 1994 to May 1995,
and vice president of finance for Herman Miller Europe from December 1991 to
July 1994.
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<PAGE> 8
PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
SHARE PRICE, EARNINGS, AND DIVIDENDS SUMMARY
Herman Miller, Inc., common stock is quoted in the NASDAQ-National Market
System (NASDAQ-NMS Symbol: MLHR). As of August 4, 1997, there were
approximately 17,000 shareholders of record of the company's common stock.
<TABLE>
<CAPTION>
Market Market Market Per Per
Price Price Price Share Share
Per Share and Unaudited High Low Close Earnings Dividends
<S> <C> <C> <C> <C> <C>
YEAR ENDED MAY 31, 1997
First quarter 19.125 14.938 18.763 .32 .065
Second quarter 23.750 18.500 23.500 .37 .065
Third quarter 34.000 22.531 32.875 .28 .065
Fourth quarter 37.313 28.875 35.750 .58 .073
Year 37.313 14.938 35.750 1.55 .268
YEAR ENDED JUNE 1, 1996
First quarter 13.250 10.750 13.125 .24 .065
Second quarter 16.000 12.750 15.875 .10 .065
Third quarter 17.063 13.813 16.094 .23 .065
Fourth quarter 16.125 13.766 15.438 .34 .065
Year 17.063 10.750 15.438 .91 .260
</TABLE>
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<PAGE> 9
Item 6 SELECTED FINANCIAL DATA
REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
(In Thousands Except Per Share Data) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales $1,495,885 $1,283,931 $1,083,050 $953,200 $855,673
Gross Margin 533,924 434,946 378,269 337,138 298,501
Selling, General, and Administrative 359,601 316,024 303,621 245,189 230,219
Design and Research Expense 29,140 27,472 33,682 30,151 24,513
Operating Income 130,683 74,935 9,066 61,798 43,769
Income (Loss) Before Income Taxes 125,883 70,096 4,039 63,473 42,354
Net Income (Loss) 74,398 45,946 4,339 40,373 22,054
Cash Flow from Operating Activities 218,170 124,458 29,861 69,764 82,588
Depreciation and Amortization 47,985 45,009 39,732 33,207 31,600
Capital Expenditures 54,470 54,429 63,359 40,347 43,387
Common Stock Repurchased plus
Cash Dividends Paid 110,425 38,116 13,600 38,461 21,157
KEY RATIOS
Sales Growth 16.5 18.5 13.6 11.4 6.3
Gross Margin (1) 35.7 33.9 34.9 35.4 34.9
Selling, General, and Administrative (1) 24.0 24.6 28.0 25.7 26.9
Design & Research Expense (1) 1.9 2.1 3.1 3.2 2.9
Operating Income (1) 8.7 5.8 0.8 6.5 5.1
Net Income Growth 61.9 958.9 (89.3) 83.1 255.9
After-Tax Return on Net Sales 5.0 3.6 0.4 4.2 2.6
After-Tax Return on Average
Assets 10.3 6.8 0.7 7.9 4.6
After-Tax Return on
Average Equity 25.0 15.4 1.5 13.9 7.8
COMMON SHARE DATA
Earnings per Share $1.55 $.91 $.09 $.80 $.44
Cash Dividends Declared per Share .27 .26 .26 .26 .26
Book Value per Share at Year End 5.97 6.13 5.79 5.87 5.68
Market Price per Share at Year End 35.75 15.44 10.84 12.44 12.81
Average Shares and Equivalents Outstanding 48,062 50,258 49,584 50,510 49,986
FINANCIAL CONDITION
Total Assets $755,587 $694,911 $659,012 $533,746 $484,342
Working Capital 100,253 115,878 39,575 50,943 62,711
Current Ratio 1.35 1.53 1.15 1.29 1.43
Interest-Bearing Debt 127,369 131,710 144,188 70,017 39,877
Shareholders' Equity 287,062 308,145 286,915 296,325 283,942
Total Capital 414,431 439,855 431,103 366,342 323,819
Interest-Bearing Debt
to Total Capital 30.7 29.9 33.4 19.1 12.3
</TABLE>
(1) Shown as a percent of net sales.
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<PAGE> 10
(Graph)
NET SALES
IN MILLIONS OF DOLLARS
<TABLE>
<S> <C>
1993 856
1994 953
1995 1,084
1996 1,284
1997 1,496
</TABLE>
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<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
The issues discussed in management's discussion and analysis should be read in
conjunction with the company's consolidated financial statements and the
related footnotes.
FORWARD-LOOKING STATEMENTS
This discussion and analysis of financial condition and results of operations,
as well as other sections of our Annual Report, contain 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 about the
company itself. Words such as "anticipates," "believes," "confident,"
"estimates," "expects," "forecasts," "likely," "plan," "projects," "should,"
variations of such words, and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties, and assumptions that are
difficult to predict with regard to timing, extent, likelihood, and degree of
occurrence. Therefore, actual results and outcomes may materially differ from
what may be expressed or forecasted in such forward-looking statements.
Furthermore, Herman Miller undertakes no obligation to update, amend, or
clarify forward-looking statements, whether as a result of new information,
future events, or otherwise.
OVERVIEW
We had another very good year in 1997. This year followed a very strong
recovery in 1996, after a year of disappointing results, leadership changes,
and restructuring in 1995. We established new performance records in each of
the past eight quarters. In 1997, we set new records for net sales, net income,
earnings per share, and cash flow.
The exceptional operating performance in 1997 enabled us to return $110.4
million to our shareholders in the form of cash dividends and share
repurchases. In March of this year, we announced a 2-for-1 stock split and
increased our quarterly dividend 11.5 percent to $.0725 per share. We created
value for our shareholders and employee-owners through share-price appreciation
and dividends. During 1997, a share of Herman Miller stock appreciated 131.6
percent (based on share price) for a total return of 135.0 percent (including
dividends) versus 29.5 percent for the S&P 500 as a whole.
(graph)
<TABLE>
<CAPTION>
TOTAL RETURN TO SHAREHOLDERS
AS A PERCENT
S&P 500 Herman Miller
<S> <C> <C>
1993 11.56% 37.61%
1994 4.25% -0.90%
1995 20.16% -9.72%
1996 28.55% 43.11%
1997 29.54% 134.95%
</TABLE>
Our fiscal 1997 financial results reflect the following:
- - Accelerated demand for office furniture in the United States
- - Increased domestic market share
- - Turnaround efforts in our international business
- - Improved manufacturing productivity
- - Stringent cost containment
- - Improved management of working capital
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<PAGE> 12
REVIEW OF OPERATIONS
NET SALES AND EARNINGS PER SHARE
One of management's key goals is to increase net sales 15 percent per annum. We
exceeded this goal in both 1997 and 1996. Net sales increased 16.5 percent in
1997 to a record $1.49 billion. Net sales increased 18.5 percent and 13.6
percent in the two previous years.
Management also set a net income growth goal of 15 percent per annum, excluding
unusual charges. Net income grew 50.0 percent in 1997 to a record $84.8
million, or $1.77 per share, excluding the loss on the sale of the German
manufacturing operations. Net income grew 74.2 percent in 1996 to $56.5
million, or $1.13 per share, excluding the patent litigation settlement,
following a decline of 19.7 percent in 1995, excluding the restructuring
charges.
DOMESTIC OPERATIONS
The United States office furniture industry is enjoying increased sales and
strong demand. The Business and Institutional Furniture Manufacturers
Association ("BIFMA") reported that United States sales increased approximately
10.7 percent in the 12 months ended May 31, 1997, after increasing 4.8 percent
in 1996 and 9.2 percent in 1995. We believe the accelerated demand in recent
years is due to secular changes affecting work environments. In particular, new
and emerging work styles and the rapid deployment of technology are causing
companies to rethink completely their approach to work environments. In
addition, the fast-growing high-tech and service sectors of the economy have a
high concentration of knowledge workers. These companies and their employees
have a higher demand for office furniture that enhances productivity and
provides a safe and healthy work environment.
(graph)
DOMESTIC SALES GROWTH
AS A PERCENT
<TABLE>
<S> <C> <C>
BIFMA Herman Miller
1993 7.7% 7.9%
1994 6.9% 10.6%
1995 9.2% 10.1%
1996 4.8% 16.7%
1997 10.7% 19.2%
</TABLE>
During each of the past three years, our domestic sales have increased at a
faster rate than the overall industry. As shown in the graph, our domestic
sales grew 19.2 percent, 16.7 percent, and 10.1 percent in 1997, 1996, and
1995, respectively. The increased market share is attributable to:
- - An industry trend of consolidation
- - Our domestic business strategy announced in fiscal 1996
- - A superior product offering in the systems, seating, and filing and
storage segments
Over the past 10 years, the combined market share of the five largest
manufacturers increased from 41 to 56 percent. This trend is due to both
acquisitions and internal growth. Over this same period, our market share
increased from seven to 11 percent. This trend reflects our customers' desires
to do business with companies that can supply a broad range of value-creating
products and services.
During 1996, we began to implement a new management and business structure to
enable us to focus on two broad customer categories: those with complex needs
and those with convenience
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<PAGE> 13
needs. A key component of this strategy is the development of a seamless
distribution network and service business. Over the past three years, our
newest venture, Coro, Inc., has completed the acquisition of several privately
owned dealers. These dealers, along with privately owned dealers certified by
Coro, will be the foundation of a network of local service organizations.
Excluding these acquisitions, which were immaterial on an individual basis, our
domestic sales increase would have been 16.4 percent in 1997 and 13.7 percent
in 1996.
Our Miller SQA (SQA stands for Simple, Quick, and Affordable) business unit is
focused on our effort to serve customers who seek speed and convenience. We
believe the new products developed for this segment, including Q System and
Limerick seating, coupled with our electronic selling platform, are enabling us
to reach customers we have not previously served.
The accelerated demand for office furniture in the United States reflects the
need to efficiently integrate technology into the workspace. Today, this
integration is most effectively achieved through the use of office furniture
systems. Action Office, our series of three freestanding office partition and
furnishing systems, is believed to be the first such system introduced and
marketed nationally. We believe our Ethospace system, and recently introduced
Q System product lines provide superior technology integration capabilities. In
1997, sales of these product lines grew at a faster rate than our total net
sales.
During fiscal 1995 and 1994, we invested a significant amount of research and
design resources in the complete renewal of our seating lines. This renewal
included updating our Equa and Ergon product lines and adding two new
award-winning products, Aeron and Ambi seating. We believe based on market
demand that these investments have resulted in the strongest work-chair product
offering in the industry.
We had significant unit volume increases in each of our core product segments
in 1997. Excluding the impact of acquisitions, our domestic sales growth was
primarily due to unit volume increases. We did not increase list prices in
1997, and discounts from list were comparable to the prior year. Discounts
increased from 1995 to 1996, which resulted in slightly lower net prices to
customers. Changes in price had an immaterial impact on 1995.
INTERNATIONAL OPERATIONS AND EXPORTS FROM THE UNITED STATES
One of the key objectives for 1997 was to establish a strategy and action plan
for our international business that would improve profitability and provide for
an appropriate return on our investment. While sales growth was modest in 1997,
our turnaround efforts in Mexico, Canada, and Germany improved our operating
results.
In 1997, sales from international operations and exports from the United
States increased 4.6 percent. The year-over-year growth in sales from
international operations and exports from the United States was primarily due
to strong growth in the United Kingdom and Canada, offset by the decision to
restructure our German operations in the third quarter.
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<PAGE> 14
(graph)
INTERNATIONAL NET SALES
IN MILLIONS OF DOLLARS
<TABLE>
<S> <C>
1993 122
1994 141
1995 189
1996 240
1997 251
</TABLE>
The growth in 1996 and 1995 reflected unit volume growth and the impact of
acquisitions. Excluding the impact of acquisitions, 1996 and 1995 net sales
increased 9.2 percent and 15.3 percent, respectively.
Excluding the loss on the disposal of our German manufacturing operations, our
international operations earned $1.3 million in comparison to losses of $8.0
million in 1996 and $2.9 million in 1995. The most significant improvements
were in our Mexican and Canadian operations.
The improvement in our Mexican operation was primarily due to improved gross
margins and operating expense reductions implemented in the fourth quarter of
1996 and first quarter of 1997. Gross margins, as a percent of sales, improved
from 17.9 percent in 1996 to 35.1 percent in 1997. The improvement was
principally due to increased control over project pricing. The increased
profitability in our Canadian operation was due to a 29.0 percent increase in
sales and the completion of our efforts to integrate an acquisition concluded
in fiscal 1996.
During the second quarter of fiscal 1997, declining sales and continuing losses
at our German subsidiary led us, in accordance with our accounting policies, to
assess the realizability of the subsidiary's long-lived assets. At that time,
estimates of expected future cash flows under various options to improve our
operating results in Germany were evaluated to determine if any potential
impairment existed. Although none of the options was developed to the extent
required to enable us to reach a decision and plan for implementation, based on
the results of our various evaluations of potential impairment, we determined
at the enterprise level, the goodwill and intangibles associated with the
acquisition were no longer recoverable. As a result, a pretax charge of $5.5
million ($4.5 million, or $.10 per share after tax) was recorded for the
write-offs of the goodwill and brand-name assets of the subsidiary.
During the third quarter of fiscal 1997, we authorized and committed the
company to a plan to restructure the manufacturing component of our German
operations. The plan involved closing the manufacturing facility in Germany
which was expected to be completed in fiscal 1998. Based on the most current
information available at that time, we believed that closing the facility was
the most viable option. As a result, we recorded a pretax restructuring charge
of $13.7 million ($5.4 million, or $.11 per share after tax).
During the fourth quarter of fiscal 1997, we were able to sell the German
manufacturing operations. The sale had the effect of reducing both the pretax
restructuring costs recorded in the third quarter by $4.7 million and the
anticipated tax benefit by $5.2 million. In the end, the sale reduced our
exposure to future employment liabilities and maximized the employees' chances
for continued employment.
-14-
<PAGE> 15
In summary, after adjusting for the effects of the sale, the divestiture of the
company's investments in its German manufacturing operations resulted in a
pretax loss of $14.5 million ($10.4 million, or $.22 per share after tax) in
1997.
Our Italian operations continue to be unprofitable. During the fourth quarter,
external consultants were engaged to perform a stringent review of the
operational costs and processes of the Italian operations. At this time,
management does not believe the outcome of this review will result in
recommendations that would have a material negative effect on the financial
statements.
The 1996 loss included pretax charges for the discontinuation of two product
lines in Europe ($1.6 million) and provisions for unrealizable barter
receivables in Mexico ($2.5 million). In addition, a charge of approximately
$1.0 million was recorded to reserve for deferred tax assets associated with
our Mexican operations.
GROSS MARGIN
In 1997, we achieved four consecutive quarters of improved gross margins,
after declines in each of the two previous years. In 1997, gross margins
improved as we continued to benefit from the manufacturing and logistical
changes implemented during 1995. These changes resulted in increased
throughput and decreased fixed and semifixed manufacturing costs. These
improvements were coupled with a favorable product mix, value enhancement
engineering initiatives, and, to a lesser extent, the previously discussed
improvement in Mexico.
(graph)
GROSS MARGIN
AS A PERCENT
<TABLE>
<S> <C>
1993 34.9%
1994 35.4%
1995 34.9%
1996 33.9%
1997 35.7%
</TABLE>
Gross margins in 1996 were comparable to the second half of 1995. Cost benefits
from the manufacturing and logistics changes implemented in 1995 were offset by
additional price discounts to customers. The decline in 1995 was primarily
attributable to a decline in the third quarter as a result of a 3.5 percent
increase in raw material prices. Raw material prices were stable in both 1996
and 1997.
In 1995, the company implemented two restructuring initiatives and recorded
$31.9 million in pretax restructuring charges. The first initiative
reconfigured the company's manufacturing and logistical operations. The
reconfiguration enabled the company to develop the capability to process and
direct-ship customer orders in their entirety rather than in stages, which
requires additional warehousing and transportation between stages. The
manufacturing changes also included transferring production of the company's
wood casegoods product line to Geiger International and closing our
manufacturing facility in North Carolina.
-15-
<PAGE> 16
The manufacturing improvements were the primary factor enabling us to reduce
the days sales outstanding in the sum of accounts receivable and inventory to
63.3 days, compared with 75.6 days and 91.2 days at the end of 1996 and 1995,
respectively. The manufacturing improvements have also enabled us to reduce the
time required between the receipt of a customer's order and the shipment of the
product. This enables us to respond more quickly to changes in demand.
OPERATING EXPENSES
At the end of 1995, we set a goal of reducing our operating expenses as a
percent of net sales to 25 percent by the end of 1998. We define operating
expenses as selling, general, administrative, and research and design
expenses. In 1997, the total of these expense categories was 26.0 percent of
sales compared with 26.7 percent in 1996 and 30.0 percent in 1995. Please
note that the 1995 percentage excludes the $12.0 million pretax charge
recorded for patent litigation costs.
(graph)
OPERATING EXPENSES
AS A PERCENT OF NET SALES
<TABLE>
<S> <C>
1993 29.8%
1994 28.9%
1995 29.9%
1996 26.7%
1997 26.0%
</TABLE>
The improvement in 1997 was the result of stringent cost containment coupled
with the continuous redeployment of costs and people to our strategic
priorities.
The reduction in 1996 was due to restructuring initiatives implemented in 1995.
The restructuring included reductions in administrative and staff employment,
elimination of nonessential consulting contracts and other programs, and
discontinuation of a product development program at our healthcare subsidiary,
Milcare.
We are pleased with our improved operating expense ratio and are confident that
we can reach our goal of 25.0 percent by the end of 1998. We plan to obtain
future reductions in operating expenses through continued cost containment,
changes to systemic business processes, and improvements in international
operations.
Selling, general, and administrative expenses including design and research
expenses, increased $45.2 million from $343.5 million in 1996, to $388.7
million in 1997. The increase is primarily attributable to acquisitions and new
ventures ($10.7 million), a 4.0 percent year-over-year increase in
compensation and benefits, and increases in compensation costs that vary with
profitability and sales.
Research and development costs, excluding royalty payments, were $25.7 million
in 1997, compared with $24.5 million in 1996 and $31.3 million in 1995. Royalty
payments made to designers of the company's product as the products are sold
are not included in research and development costs as they are considered to be
a variable cost of the product. As a percentage of net sales, research and
development costs were 1.7 percent in 1997, 1.9 percent in 1996, and 2.9
-16-
<PAGE> 17
percent in 1995. New product design and development has been, and continues to
be, a key business strategy. The small decrease in research and development, as
percent of sales, in 1997 reflects continued efforts to improve the efficiency
of our processes and the timing of major projects. The decrease from 1995 to
1996 reflects a discontinued product development program at Milcare and the
completion of several programs to renew our seating offering. In 1996, we
introduced three new award-winning product lines. In 1997, we introduced our
award-winning Systems Bridge product line. The Systems Bridge enhances a
customer's current furniture system's (both ours and the competition's) ability
to integrate power and technology into the work space. We expect to introduce
several new products over the next 18 to 24 months.
PATENT LITIGATION SETTLEMENT AND OTHER CONTINGENCIES
In 1992, Haworth, Inc. ("Haworth") filed a lawsuit against the company,
alleging that the electrical systems used in creation of the company's products
infringed one or more of Haworth's patents. In 1996, the company and Haworth
agreed to terms of a settlement. We continue to believe, based upon written
opinion of counsel, that our products did not infringe Haworth's patents and we
would, more likely than not, have prevailed on the merits. However, based on
the mounting legal costs, distraction of management focus, and the uncertainty
present in any litigation, we concluded settlement was in the best interest of
our shareholders. The settlement included a one time cash payment of $44.0
million in exchange for a complete release. The companies also exchanged
limited covenants not to sue with respect to certain existing and potential
patent designs. We simultaneously reached a settlement with one of our
suppliers, who agreed to pay the company $11.0 million and, over the next seven
years, to rebate a percentage of its sales to Herman Miller that are in excess
of current levels. These rebates are recorded when earned. Accordingly, we
recorded a net litigation settlement expense of $16.5 million after applying
previously recorded reserves and the settlement with the supplier.
The company for a number of years has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. As a result of its audits, the GSA has asserted a refund
claim under the 1982 contract for approximately $2.7 million and has other
contracts under audit review. Management has been notified that the GSA has
referred the 1988 contract to the Justice Department for consideration of a
potential civil False Claims Act case. Management disputes the audit result for
the 1982 contract and does not expect resolution of that matter to have a
material adverse effect on the company's consolidated financial statements.
Management does not have information that would indicate a substantive basis
for a civil False Claims Act case under the 1988 contract.
We are not aware of any other litigation or threatened litigation that would
have a material impact on the company's financial statements.
INCOME TAXES
The effective tax rate was 40.9 percent in 1997, compared to 34.5 percent in
1996 and a benefit of 7.4 percent in 1995. The higher tax rate reflects the tax
law change effective in 1997 that reduced the benefit of the Corporate Owned
Life Insurance Program. During the third and fourth quarters of 1997,
provisions were recorded for the potential cost of unwinding this program. The
tax rate was also negatively impacted by the loss on the sale of the German
manufacturing operations, which provided a tax benefit that was lower than our
statutory rate. The 1996 effective tax rate reflects the improved operating
performance in the company's domestic operations. The 1996 effective tax rate
was benefited by the completion of a sale and leaseback of the company's
Roswell, Georgia, facility and the sale of excess land to its captive insurance
company. The completion of these transactions resulted in the recognition of
certain deferred tax assets that were reserved for in previous periods. The net
tax benefit in 1995 was due to relatively
-17-
<PAGE> 18
small pretax earnings in domestic operations as a result of the restructuring
initiatives and poor operating results. In addition, the company generated a
net tax benefit from its corporate-owned life insurance program and, to a
lesser extent, improved operating results in the United Kingdom and Japan
allowed net operating loss carryforwards to be used. Management expects its
effective tax rate for 1998 to be in the range of 37.0 to 39.0 percent.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW AND DEBT FINANCING
<TABLE>
<S> <C> <C> <C>
(Dollars In Thousands) 1997 1996 1995
Cash and cash equivalents $106,161 $57,053 $16,488
Cash from operating activities $218,170 $124,458 $29,861
Days sales in accounts receivable and
inventory 63.3 75.6 91.2
Capital expenditures $54,470 $54,429 $63,359
Interest-bearing debt to total capital 30.7% 29.9% 33.4%
</TABLE>
The improved cash flow from operations reflects our increased profitability and
a reduction in the cash used for working capital items. As previously
mentioned, the working capital improvements are a result of the manufacturing
and logistical reconfiguration implemented over the last two years and other
operational improvements.
(graph)
CASH FLOW FROM OPERATING ACTIVITIES
IN MILLIONS OF DOLLARS
<TABLE>
<S> <C>
1993 83
1994 70
1995 30
1996 124
1997 218
</TABLE>
The 1997 capital expenditures were primarily spent for a new facility at
Meridian, new product development, and machinery and equipment to improve
operational performance and expand capacity.
We expect capital expenditures, net of asset sales, to increase to $60-$70
million in 1998. The largest expenditures planned in 1998 are for new product
development and investments in information systems. We are planning for
investments in information technology that will enable us to reach our
long-term cost structure and operational performance goals and network our
service organizations and independent dealers. The cost of these investments is
estimated to be $50-$60 million, and is expected to be made over the next two
to four years. An analysis has also been performed of the work necessary to
assure that the information systems will be able to deal with the advent of the
year 2000. The cost associated with the year 2000 modification will be expensed
in the period incurred. We believe these costs will not be material to any
fiscal year.
During 1996, we began to redeploy cash invested in nonproductive or
nonessential assets. We are currently in the process of selling the facilities
and land at our Grandville, Michigan, and Roswell, Georgia, sites. The net book
value of these sites is approximately $13.5 million, and we anticipate a
selling price in excess of current net book value. The Grandville site is no
longer needed and will not be replaced. The Georgia facility will be replaced
by a new facility. The
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<PAGE> 19
facility will enable us to consolidate the operations currently performed on
our owned site with operations performed at two leased locations.
As previously discussed, in 1997, we purchased a privately owned United States
dealer as part of our service strategy. This local service organization was
acquired for approximately $9.7 million. We expect to invest between $15
million and $30 million in acquiring additional local and regional service
operations in 1998.
At the end of 1997, our cash and cash equivalents were significantly higher
than in previous periods. We intend to use the cash and cash equivalents to
repurchase shares of the company's common stock, to fund acquisitions related
to the service strategy, and to fund future capital expenditures. We believe
the cash and cash equivalents, combined with cash flow from operating
activities, will be adequate to fund operations, capital expenditures,
acquisitions, and dividends. If necessary, the company has $100 million in
available committed credit facilities and $90 million in informal credit lines.
We have established a target capital structure with a debt-to-total-capital
ratio of 30 to 35 percent. Cash in excess of requirements for capital
expenditures, acquisitions, and dividends will be used to fund the repurchase
of the company's common stock subject to market conditions.
COMMON STOCK TRANSACTIONS
<TABLE>
<S> <C> <C> <C>
(Dollars In Thousands) 1997 1996 1995
Shares acquired 4,071,081 1,720,790 68,400
Cost of shares acquired $97,962 $25,101 $732
Cost per share acquired $24.06 $14.59 $10.70
Shares issued 763,443 1,463,546 521,226
Cost per share issued $16.21 $12.95 $10.75
Cash dividends $12,593 $12,999 $12,869
Dividends per share $.27 $.26 $.26
</TABLE>
(graph)
TOTAL CASH RETURNED TO SHAREHOLDERS
IN MILLIONS OF DOLLARS
<TABLE>
<S> <C>
1993 21
1994 38
1995 14
1996 37
1997 110
</TABLE>
The Board of Directors first authorized the company to repurchase its common
stock in 1984 and has periodically renewed its authorization. Management and
the Board of Directors believe the share repurchase program is an excellent
means of returning value to our shareholders and preventing dilution from
employee ownership programs. As a result, at the May 1997 Board of Directors'
meeting, the Board authorized the company to repurchase an additional 2.0
million shares. At May 31, 1997, we had approximately 2,836,000 remaining
shares under the July 1996 and May 1997 repurchase authorizations.
On March 18, 1997, the Board of Directors approved a 2-for-1 stock split
effected in the form of a 100 percent dividend to shareholders of record on
March 31, 1997, payable on April 15, 1997. The distribution increased the
number of shares outstanding from 23,657,000 to 47,314,000. All
-19-
<PAGE> 20
share and per share data, including stock plan information, are restated to
reflect the split. The Board of Directors also approved an increase in the
cash dividend from $.065 per share to $.0725 per share for shareholders of
record on May 31, 1997.
ECONOMIC VALUE ADDED
One of our primary goals is to create economic value for shareholders and
employee-owners. To aid and support the accomplishment of that objective, we
have created and installed a performance measurement and compensation system
called "Economic Valued Added" (EVA). EVA is an internal measurement of
operating and financial performance that extensive independent market
research has shown more closely correlates with shareholder value than any
other performance measure.
(graph)
EVA
IN MILLIONS OF DOLLARS
<TABLE>
<S> <C>
1993 -28
1994 -1
1995 -13
1996 10
1997 40
</TABLE>
Simply put, EVA is what remains of profits after taxes once a charge for the
capital employed in the business is deducted. As an operating discipline, the
main advantage of EVA is that it focuses management's attention on the balance
sheet as well as on the income statement.
Herman Miller is effectively competing for scarce capital resources.
Management's task is to put this scarce resource to work and earn the best
possible return for our shareholders. This means investing in projects that
earn a return greater than the cost of sourcing the funds from our investors.
As long as we are making investments that earn a return higher than the cost of
capital, then our investors should earn a return in excess of their
expectations and our stock is likely to command a premium in the marketplace.
A critical feature of the new EVA measurement system was linking it to
incentive compensation. In 1997, the incentive compensation plans of corporate
officers, vice presidents, and directors at each of the business units were
linked to the EVA concept. Under the terms of the EVA plan, focus is shifted
from budget performance to long-term continuous improvements in shareholder
value. The EVA target is raised each year by an improvement factor, so that
increasingly higher EVA targets must be attained in order to earn the same
level of incentive pay. The improvement is set by the Board of Directors for a
period of three years. During 1997, we trained 85 percent of our
employee-owners in the EVA concept and developed decision tools and incentive
plans that are aligned with our overall EVA goals.
-20-
<PAGE> 21
CALCULATION OF ECONOMIC VALUE ADDED
<TABLE>
<S> <C> <C> <C>
(Dollars In Thousands) 1997 1996 1995
Operating income $130,683 $74,935 $9,066
Adjust for:
Divestiture/patent litigation/restructuring 14,500 16,535 43,900
Interest expense on noncapitalized leases(1) 4,509 4,316 4,215
Goodwill amortization 4,725 4,115 1,272
Other 5,093 3,071 1,121
Increase in reserves 18,649 6,548 506
Capitalized design and research 2,819 1,984 3,450
-------- -------- ---------
Adjusted operating profit 180,978 111,504 63,530
Cash taxes(2) (72,091) (34,561) (18,317)
-------- -------- ---------
Adjusted operating profit after taxes 108,887 76,943 45,213
Weighted average capital employed(3) 617,727 605,438 532,760
Weighted average cost of capital(4) 11% 11% 11%
-------- -------- ---------
Cost of capital 67,950 66,598 58,604
-------- -------- ---------
Economic value added $40,937 $10,345 ($13,391)
-------- -------- ---------
</TABLE>
(1) Imputed interest as if the total non-cancelable lease payments were
capitalized.
(2) The reported current tax provision is adjusted for the statutory tax
impact of interest income and expense.
(3) Total assets less non-interest bearing liabilities plus the LIFO,
doubtful accounts and notes receivable reserves, warranty reserve,
amortized goodwill, loss on sale of the German manufacturing operations,
patent litigation settlement costs, restructuring costs, and capitalized
design and research expense. Design and research is capitalized and
amortized over 5 years.
(4) Management's estimate of the weighted-average of the minimum equity and
debt returns required by the providers of capital.
(R)EVA is a registered trademark of Stern, Stewart & Co.
-21-
<PAGE> 22
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA
Summary of the quarterly operating results on a consolidated basis:
<TABLE>
<CAPTION>
May 31, 1997; June 1, 1996; June 3, 1995
(In Thousands Except Per Share Data) First Second Third Fourth
Unaudited Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
1997 Net sales $342,484 $377,137 $365,060 $411,204
Gross margin 118,272 134,300 131,933 149,419
Net income 15,586 17,852 13,535 27,425
Net income per share $.32 $.37 $.28 $.58
1996 Net sales $301,088 $328,393 $312,915 $341,535
Gross margin 102,879 112,653 103,415 115,999
Net income 12,014 4,955 11,900 17,077
Net income per share $.24 $.10 $.23 $.34
1995 Net sales $252,831 $279,077 $259,950 $291,192
Gross margin 91,011 99,358 88,881 99,019
Net income 7,937 1,443 4,259 (9,300)
Net income per share $.16 $.03 $.09 $ (.19)
</TABLE>
-22-
<PAGE> 23
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
May 31, 1997; June 1, 1996; June 3, 1995 1997 1996 1995
(In Thousands Except Per Share Data)
<S> <C> <C> <C>
NET SALES $1,495,885 $1,283,931 $1,083,050
COST OF SALES 961,961 848,985 704,781
---------- ---------- ----------
GROSS MARGIN 533,924 434,946 378,269
---------- ---------- ----------
Operating Expenses:
Selling, general, and administrative 359,601 316,024 303,621
Design and research 29,140 27,472 33,682
Patent litigation settlement -- 16,515 --
Loss on divestiture/restructuring charges 14,500 -- 31,900
---------- ---------- ----------
TOTAL OPERATING EXPENSES 403,241 360,011 369,203
---------- ---------- ----------
OPERATING INCOME 130,683 74,935 9,066
---------- ---------- ----------
Other Expenses:
Interest expense 8,843 7,910 6,299
Interest income (8,926) (6,804) (6,154)
Loss on foreign exchange 1,687 1,614 3,067
Other, net 3,196 2,119 1,815
---------- ---------- ----------
NET OTHER EXPENSES 4,800 4,839 5,027
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 125,883 70,096 4,039
Income Taxes 51,485 24,150 (300)
---------- ---------- ----------
NET INCOME $74,398 $45,946 $4,339
---------- ---------- ----------
NET INCOME PER SHARE $1.55 $.91 $.09
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
-23-
<PAGE> 24
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, 1997, and June 1, 1996 1997 1996
(In Thousands Except Share and Per Share Data)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $106,161 $57,053
Accounts receivable, less allowances of $12,943 in 1997 and
$10,423 in 1996 179,242 170,116
Inventories 53,877 65,730
Prepaid expenses and other 46,584 42,006
---------- --------
TOTAL CURRENT ASSETS 385,864 334,905
---------- --------
Property and Equipment:
Land and improvements 26,936 27,386
Buildings and improvements 156,002 159,353
Machinery and equipment 346,653 328,690
Construction in progress 25,991 20,679
---------- --------
555,582 536,108
Less accumulated depreciation 290,355 267,343
---------- --------
NET PROPERTY AND EQUIPMENT 265,227 268,765
---------- --------
Notes Receivable, less allowances of $8,489 in 1997 and $4,415 in 1996 47,431 39,212
Other Assets 57,065 52,029
---------- --------
TOTAL ASSETS $755,587 $694,911
---------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Unfunded checks $25,730 $2,867
Current portion of long-term debt 173 317
Notes payable 17,109 21,148
Accounts payable 76,975 59,208
Accrued liabilities 165,624 135,487
---------- --------
TOTAL CURRENT LIABILITIES 285,611 219,027
Long-Term Debt, less current portion above 110,087 110,245
Other Liabilities 72,827 57,494
---------- --------
TOTAL LIABILITIES 468,525 386,766
---------- --------
Shareholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, none issued) -- --
Common stock, $.20 par value (60,000,000 shares authorized, 46,030,822
and 49,398,460 shares issued and outstanding in 1997 and 1996) 9,207 4,934
Additional paid-in capital -- 14,468
Retained earnings 292,237 303,578
Cumulative translation adjustment (10,863) (11,633)
Key executive stock programs (3,519) (3,202)
---------- --------
TOTAL SHAREHOLDERS' EQUITY 287,062 308,145
---------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $755,587 $694,911
---------- --------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-24-
<PAGE> 25
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In Thousands Common Additional Retained Cumulative Key Exec. Total
Except Share and Stock Paid-In Earnings Translation Stock Shareholders'
Per Share Data) Capital Adjustment Programs Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE MAY 28, 1994 $4,918 $16,649 $279,161 $ (3,460) $(943) $296,325
Net income -- -- 4,339 -- -- 4,339
Cash dividends ($.26 per share) -- -- (12,869) -- -- (12,869)
Exercise of stock options 23 2,353 -- -- -- 2,376
Common stock issued pursuant
to employee stock purchase plan 26 2,592 -- -- -- 2,618
Common stock issued 4 396 -- -- -- 400
Repurchase and retirement of
68,400 shares of common stock (7) (725) -- -- -- (732)
Stock grants earned -- -- -- -- 207 207
Stock grants issued 3 299 -- -- (361) (59)
Key executive stock purchase
assistance plan -- -- -- -- (2,165) (2,165)
Current year translation adjustment -- -- -- (3,525) -- (3,525)
------- -------- -------- --------- --------- ---------
BALANCE JUNE 3, 1995 $4,967 $21,564 $270,631 $ (6,985) $ (3,262) $286,915
Net income -- -- 45,946 -- -- 45,946
Cash dividends ($.26 per share) -- -- (12,999) -- -- (12,999)
Exercise of stock options 79 9,817 -- -- 31 9,927
Common stock issued pursuant
to employee stock purchase plan 18 2,258 -- -- -- 2,276
Repurchase and retirement of
1,720,790 shares of common stock(172) (26,006) -- -- 1,077 (25,101)
Common stock issued for
acquisitions 43 6,425 -- -- -- 6,468
Stock grants earned -- -- -- -- 284 284
Stock grants forfeited (8) (639) -- -- 647 --
Stock grants issued 7 1,049 -- -- (1,467) (411)
Key executive stock purchase
assistance plan -- -- -- -- (512) (512)
Current year translation adjustment -- -- -- (4,648) -- (4,648)
------- -------- -------- --------- --------- ---------
BALANCE JUNE 1, 1996 $4,934 $14,468 $303,578 $ (11,633) $ (3,202) $308,145
Net income -- -- 74,398 -- -- 74,398
Cash dividends ($.27 per share) -- -- (12,593) -- -- (12,593)
Exercise of stock options 63 9,049 -- -- -- 9,112
Common stock issued pursuant
to employee stock purchase plan 14 2,637 -- -- -- 2,651
Repurchase and retirement of
4,071,081 shares of common stock (553) (29,374) (68,414) -- 379 (97,962)
Stock dividend 4,732 -- (4,732) -- -- --
Directors fees 1 225 -- -- -- 226
Stock grants earned -- -- -- -- 387 387
Stock grants issued 16 2,995 -- -- (1,776) 1,235
Key executive stock purchase
assistance plan -- -- -- -- 693 693
Current year translation adjustment -- -- -- 770 -- 770
------- -------- -------- --------- --------- ---------
BALANCE MAY 31, 1997 $9,207 $-- $292,237 $ (10,863) $ (3,519) $287,062
------- -------- -------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 26
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
May 31, 1997; June 1, 1996; and June 3, 1995 1997 1996 1995
(In Thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $74,398 $45,946 $4,339
--------- -------- ---------
Adjustments to reconcile net income
to net cash provided by operating activities 143,772 78,512 25,522
--------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 218,170 124,458 29,861
--------- -------- ---------
Cash Flows from Investing Activities:
Notes receivable repayments 449,405 455,973 428,375
Notes receivable issued (460,956) (454,261) (436,434)
Property and equipment additions (54,470) (54,429) (63,359)
Proceeds from sales of property and equipment 5,336 13,486 105
Net cash paid for acquisitions (9,743) (5,101) (17,721)
Other, net 1,548 (212) (8,705)
--------- -------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (68,880) (44,544) (97,739)
--------- -------- ---------
Cash Flows from Financing Activities:
Short-term debt borrowings 236,627 517,862 303,309
Short-term debt repayments (239,417) (579,613) (270,475)
Long-term debt borrowings -- 270,985 60,000
Long-term debt repayments (186) (222,772) (20,246)
Dividends paid (12,463) (13,015) (12,868)
Common stock issued 11,989 12,203 5,394
Common stock repurchased and retired (97,962) (25,101) (732)
Capital lease obligation repayments (116) (250) (263)
--------- -------- ---------
NET CASH (USED FOR) PROVIDED BY
FINANCING ACTIVITIES (101,528) (39,701) 64,119
--------- -------- ---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 1,346 352 (2,454)
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 49,108 40,565 (6,213)
--------- -------- ---------
Cash and Cash Equivalents, Beginning of Year 57,053 16,488 22,701
--------- -------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $106,161 $57,053 $16,488
--------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
-26-
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The following is a summary of significant accounting and reporting policies not
reflected elsewhere in the accompanying financial statements.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Herman Miller, Inc., and its wholly owned domestic and foreign
subsidiaries (the "company"). All significant intercompany accounts and
transactions have been eliminated.
DESCRIPTION OF BUSINESS The company is engaged in the design, manufacture, and
sale of furniture and furniture systems for offices, and, to a lesser extent,
for healthcare facilities. The company's products are sold primarily to or
through independent contract office furniture dealers. Accordingly, accounts
and notes receivable in the accompanying balance sheets principally are amounts
due from the dealers.
FISCAL YEAR The company's fiscal year ends on the Saturday closest to May 31.
The years ended May 31, 1997, and June 1, 1996, each contained 52 weeks. The
year ended June 3, 1995, contained 53 weeks.
FOREIGN CURRENCY TRANSLATION The functional currency for most foreign
subsidiaries is the local currency. The cumulative effects of translating the
balance sheet accounts from the functional currency into the U.S. dollar at
current exchange rates and revenue and expense accounts using average exchange
rates for the period are included as a separate component of shareholders'
equity. The U.S. dollar is used as the functional currency for subsidiaries in
highly inflationary foreign economies, and the financial results are translated
using a combination of current and historical exchange rates, and the resulting
translation adjustments are included along with gains or losses arising from
remeasuring all foreign currency transactions into the functional currency in
determining net income.
CASH EQUIVALENTS The company invests in certain debt and equity securities as
part of its cash management function. Due to the relative short-term maturities
and high liquidity of these securities (consisting primarily of Euro overnight
investments), they are included in the accompanying consolidated balance sheets
as cash equivalents at market value and totaled $85.1 million and $58.1 million
as of May 31, 1997, and June 1, 1996, respectively. The company's cash
equivalents are considered "available for sale." As of May 31, 1997, the market
value approximated the securities' cost. All cash and cash equivalents are
high-credit quality financial instruments, and the amount of credit exposure to
any one financial institution or instrument is limited.
PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment are stated at
cost. The cost is depreciated over the estimated useful lives of the assets
using the straight-line method. The average useful lives of the assets are 32
years for buildings and seven years for all other property and equipment.
NOTES RECEIVABLE The notes receivable are primarily from certain independent
contract office furniture dealers. The notes are collateralized by the assets
of the dealers and bear interest based on the prevailing prime rate. Interest
income relating to these notes was $4.8, $3.9, and $3.9 million in 1997, 1996,
and 1995, respectively.
-27-
<PAGE> 28
LONG-LIVED ASSETS The company assesses the recoverability of its long-lived
assets whenever events or circumstances such as current and projected future
operating losses or changes in the business climate indicate that the carrying
amount may not be recoverable. Assets are grouped and evaluated at the lowest
level for which there are independent and identifiable cash flows. The company
considers historical performance and future estimated results in its evaluation
of potential impairment and then compares the carrying amount of the asset to
the estimated future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset. If the carrying amount of the
asset exceeds the expected future cash flows, the company measures and records
an impairment loss for the excess of the carrying value of the asset over its
fair value. The estimation of fair value is made by discounting the expected
future cash flows at the rate the company uses to evaluate similar potential
investments based on the best information available at that time. If the assets
being tested for recoverability were acquired in a purchase business
combination, the goodwill that arose in that transaction is included in the
asset group's carrying values on a pro-rata basis using the relative fair
values.
In situations where goodwill and intangible balances remain after applying the
impairment measurements to business unit asset groupings under Statement of
Financial Accounting Standards (SFAS) No. 121, the company assesses the
recoverability of the remaining balances at the enterprise level under the
provisions of APB Opinion 17. Applying these provisions, when the estimated
undiscounted future operating income (before interest and amortization) for
individual business units is not sufficient to recover the remaining carrying
value over the remaining amortization period, the company recognizes an
impairment loss for the excess.
Excluding the impairment incurred in connection with the divestiture of the
company's German manufacturing operations (see Acquisitions and Divestitures
note), such provisions were not significant in 1997, 1996, or 1995.
Intangible assets included in other assets consist mainly of goodwill, patents,
and other acquired intangibles, and are carried at cost, less applicable
amortization of $12.1 and $9.5 million in 1997 and 1996, respectively. These
assets are amortized using the straight-line method over periods of five to 15
years.
UNFUNDED CHECKS As a result of maintaining a consolidated cash management
system, the company utilizes controlled disbursement bank accounts. These
accounts are funded as checks are presented for payment, not when checks are
issued. The resulting book overdraft position is included in current
liabilities as unfunded checks.
SELF-INSURANCE The company is partially self-insured for general liability,
workers' compensation, and certain employee health benefits. The general and
workers' compensation liabilities are managed through a wholly owned insurance
captive; the related liabilities are included in the accompanying financial
statements. The company's policy is to accrue amounts equal to the actuarially
determined liabilities. The actuarial valuations are based on historical
information along with certain assumptions about future events. Changes in
assumptions for such matters as legal actions, medical costs, and changes in
actual experience could cause these estimates to change in the near term.
RESEARCH, DEVELOPMENT, ADVERTISING, AND OTHER RELATED COSTS Research,
development, advertising materials, preproduction and start-up costs are
expensed as incurred. Research and development costs consist of expenditures
incurred during the course of planned search and investigation aimed at
discovery of new knowledge that will be useful in developing new products or
processes, or significantly enhancing existing products or production
processes, and the implementation of such through design, testing of product
alternatives, or construction of
-28-
<PAGE> 29
prototypes. Royalty payments made to designers of the company's products as the
products are sold are not included in research and development costs, as they
are considered to be a variable cost of the product. Research and development
costs, included in design and research expense in the accompanying statements
of income, were $25.7, $24.5, and $31.3 million in 1997, 1996, and 1995,
respectively.
INCOME TAXES Deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to reverse.
REVENUE RECOGNITION Revenues are recorded when product is shipped and invoiced
or performance of services is complete.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards
Board issued SFAS No. 128, "Earnings Per Share." The new standard simplifies
the computation of earnings per share (EPS) and increases comparability to
international standards. Under SFAS No. 128, primary EPS is replaced by "Basic"
EPS, which excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. "Diluted" EPS, which is computed similarly to fully diluted
EPS, reflects the potential dilution that could occur if securities and other
contracts to issue common stock were exercised or converted into common stock.
The company is required to adopt the new standard in its third quarter of
fiscal 1998 financial statements. All prior-period EPS information (including
interim EPS) is required to be restated at that time. Early adoption is not
permitted. Pro forma EPS, as if the company had adopted SFAS No. 128 at the
beginning of each fiscal year are as follows:
For the Fiscal Year Ended
1997 1996 1995
Basic EPS $1.57 $.92 $.09
Diluted EPS $1.55 $.91 $.09
-29-
<PAGE> 30
ACQUISITIONS AND DIVESTITURES
During 1997, 1996, and 1995, the company made several acquisitions, all of
which were recorded using the purchase method of accounting. Accordingly, the
purchase price of these acquisitions has been allocated to the assets acquired
and liabilities assumed based on the estimated fair values at the date of the
acquisition. The cost of the acquisitions in excess of net identifiable assets
acquired has been recorded as goodwill.
During 1997 and 1996, the company purchased various privately owned United
States dealers. These companies were acquired for approximately $21.4 million.
The consideration included 212,662 shares of Herman Miller common stock and
approximately $15.0 million in cash, which resulted in approximately $14.0
million of goodwill.
During 1995, the company purchased Geneal GmbH, a privately held office
furniture company in Essen, Germany. The company also purchased a division of
B&B Italia, a privately owned office furniture company in Milan, Italy. In
addition, the company purchased various privately owned United States and
Canadian dealers. These companies were acquired for approximately $21.2
million, which resulted in approximately $9.0 million in goodwill.
The results of the acquisitions were not material to the company's consolidated
operating results.
During the second quarter of fiscal 1997, declining sales and continuing losses
at the company's German subsidiary led the company, in accordance with its
accounting policies, to assess the realizability of the subsidiary's long-lived
assets. At that time, estimates of expected future cash flows under various
options to improve the company's operating results in Germany were evaluated to
determine if any potential impairment existed. Although none of the options was
developed to the extent required to enable the company to reach a decision and
plan for implementation, based on the results of its various evaluations of
potential impairment, the company determined at the enterprise level, the
goodwill and intangibles associated with the acquisition were no longer
recoverable. As a result, a pretax charge of $5.5 million ($4.5 million, or
$.10 per share after tax) was recorded for the write-off of the goodwill and
brand-name assets of the subsidiary.
During the third quarter of fiscal 1997, management authorized and committed
the company to a plan to restructure the manufacturing component of its German
operations. The plan involved closing the manufacturing facility in Germany and
was expected to be completed in fiscal 1998. Based on the most current
information available at that time, management believed that closing the
facility was the most viable option. As a result, the company recorded a pretax
restructuring charge of $13.7 million ($5.4 million, or $.11 per share after
tax).
During the fourth quarter of fiscal 1997, the company sold the German
manufacturing operations. The sale had the effect of reducing both the pretax
restructure costs recorded in the third quarter by $4.7 million and the
anticipated tax benefit by $5.2 million.
In summary, after adjusting for the effects of the sale, the divestiture of the
company's investments in its German manufacturing operations resulted in a
pretax loss of $14.5 million ($10.4 million, or $.22 per share after tax) for
fiscal 1997.
-30-
<PAGE> 31
INVENTORIES
(In Thousands) 1997 1996
Finished products $23,552 $24,787
Work in process 8,074 10,896
Raw materials 22,251 30,047
------- -------
$53,877 $65,730
------- -------
Inventories are valued at the lower of cost or market and include material,
labor, and overhead. The inventories of Herman Miller, Inc., are valued using
the last-in, first-out (LIFO) method. The inventories of the company's
subsidiaries are valued using the first-in, first-out method. Inventories
valued using the LIFO method amounted to $27.5 and $30.7 million at May 31,
1997, and June 1, 1996, respectively.
If all inventories had been valued using the first-in, first-out method,
inventories would have been $15.6 and $16.4 million higher than reported at May
31, 1997, and June 1, 1996, respectively.
-31-
<PAGE> 32
PREPAID EXPENSES AND OTHER
<TABLE>
<S> <C> <C>
(In Thousands) 1997 1996
Current deferred income taxes $26,382 $21,006
Other 20,202 21,000
-------- --------
$46,584 $42,006
-------- --------
ACCRUED LIABILITIES
(In Thousands) 1997 1996
Compensation and employee benefits $80,778 $54,124
Restructuring reserves 3,704 7,493
Income taxes 15,802 13,942
Warranty reserves 11,048 6,510
Other taxes 12,395 11,931
Other 41,897 41,487
-------- --------
$165,624 $135,487
-------- --------
OTHER LIABILITIES
(In Thousands) 1997 1996
Postretirement benefits $22,982 $20,522
Other 49,845 36,972
-------- --------
$72,827 $57,494
-------- --------
NOTES PAYABLE
(In Thousands) 1997 1996
Non-U.S. dollar currencies $17,109 $21,148
</TABLE>
The following information relates to short-term borrowings in 1997:
<TABLE>
<CAPTION>
(Dollars In Thousands) Domestic Foreign
<S> <C> <C>
Weighted-average interest rate at May 31, 1997 -- 6.4%
Weighted-average interest rate at June 1, 1996 -- 6.9%
Weighted-average interest rate during 1997 -- 5.3%
Unused short-term credit lines $6,000 $38,621
</TABLE>
In addition to the company's formal short-term credit lines shown above, the
company has available informal lines of credit totaling $90 million.
LONG-TERM DEBT
<TABLE>
<CAPTION>
(In Thousands) 1997 1996
<S> <C> <C>
Series A senior notes, 6.37%, due March 5, 2006 $70,000 $70,000
Series B senior notes, 6.08%, due March 5, 2001 15,000 15,000
Series C senior notes, 6.52%, due March 5, 2008 15,000 15,000
Finance lease obligation 10,000 10,000
Other 260 562
-------- --------
$110,260 $110,562
Less current portion 173 317
-------- --------
$110,087 $110,245
-------- --------
</TABLE>
During the third quarter of 1996, the company entered into a private placement
of $100.0 million of senior notes with seven insurance companies. The Series A,
B, and C notes have interest-only payments until March 5, 2000, March 5, 2001,
and March 5, 2004, respectively.
The company has available an unsecured revolving credit loan that provides for
a $100.0 million line of credit. The loan permits borrowings in
multi-currencies and matures on February 28,
-32-
<PAGE> 33
2002. Outstanding borrowings bear interest, at the option of the company, at
rates based on the prime rate, certificates of deposit, LIBOR, or negotiated
rates. Interest is payable periodically throughout the period a borrowing is
outstanding. During 1997, the company had no borrowings. During 1996, the
company borrowed at a negotiated rate of 6.0 percent.
Provisions of the senior notes and the unsecured senior revolving credit loan
limit, without prior consent, the company's borrowings, long-term leases, and
sale of certain assets. In addition, the company has agreed to maintain certain
financial performance ratios. At May 31, 1997, the company was in compliance
with all of these provisions.
During May 1996, the company entered into an agreement for the sale and
leaseback of its Roswell, Georgia, facility. The company has an early buyout
option at the end of two-and-one-half years at an amount equal to approximately
103.03 percent of the lessor's cost. The company also has a purchase option at
the end of five years at an amount equal to the facility's then fair market
value. If the purchase option is not exercised, the lease automatically renews
for an additional 30 months. The company has guaranteed a residual value of
59.0 percent of the lessor's cost. The lease has been accounted for as a
financing lease in accordance with SFAS No. 98. The book value and accumulated
depreciation of the facility are approximately $13.9 million and $6.7 million,
respectively.
Annual maturities of long-term debt for the five years subsequent to May 31,
1997, (in millions) are as follows: 1998--$.2; 1999--$.1; 2000--$10.0;
2001--$25.0; 2002--$.0; thereafter--$75.0.
OPERATING LEASES
The company leases real property and equipment under agreements that expire on
various dates. Certain leases contain renewal provisions and generally require
the company to pay utilities, insurance, taxes, and other operating expenses.
Future minimum rental payments (in millions) required under operating leases
that have initial or remaining noncancellable lease terms in excess of one year
as of May 31, 1997, are as follows: 1998--$15.1; 1999--$11.8; 2000--$9.5;
2001--$7.7; 2002--$6.3; thereafter--$11.1.
Total rental expense charged to operations was $20.9, $23.9, and $18.0 million
in 1997, 1996, and 1995, respectively. Substantially all such rental expense
represented the minimum rental payments under operating leases.
DOMESTIC RESTRUCTURING CHARGES
In the fiscal year ended June 3, 1995, the company recorded $31.9 million in
pretax restructuring charges, which reduced net income by $20.3 million, or
$.41 per share. A charge of $15.5 million was taken in the second quarter of
fiscal 1995 to account for the closure of certain of the company's
manufacturing and logistics facilities prior to the relocation of their
production activities to other U.S. Herman Miller facilities. In addition, the
charge also included the costs associated with the closure of and
discontinuance of wood casegoods manufacturing in the Sanford, North Carolina,
facility and the transfer of products produced there to Geiger International of
Atlanta, Georgia, a respected contract provider of quality wood casegoods. The
$16.4 million charge recorded in the fourth quarter of fiscal 1995 included
charges in the United States for reductions in employment and the
discontinuation of a product development program at the company's healthcare
subsidiary, Milcare.
The $31.9 million total pretax restructuring charge consisted of facilities and
equipment write-offs ($15.5 million), termination benefits ($14.1 million), and
other exit costs associated with the
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<PAGE> 34
restructuring ($2.3 million). Approximately 535 employees were terminated or
took voluntary early retirement as a result of the facility closing and job
elimination process. The closure of the manufacturing and logistics facilities
was substantially complete at the end of fiscal 1995. The job elimination
process was completed in July 1995.
Amounts paid or charged against these reserves during fiscal 1997 were as
follows:
June 1, 1996 Costs Paid May 31, 1997
(In Thousands) Balance or Charged Balance
Facilities and equipment $5,330 $2,575 $2,755
Termination benefits 1,885 1,015 870
Other exit costs 278 199 79
------- ---------- -------
$7,493 $3,789 $3,704
------- ---------- -------
EMPLOYEE BENEFIT PLANS
The company maintains plans which provide retirement benefits for substantially
all employees.
PENSION PLANS The principal domestic plan is a noncontributory defined benefit
pension plan. Benefits under this plan are based upon an employee's years of
service and the average earnings for the five highest consecutive years of
service during the 10 years immediately preceding retirement. Domestically, the
company's policy is to fund its plan to the maximum amount currently deductible
for federal income tax purposes, which equals or exceeds the minimum amount
required by the Employee Retirement Income Security Act.
One of Herman Miller, Inc.'s wholly owned foreign subsidiaries has a defined
benefit pension plan which is similar to the principal domestic plan. This plan
is included in the information presented below.
<TABLE>
<CAPTION>
Net pension cost included the following components:
(In Thousands) 1997 1996 1995
<S> <C> <C> <C>
Service cost benefits earned during the year $9,620 $8,688 $8,276
Interest cost on projected benefit obligation 12,683 10,588 9,239
Return on assets:
Actual (40,365) (27,468) (13,391)
Deferred gain 29,357 18,582 5,767
Net amortization (514) (224) 106
Cost of early retirement incentive program -- 479 1,700
-------- -------- --------
Net pension cost $10,781 $10,645 $11,697
-------- -------- --------
</TABLE>
-34-
<PAGE> 35
The following table presents a reconciliation of the funded status of the plans
and the amount recorded in the accompanying balance sheets:
<TABLE>
<CAPTION>
(In Thousands) 1997 1996
<S> <C> <C>
Plan assets at fair market value $184,178 $145,678
---------------------- --------------------
Actuarial present value of benefit obligations:
Vested benefits (127,143) (102,236)
Nonvested benefits (1,531) (2,271)
---------------------- --------------------
Accumulated benefit obligation (128,674) (104,507)
Effect of projected future salary increases (60,069) (53,618)
---------------------- --------------------
Projected benefit obligation (188,743) (158,125)
---------------------- --------------------
Projected benefit obligation in excess of
plan assets at fair market value (4,565) (12,447)
Unrecognized net asset from date of adoption of SFAS No. 87 (2,506) (3,051)
Unrecognized net gain from past experience different from that
assumed, and changes in assumptions (18,019) (1,013)
Unrecognized prior service cost (229) (218)
---------------------- --------------------
Accrued pension cost included in accrued and other liabilities $ (25,319) $(16,729)
---------------------- --------------------
</TABLE>
The assumptions used in the determination of net pension cost were as follows:
<TABLE>
1997 1996 1995
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 7.5%
Rate of salary progression 5.0% 5.0% 5.0%
Long-term rate of return on assets 7.5% 7.5% 7.5%
</TABLE>
Plan assets consist primarily of listed common stocks, mutual funds, and
corporate obligations. Plan assets at May 31, 1997, and June 1, 1996, included
655,344 shares of Herman Miller, Inc., common stock.
In connection with the 1995 restructuring, the company offered an early
retirement incentive program to eligible participants. The results of this
program are reflected in the net cost and funded status of the pension plan and
postretirement benefits.
PROFIT SHARING PLAN Herman Miller, Inc., and three of its subsidiaries have a
trusteed profit sharing plan that covers substantially all employees who have
completed one year of employment. The plan provides for discretionary
contributions (payable in the company's common stock) of not more than 6.0
percent of pretax income of the participating companies, or such other lesser
amounts as may be established by the Board of Directors. The cost of the plan
charged against operations was $6.6, $4.5, and $2.6 million in 1997, 1996, and
1995, respectively.
POSTRETIREMENT BENEFITS In addition to providing pension and profit sharing
benefits, the company provides healthcare and life insurance benefits for
certain retired employees.
The components of net postretirement benefit cost were as follows:
<TABLE>
<CAPTION>
(In Thousands) 1997 1996 1995
<S> <C> <C> <C>
Service cost $1,132 $1,140 $986
Interest cost on accumulated benefit obligation 1,653 1,496 1,305
Cost of early retirement program -- -- 400
Net amortization (44) (39) (44)
------ ------ ------
Net postretirement benefit cost $2,741 $2,597 $2,647
------ ------ ------
</TABLE>
-35-
<PAGE> 36
The following table presents a reconciliation of the plan's funded status with
amounts recognized in the accompanying balance sheets:
<TABLE>
<CAPTION>
(In Thousands) 1997 1996
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $(9,622) $(8,823)
Fully eligible, active plan participants (223) (202)
Other active plan participants (14,622) (13,212)
Unrecognized prior service cost (981) (1,031)
Unrecognized net loss 2,359 2,250
--------- ---------
Accrued postretirement benefit obligation $(23,089) $(21,018)
--------- ---------
</TABLE>
The accumulated postretirement benefit obligation was computed using an assumed
discount rate of 7.5 percent for May 31, 1997, and June 1, 1996.
The weighted average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., healthcare cost trend rate) is 7.5 percent for 1998 and
is assumed to decrease gradually to 6.0 percent for 2001 and remain at that
level thereafter. A 1.0 percent increase in this annual trend rate would have
increased the accumulated postretirement benefit obligation at May 31, 1997, by
$.8 million, with an immaterial effect on 1997 postretirement benefit cost.
COMMON STOCK AND PER SHARE INFORMATION
On March 18, 1997, the Board of Directors approved a 2-for-1 stock split
effected in the form of a 100 percent dividend to shareholders of record on
March 31, 1997, payable on April 15, 1997. The distribution increased the
number of shares outstanding from 23,657,000 to 47,314,000. All share and per
share data, including stock plan information, are restated to reflect the
split. The Board of Directors also approved an increase in the cash dividend
from $.065 to $.0725 per share for shareholders of record on May 31, 1997.
Earnings per share of common stock have been computed using the
weighted-average number of outstanding common shares and common share
equivalents to the extent they are dilutive during each of the three years in
the period ended May 31, 1997 (48,062,100 in 1997; 50,257,470 in 1996;
49,584,114 in 1995).
STOCK PLANS
Under the terms of the company's 1987 Employee Stock Purchase Plan, 4.1 million
shares of authorized common stock were reserved for purchase by plan
participants at 85.0 percent of the market price. At May 31, 1997, 1,888,126
shares remained available for purchase through the plan, and there were 5,102
employees eligible to participate in the plan, of which 1,539 or 30.2 percent,
were participants. During 1997, 1996, and 1995, employees purchased 118,798,
178,444 and 264,026 shares, respectively.
The company has stock option plans under which options are granted to employees
and nonemployee officers and directors at a price not less than the market
price of the company's common stock on the date of grant. All options become
exercisable one year from date of grant and expire ten years from date of
grant. At May 31, 1997, there were 150 employees and 11 nonemployee officers
and directors eligible, all of whom were participants in the plans. At May 31,
1997, there were 1,390,942 shares available for future options.
-36-
<PAGE> 37
A summary of shares subject to options follows:
<TABLE>
<CAPTION>
1997 1996
Weighted- Weighted-
Average Average
1997 Exercise 1996 Exercise 1995
Shares Prices Shares Prices Shares
<S> <C> <C> <C> <C> <C>
Outstanding at
beginning of year: 2,431,920 12.95 2,578,700 11.97 2,239,350
Granted 169,000 31.00 807,800 15.14 834,560
Exercised (551,322) 11.56 (786,340) 11.78 (242,800)
Terminated (35,500) 15.47 (168,240) 12.78 (252,410)
--------- --------- ---------
Outstanding at end
of year 2,014,098 14.54 2,431,920 12.95 2,578,700
--------- --------- ---------
Exercisable at end
of year 1,885,098 13.35 1,680,720 11.96 1,796,740
--------- --------- ---------
Weighted-average
fair market value
of options
granted 8.84 4.16
</TABLE>
-37-
<PAGE> 38
A summary of stock options outstanding at May 31, 1997, follows:
<TABLE>
<CAPTION>
Exercisable Stock
-------------------------------
Outstanding Stock Options Options
-------------------------------------------------------- -------------------------------
Weighted-Average
Range of Exercise Shares Remaining Weighted-Average Shares Weighted-Average
Price (In Thousands) Contractual Life Exercise Price (In Thousands) Exercise Price
<S> <C> <C> <C> <C> <C>
$9.31-$13.56 1,070 5.93 years $11.67 1,070 $11.67
$14.56-$35.75 944 8.47 years $17.78 815 $15.56
-------------- --------------
Total 2,014 7.12 years $14.54 1,885 $13.35
-------------- --------------
</TABLE>
The company accounts for its employee stock purchase plan and its stock option
plans under APB Opinion 25; therefore, no compensation costs are recognized
when employees purchase stock or when stock options are authorized, granted, or
exercised. If compensation costs had been computed under SFAS No. 123,
"Accounting for Stock-Based Compensation," the company's net income and
earnings per share would have been reduced by approximately $1.1 million, or
$.02 per share in 1997, and $2.4 million, or $.05 per share in 1996.
For purposes of computing compensation costs of stock options granted, the fair
value of each stock option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: 5.93% to 6.35% and 5.70% to 6.19% risk-free interest rates in 1997
and 1996, respectively; three-year expected lives in 1997 and 1996; 31%
expected volatility in 1997 and 1996; and .5% expected dividend yields in 1997
and 1996. Black-Scholes is a widely accepted stock option pricing model;
however, the ultimate value of stock options granted will be determined by the
actual lives of options granted and future price levels of the company's common
stock.
KEY EXECUTIVE AND DIRECTOR STOCK PROGRAMS
RESTRICTED STOCK GRANTS The company has granted restricted common shares to
certain key employees. Shares were awarded in the name of the employee, who has
all rights of a shareholder, subject to certain restrictions on transferability
and a risk of forfeiture. The forfeiture provisions on the awards expire
annually, over a period not to exceed six years, as certain financial goals are
achieved. During fiscal 1997, 50,738 shares were granted under the company's
long-term incentive plan, 7,200 shares were forfeited, and the forfeiture
provisions expired on 32,431 shares. As of May 31, 1997, 117,278 shares
remained subject to forfeiture provisions and restrictions on transferability.
The remaining shares subject to forfeiture provisions have been recorded as
unearned stock grant compensation and are included as a separate component of
shareholders' equity under the caption Key Executive Stock Programs. The
unearned compensation is being charged to selling, general, and administrative
expense over the five-year vesting period and was $.4, $.3, and $.2 million in
1997, 1996, and 1995, respectively.
KEY EXECUTIVE STOCK PURCHASE ASSISTANCE PLAN In October 1994, the company
adopted a key executive stock purchase assistance plan whereby the company may
extend credit to officers and key executives to purchase the company's stock
through the exercise of options or on the open market. These loans are secured
by the shares acquired and are repayable under full recourse promissory notes.
The sale or transfer of shares is restricted for five years after the loan
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<PAGE> 39
is fully paid. The plan provides for the key executives to earn repayment of a
portion of the notes, based on meeting annual performance objectives as set
forth by the Executive Compensation Committee of the Board of Directors. The
notes bear interest at 7.0 percent per annum. Interest is payable annually and
principal is due on various dates through September 1, 2007. As of May 31,
1997, the notes outstanding relating to the exercise of options were $.5
million and are included as a separate component of shareholders' equity under
the caption Key Executive Stock Programs. Notes outstanding related to
open-market purchases were $1.5 million and are recorded in other assets.
Compensation expense related to earned repayment was $3.9 million in 1997, $1.7
million in 1996, and immaterial in 1995.
DIRECTOR FEES During fiscal 1997, the Board of Directors approved a plan that
allows the Board members to elect to receive their director fees in the form of
unrestricted company stock at the then fair market value rather than in cash.
In fiscal 1997, the Board members received 4,968 shares of the company's stock
under the plan.
INCOME TAXES
Pretax income consisted of the following:
(In Thousands) 1997 1996 1995
Domestic $141,742 $77,169 $13,418
Foreign (15,859) (7,073) (9,379)
---------- --------- --------
$125,883 $70,096 $4,039
---------- --------- --------
The provision (credit) for income taxes consisted of the following:
(In Thousands) 1997 1996 1995
Current: Domestic--Federal $66,003 $15,725 $18,104
Domestic--State 4,957 1,615 935
Foreign (2,287) (527) (1,580)
---------- --------- --------
$68,673 $16,813 $17,459
---------- --------- --------
Deferred: Domestic--Federal (15,938) 6,115 (15,137)
Domestic--State (677) 50 (1,951)
Foreign (573) 1,172 (671)
---------- --------- --------
(17,188) 7,337 (17,759)
---------- --------- --------
Total income tax provision $51,485 $24,150 $ (300)
---------- --------- --------
The following table represents a reconciliation of income taxes at the United
States statutory rate with the effective tax rate as follows:
<TABLE>
<CAPTION>
(In Thousands) 1997 1996 1995
<S> <C> <C> <C>
Income taxes computed at the United States statutory
rate of 35% $44,059 $24,534 $1,414
Increase (decrease) in taxes resulting from:
Corporate-owned life insurance 1,854 (3,302) (1,842)
Changes in valuation allowance -- (2,762) --
Additional reserves provided -- 2,834 --
State taxes, net 2,782 1,082 (660)
Foreign net operating losses -- -- 735
Other 2,790 1,764 53
-------- ------- -------
$51,485 $24,150 $(300)
-------- ------- -------
</TABLE>
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<PAGE> 40
The tax effects and types of temporary differences that give rise to significant
components of the deferred tax assets and liabilities at May 31, 1997, and June
1, 1996, are presented below:
<TABLE>
<S> <C> <C>
(In Thousands) 1997 1996
Deferred tax assets:
Foreign net operating loss carryforwards $10,791 $22,475
Book over tax loss on sale of fixed assets 6,045 3,506
Compensation related accruals 13,813 11,164
Restructuring charge accruals 1,668 2,774
Accrued postretirement benefit obligation 8,044 7,410
Reserves for inventory 5,295 2,213
Reserve for uncollectible accounts and notes receivable 5,212 2,551
Other 25,540 16,348
Valuation allowance (10,791) (22,475)
--------- ---------
$65,617 $ 45,966
--------- ---------
Deferred tax liabilities:
Book basis in property in excess of tax basis $ (19,429) $(17,058)
Prepaid employee benefits (2,239) (3,037)
Other (8,904) (8,014)
--------- ---------
$ (30,572) $(28,109)
--------- ---------
</TABLE>
The company has foreign net operating loss carryforwards, the tax benefit of
which is $10.8 million, of which $8.8 million expires at various dates through
2006, and of which $2.0 million has unlimited expiration. For financial
statement purposes, the tax benefit of the foreign net operating loss
carryforward has been recognized as a deferred tax asset, subject to a valuation
allowance.
Changes in the valuation allowance during 1996 reflect the utilization of the
company's capital loss carryforwards which served to offset capital gains
recognized on the sale and leaseback of the Roswell, Georgia, facility (see the
Long-Term Debt note for a description of the lease) and on certain excess land
sold to the company's captive insurance company. In addition, the allowance
reflects changes in the net operating loss carryforwards at the company's
foreign subsidiaries, which in 1997 primarily reflects the divestiture of the
German manufacturing operations.
The company has not provided for United States income taxes on undistributed
earnings of foreign subsidiaries totaling $40.0 million. Recording of deferred
income taxes on these undistributed earnings is not required, since these
earnings have been permanently reinvested. These amounts would be subject to
possible U.S. taxation only if remitted as dividends. The determination of the
hypothetical amount of unrecognized deferred U.S. taxes on undistributed
earnings of foreign entities is not practicable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the company's financial instruments included in current
assets and current liabilities approximates their fair value due to their
short-term nature. The fair value of the notes receivable is estimated by
discounting expected future cash flows using current interest rates at which
similar loans would be made to borrowers with similar credit ratings and
remaining maturities. As of May 31, 1997, and June 1, 1996, the fair value of
the notes receivable approximated the carrying value. The company intends to
hold these notes to maturity and has recorded allowances to reflect the terms
negotiated for carrying value purposes. As of May 31, 1997, and June 1, 1996,
the carrying value approximated the fair value of the company's long-term debt.
-40-
<PAGE> 41
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The company utilizes derivative financial instruments to manage its exposure to
foreign currency volatility at the transactional level. The majority of these
contracts relate to major currencies such as the Japanese yen, the Australian
dollar, and the British pound. The exposure to credit risk is minimal, since
the counterparties are major financial institutions. The market risk exposure
is essentially limited to currency rate movements. The gains or losses arising
from these financial instruments are applied to offset exchange gains or losses
on related hedged exposures. Realized gains or losses in 1997 and 1996 were not
material to the company's results of operations. At May 31, 1997, and June 1,
1996, the company had no outstanding derivative financial instruments.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following table presents a reconciliation of net income to net cash
provided by operating activities:
<TABLE>
<S> <C> <C> <C>
(In Thousands) 1997 1996 1995
Depreciation and amortization $47,985 $45,009 $39,732
Restructuring charges 14,500 -- 31,900
Provision for losses on accounts
and notes receivable 7,302 4,635 1,405
Loss on sales of property and equipment 1,575 120 1,077
Deferred taxes (17,188) 7,337 (17,759)
Other liabilities 17,070 1,468 6,587
Stock grants earned 387 284 207
Changes in current assets and liabilities:
Decrease (increase) in assets:
Accounts receivable (11,735) 4,295 (39,901)
Inventories 11,130 11,042 (9,239)
Prepaid expenses and other (4,096) (5,009) (3,912)
Increase (decrease) in liabilities:
Accounts payable 15,296 627 8,674
Accrued liabilities 61,546 8,704 6,751
---------- ---------- --------
Total changes in current assets and liabilities 72,141 19,659 (37,627)
---------- ---------- --------
Total adjustments $143,772 $78,512 $25,522
---------- ---------- --------
</TABLE>
Cash payments for interest and income taxes were as follows:
<TABLE>
<S> <C> <C> <C>
(In Thousands) 1997 1996 1995
Interest paid $8,759 $7,458 $6,296
Income taxes paid $53,185 $13,883 $16,095
</TABLE>
CONTINGENCIES
In fiscal 1992, Haworth, Inc. ("Haworth") filed a lawsuit against the company,
alleging that the electrical systems used in creation of the company's products
infringed one or more of Haworth's patents. In fiscal 1996, the company and
Haworth agreed to terms of a settlement. The company continues to believe,
based upon written opinion of counsel, that its products did not infringe
Haworth's patents and that it was more likely than not to prevail on the
merits. However, based on the mounting legal costs, distraction of management
focus, and the uncertainty present in any litigation, the company concluded
settlement was in the best interest of its shareholders. The settlement
included a one time cash payment of $44.0 million in exchange for a complete
release. The companies also exchanged limited covenants not to sue
with respect to certain existing and potential patent designs. Herman Miller
simultaneously reached a settlement with one of its
-41-
<PAGE> 42
suppliers, who agreed to pay the company $11.0 million and, over the next
seven years, to rebate a percentage of its sales to Herman Miller that are in
excess of current levels. The $11.0 million, plus interest, will be paid in
annual installments over seven years and, the rebates will be recorded when
earned. Accordingly, the company recorded a net litigation settlement expense of
$16.5 million after applying previously recorded reserves and the settlement
with the supplier.
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. As a result of its audits, the GSA has asserted a refund
claim under the 1982 contract for approximately $2.7 million and has other
contracts under audit review. Management has been notified that the GSA has
referred the 1988 contract to the Justice Department for consideration of a
potential civil False Claims Act case. Management disputes the audit result for
the 1982 contract and does not expect resolution of the matter to have a
material adverse effect on the company's consolidated financial statements.
Management does not have information that would indicate a substantive basis
for a civil False Claims Act case under the 1988 contract.
The company is also involved in legal proceedings and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
company's consolidated financial statements.
SEGMENT INFORMATION
The company operates on a worldwide basis in a single industry consisting of
the design, manufacture, and sale of office furniture systems, products, and
related services. The following information is presented with respect to the
company's operations in different geographic areas for the fiscal years ended
May 31, 1997, June 1, 1996, and June 3, 1995. Transfers between geographic
areas represent the selling price of sales to affiliates, which is generally
based on cost plus a markup. Net income of foreign operations and exports
includes royalty income from licensee sales and reflects the gain or loss on
foreign currency exchange. The cash and cash equivalents accounts of the
company are considered to be corporate assets. All other assets have been
identified with domestic or foreign operations. No single customer accounted
for more than 10.0 percent of consolidated net sales.
-42-
<PAGE> 43
<TABLE>
<CAPTION>
(In Thousands) Foreign Adjustments
Operations and
United States and Exports Eliminations Consolidated
<S> <C> <C> <C> <C>
1997
Sales to unaffiliated customers $1,244,645 $251,240 $ -- $1,495,885
Transfers between geographic areas 23,723 15,732 (39,455) --
------------- ----------- ------------ ------------
Net sales $1,268,368 $266,972 $(39,455) $1,495,885
------------- ----------- ------------ ------------
Net income (loss) $83,497 $(9,099) $ -- $74,398
------------- ----------- ------------ ------------
Identifiable assets $554,044 $95,382 $ -- $649,426
------------- ----------- ------------ ------------
Corporate assets 106,161
------------
Total assets $755,587
------------
1996
Sales to unaffiliated customers $1,043,850 $240,081 $ -- $1,283,931
Transfers between geographic areas 34,667 13,176 (47,843) --
------------- ----------- ------------ ------------
Net sales $1,078,517 $253,257 $(47,843) $1,283,931
------------- ----------- ------------ ------------
Net income (loss) $53,977 $ (8,031) $ -- $45,946
------------- ----------- ------------ ------------
Identifiable assets $532,371 $105,487 $ -- $637,858
------------- ----------- ------------ ------------
Corporate assets 57,053
------------
Total assets $694,911
------------
1995
Sales to unaffiliated customers $894,455 $188,595 $ -- $1,083,050
Transfers between geographic areas 55,206 5,186 (60,392) --
------------- ----------- ------------ ------------
Net sales $949,661 $193,781 $(60,392) $1,083,050
------------- ----------- ------------ ------------
Net income (loss) $7,265 $ (2,926) $ -- $4,339
------------- ----------- ------------ ------------
Identifiable assets $550,666 $91,858 $ -- $642,524
------------- ----------- ------------ ------------
Corporate assets 16,488
------------
Total assets $659,012
------------
</TABLE>
-43-
<PAGE> 44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Herman Miller, Inc.:
We have audited the accompanying consolidated balance sheets of Herman Miller,
Inc. (a Michigan corporation) and subsidiaries as of May 31, 1997, and June 1,
1996, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended May 31, 1997.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Herman Miller, Inc., and
subsidiaries as of May 31, 1997, and June 1, 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Grand Rapids, Michigan
June 26, 1997
-44-
<PAGE> 45
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements of Herman Miller, Inc., and subsidiaries
were prepared by, and are the responsibility of, management. The statements
have been prepared in conformity with generally accepted accounting principles
appropriate in the circumstances and include amounts that are based on
management's best estimates and judgments.
The company maintains systems of internal accounting controls designed to
provide reasonable assurance that all transactions are properly recorded in the
company's books and records, that policies and procedures are adhered to, and
that assets are protected from unauthorized use. The systems of internal
accounting controls are supported by written policies and guidelines and are
complemented by a staff of internal auditors and by the selection, training,
and development of professional financial managers.
The consolidated financial statements have been audited by the independent
public accounting firm Arthur Andersen LLP, whose appointment is ratified
annually by shareholders at the annual shareholders' meeting. The independent
public accountants conduct a review of internal accounting controls to the
extent required by generally accepted auditing standards and perform such tests
and related procedures as they deem necessary to arrive at an opinion on the
fairness of the financial statements.
The Financial Audit Committee of the Board of Directors, composed solely of
directors from outside the company, regularly meets with the independent public
accountants, management, and the internal auditors to satisfy itself that they
are properly discharging their responsibilities. The independent public
accountants have unrestricted access to the Financial Audit Committee, without
management present, to discuss the results of their audit and the quality of
financial reporting and internal accounting control.
Michael A. Volkema, President and Chief Executive Officer
Brian C. Walker, Executive Vice President, Financial Services, and Chief
Financial Officer
June 26, 1997
-45-
<PAGE> 46
Item 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No changes in, or disagreements with, accountants referenced in Item 304 of
Regulation S-K occurred during the 24-month period ended May 31, 1997.
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of Registrant
Information relating to directors and director nominees of the registrant is
contained under the caption "Director and Executive Officer Information," in
the company's definitive Proxy Statement, dated August 25, 1997, relating to
the company's 1997 Annual Meeting of Shareholders and the information within
that section is incorporated by reference. Information relating to Executive
Officers of the company is included in Part I hereof entitled "Executive
Officers of the Registrant."
There are no family relationships between or among the above-named executive
officers. There are no arrangements or understandings between any of the
above-named officers pursuant to which any of them was named an officer.
Item 11 EXECUTIVE COMPENSATION
Information relating to management remuneration is contained under the tables
and discussions on pages 10-12 in the company's definitive Proxy Statement,
dated August 25, 1997, relating to the company's 1997 Annual Meeting of
Shareholders, and the information within those sections is incorporated by
reference.
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The sections entitled "Voting Securities and Principal Shareholders" and
"Director and Executive Officer Information" in the definitive Proxy Statement,
dated August 25, 1997, relating to the company's 1997 Annual Meeting of
Shareholders and the information within those sections is incorporated by
reference.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions contained
under the captions "Director and Executive Officer Information" and
"Compensation of Board Members and Non-Employee Officers" in the definitive
Proxy Statement, dated August 25, 1997, relating to the company's 1997 Annual
Meeting of Shareholders is incorporated by reference.
-46-
<PAGE> 47
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the company are
included in this Form 10-K on the pages noted:
Page Number in
the Form 10-K
--------------
Consolidated Statements of Income 23
Consolidated Balance Sheets 24
Consolidated Statements of Shareholders' Equity 25
Consolidated Statements of Cash Flows 26
Notes to Consolidated Financial Statements 27
Report of Independent Public Accountants 44
Management's Report on Financial Statements 45
(a) 2. Financial Statement Schedule
The following financial statement schedule and related Report of
Independent Public Accountants on the Financial Statement
Schedule are included in this Form 10-K on the pages noted:
Page Number in
the Form 10-K
--------------
Report of Independent Public Accountants
on Financial Statement Schedule 49
Consent of Independent Public Accountants 50
-47-
<PAGE> 48
Page Number in
the Form 10-K
--------------
Schedule II- Valuation and Qualifying
Accounts and Reserves for the Years
Ended May 31, 1997; 52
June 1, 1996; and June 3, 1995
All other schedules required by Form 10-K Annual Report have been omitted
because they were inapplicable, included in the notes to consolidated
financial statements, or otherwise not required under instructions
contained in Regulation S-X.
(a) 3. Exhibits
Reference is made to the Exhibit Index which is found on pages 53 through
55 of this Form 10-K Annual Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
year ended May 31, 1997.
-48-
<PAGE> 49
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of Herman Miller, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Herman Miller, Inc., and subsidiaries
included in this Form 10-K, and have issued our report thereon dated June 26,
1997. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed at Item 14(a)2 above is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
-----------------------
Grand Rapids, Michigan
June 26, 1997
-49-
<PAGE> 50
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Herman Miller, Inc.:
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
Form S-8 Registration Statement File Numbers 33-5810, 33-43234, 33-43235,
33-45812, 2-84202, 33-04369, 33-04367, and 33-04365 and Form S-3 Registration
Statement File Number 33-19525.
/s/ Arthur Andersen LLP
-----------------------
Grand Rapids, Michigan
August 27, 1997
-50-
<PAGE> 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HERMAN MILLER, INC.
/s/ Michael A. Volkema and /s/ Brian C. Walker
- ----------------------- ------------------------------
By Michael A. Volkema Brian C. Walker
(President and Chief Executive Officer) (Chief Financial Officer)
Date: August 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on August 27, 1997, by the following persons on
behalf of the Registrant in the capacities indicated. Each Director of the
Registrant, whose signature appears below, hereby appoints Michael A. Volkema
as his attorney-in-fact, to sign in his name and on his behalf, as a Director
of the Registrant, and to file with the Commission any and all amendments to
this Report on Form 10-K.
/s/ David L. Nelson /s/ Michael A. Volkema
----------------------- ---------------------------------
David L. Nelson Michael A. Volkema
(Chairman of the Board) (President, Chief Executive
Officer and Director)
/s/ William K. Brehm /s/ E. David Crockett
----------------------- ---------------------------------
William K. Brehm E. David Crockett
(Director) (Director)
/s/ James R. Carreker /s/ Lord Griffiths of Fforestfach
----------------------- ---------------------------------
James R. Carreker Lord Griffiths of Fforestfach
(Director) (Director)
/s/ Richard H. Ruch /s/ C. William Pollard
----------------------- ---------------------------------
Richard H. Ruch C. William Pollard
(Director) (Director)
/s/ Charles D. Ray /s/ Ruth A. Reister
----------------------- ---------------------------------
Charles D. Ray Ruth A. Reister
(Director) (Director)
/s/ H. Harold Chandler
-----------------------
J. Harold Chandler
(Director)
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<PAGE> 52
HERMAN MILLER, INC., AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- ---------- --------------------- -------------------------- --------
Additions Increased Uncollectible
Balance at charged to net accounts Balance
beginning costs and operating written off Losses at end
Description of period expenses losses (net) (1) Utilized (2) of period
<S> <C> <C> <C> <C> <C> <C>
Year ended May 31, 1997:
Allowance for possible losses
on accounts receivable $10,423 $4,809 $-- $2,289 $-- $12,943
Allowance for possible losses
on notes receivable $4,415 $4,074 $-- $-- $-- $8,489
Valuation allowance for deferred tax asset $22,475 $-- $1,034 $-- $12,718 $10,791
Year ended June 1, 1996:
Allowance for possible losses
on accounts receivable $7,180 $3,816 $-- $573 $-- $10,423
Allowance for possible losses
on notes receivable $2,627 $2,573 $-- $785 $-- $4,415
Valuation allowance for deferred tax asset $25,237 $-- $3,856 $-- $6,618 $22,475
Year ended June 3, 1995:
Allowance for possible losses
on accounts receivable $6,742 $405 $-- $(33) $-- $7,180
Allowance for possible losses
on notes receivable $2,159 $1,000 $-- $532 $-- $2,627
Valuation allowance for deferred tax asset $21,488 $-- $7,253 $-- $3,504 $25,237
</TABLE>
(1) Includes effects of foreign currency translation.
(2) Includes utilization of capital and net operating losses. In 1997,
this includes the write-off related to the German divestiture.
-52-
<PAGE> 53
HERMAN MILLER, INC., AND SUBSIDIARIES
Exhibit Index
Page
(3) Articles of Incorporation and Bylaws
(a) Articles of Incorporation are incorporated by
reference to Exhibit 3(a) and 3(b) of the
Registrant's 1986 Form 10-K Annual Report.
(b) Certificate of Amendment to the Articles of
Incorporation, dated October 15, 1987, are
incorporated by reference to Exhibit 3(b) of the
Registrant's 1988 Form 10-K Annual Report.
(c) Certificate of Amendment to the Articles of
Incorporation, dated May 10, 1988, are incorporated
by reference to Exhibit 3(c) of the Registrant's 1988
Form 10-K Annual Report.
(d) Amended and Restated Bylaws, dated January 6,
1997, are incorporated by reference to Exhibit 3(d)
of the Registrant's 1997 Form 10-K Annual Report. 56-69
(4) Instruments Defining the Rights of Security Holders
(a) Specimen copy of Herman Miller, Inc., common
stock is incorporated by reference to Exhibit 4(a) of
Registrant's 1981 Form 10-K Annual Report.
(b) Note Purchase Agreement dated March 1, 1996,
is incorporated by reference to Exhibit 4(b) of the
Registrant's 1996 Form 10-K Annual Report.
(c) Other instruments which define the rights of
holders of long-term debt individually represent debt
of less than 10 percent of total assets. In
accordance with item 601(b)(4)(iii)(A) of regulation
S-K, the Registrant agrees to furnish to the
Commission copies of such agreements upon request.
(d) Dividend Reinvestment Plan for Shareholders of
Herman Miller, Inc., dated January 6, 1997, is
incorporated by reference to Exhibit 4(d) of the
Registrant's 1997 Form 10-K Annual Report. 70-78
(10) Material Contracts
(a) Description of Officers Executive
Incentive Plan is incorporated by reference to
Exhibit 10(e) of the Registrant's 1981 Form
10-K Annual Report. *
(b) Officers' Supplemental Retirement
Income Plan is incorporated by reference to
Exhibit 10(f) of the Registrant's 1986 Form
10-K Annual Report. *
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Page
Exhibit Index (continued)
(c) Officers' Salary Continuation Plan is
incorporated by reference to Exhibit 10(g) of
the Registrant's 1982 Form 10-K Annual Report.
*
(d) Herman Miller, Inc., Plan for Severance
Compensation after Hostile Takeover is
incorporated by reference to Exhibit 10(f) of
the Registrant's 1986 Form 10-K Annual Report.
*
(e) Amended Herman Miller, Inc., Plan for
Severance Compensation after Hostile Takeover,
dated January 17, 1990, is incorporated by
reference to Exhibit 10(n) of the Registrant's
1990 Form 10-K Annual Report. *
(f) Herman Miller, Inc., 1994 Key Executive
Stock Purchase Assistant Plan, dated October
6, 1994, is incorporated by reference to
Appendix C of the Registrant's 1994 Proxy
Statement. *
(g) Incentive Share Grant Agreement, dated
October 4, 1995, between the company and
Michael A. Volkema is incorporated by
reference to Exhibit 10(g) of the Registrant's
1996 Form 10-K Annual Report. *
(h) Incentive Share Grant Agreement, dated
May 15, 1996, between the company and Michael
A. Volkema is incorporated by reference to
Exhibit 10(h) of the Registrant's 1996 Form
10-K Annual Report. *
(i) Termination and Mutual Release Agreement,
dated March 27, 1996, between the company and
Hansjorg Broser is incorporated by reference to
Exhibit 10(i) of the Registrant's 1996 Form 10K
Annual Report. *
(j) Herman Miller, Inc., Long-Term Incentive
Plan, dated October 6, 1994, is incorporated by
reference to Exhibit 4 of the Registrant's May
22, 1996, Form S-8 Registration No. 33-04369*
(k) Herman Miller, Inc., 1994 Nonemployee
Officer and Director Stock Option Plan, dated
October 6, 1994, is incorporated by reference
to Exhibit 4 of the Registrant's May 22, 1996,
Form S-8 Registration No. 33-04367 *
(l) Herman Miller, Inc., Key Executive
Deferred Compensation Plan and form of
Deferred Compensation Agreement, dated
February 28, 1997, is incorporated by
reference to Exhibit 10(l) of the
Registrant's 1997 Form 10-K Annual
Report. 79-98
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<PAGE> 55
(m) Consulting Agreement, dated October 2, 1996, between the
company and Dr. Alan Fern is incorporated by reference to
Exhibit 10(m) of the registrant's 1997 Form 10-K Annual
Report. 99-100
* denotes compensatory plan or
arrangement.
(11) Computation of Per Share Earnings. 101
(22) Subsidiaries. 102
(27) Financial Data Schedule (exhibit available upon request)
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EXHIBIT 3d
B Y L A W S
OF
HERMAN MILLER, INC.
A MICHIGAN CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be as specified in the Articles of Incorporation or such other place as
determined by the Board of Directors upon filing proper notice thereof with the
State of Michigan. The Corporation shall keep records containing the names and
addresses of all shareholders, the number, class and series of shares held by
each, and the dates when they respectively became holders of record thereof, at
its registered office or at the office of its transfer agent.
Section 2. Other Offices. The business of the Corporation may be
transacted in such locations other than the registered office, within or
outside the State of Michigan, as the Board of Directors may from time to time
determine, or as the business of the Corporation may require.
ARTICLE II
CAPITAL STOCK
Section 1. Stock Certificates. Certificates representing shares of the
Corporation shall be in such form as is approved by the Board of Directors.
Certificates shall be signed by the chairman of the Board of Directors, vice
chairman of the Board of Directors, president or a vice president, and may also
be signed by another officer of the Corporation. The certificate may be sealed
with the seal of the Corporation, or a facsimile thereof. The signatures of the
officers may be facsimiles. If an officer who has signed, or whose facsimile
signature has been placed upon, a certificate ceases to be such officer before
the certificate is issued, it may be issued by the Corporation with the same
effect as if he or she were such officer at the date of issue.
Section 2. Replacement of Lost or Destroyed Certificates. If a stock
certificate is lost or destroyed, no new certificate shall be issued in place
thereof until the Corporation has received from the registered holder such
assurances, representations, warranties and/or guarantees as the Board of
Directors, in its sole discretion, shall deem advisable, and until the
Corporation receives sufficient indemnification protecting it against any claim
that may be made on account of such lost or destroyed certificate, or the
issuance of any new certificate in place thereof, including an indemnity bond
in such amount and with sureties, if any, as the Board of Directors, in its
sole discretion, deems advisable.
Section 3. Transfer of Shares. Shares of stock of the Corporation shall be
transferable only upon the books of the Corporation. The old certificates shall
be surrendered to the Corporation by delivery thereof to the person in charge
of the stock transfer books of the Corporation or to such other person as the
Board of Directors may designate, properly endorsed for transfer, and such
certificates shall be canceled before a new certificate is issued. The
Corporation shall be entitled to treat the person in whose name any share,
right or option is registered as the owner thereof for all purposes, and shall
not be bound to recognize any equitable or other claim with
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respect thereto, regardless of any notice thereof, except as may be
specifically required by the laws of the State of Michigan.
Section 4. Rules Governing Stock Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration of
certificates of stock, and may appoint a transfer agent and/or a registrar of
transfer, and may require all such certificates to bear the signature of such
transfer agent and/or of such registrar of transfers.
Section 5. Record Date for Share Dividends, Distributions and Other
Actions. For the purpose of determining shareholders entitled to receive
payment of a share dividend or distribution, or allotment of a right, or for
the purpose of any other action, the Board of Directors may fix a record date
which shall not precede the date on which the resolution fixing the record date
is adopted by the Board. The date shall not be more than sixty (60) days before
the payment of the share dividend or distribution or allotment of a right or
other action. If a record date is not fixed, the record date shall be the close
of business on the day on which the resolution of the Board relating to the
corporate action is adopted.
Section 6. Dividends. The Board of Directors, in its discretion, may from
time to time declare and direct payment of dividends or other distributions
upon the Corporation's outstanding shares. Dividends may be paid in money or
other property, subject to the limitations of the Michigan Business Corporation
Act.
Section 7. Acquisition of Shares. Subject to the limitations of the
Michigan Business Corporation Act, the Board of Directors may authorize the
Corporation to acquire its own shares, and shares so acquired shall constitute
authorized but unissued shares, except that shares of the Corporation acquired
by it may be pledged as security for the payment of the purchase price of the
shares and, until the purchase price is paid by the Corporation, such shares
are not canceled and do not constitute authorized but unissued shares. In such
event, the acquired and pledged shares shall not be voted directly or
indirectly at any meeting or otherwise, shall not be counted in determining the
total number of issued shares entitled to vote at any given time, and, upon
payment of the purchase price, are canceled and constitute authorized but
unissued shares.
Section 8. Redemption of Control Shares. Control shares acquired in a
control share acquisition, with respect to which no acquiring person statement
has been filed with the Corporation, shall, at any time during the period
ending sixty (60) days after the last acquisition of control shares or the
power to direct the exercise of voting power of control shares by the acquiring
person, be subject to redemption by the Corporation. After an acquiring person
statement has been filed with the Corporation and after the meeting at which
the voting rights of the control shares acquired in a control share acquisition
are submitted to the shareholders, the shares shall be subject to redemption by
the Corporation unless the shares are accorded full voting rights by the
shareholders as provided in Section 798 of the Michigan Business Corporation
Act. Redemptions of shares pursuant to this bylaw shall be at the fair value of
the shares pursuant to procedures adopted by the Board of Directors of the
Corporation.
The terms "control shares," "control share acquisition," "acquiring person
statement," "acquiring person," and "fair value," as used in this bylaw, shall
have the meanings ascribed to them, respectively, in Chapter 7B (known as the
Stacey, Bennett and Randall shareholder equity act) of the Michigan Business
Corporation Act.
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ARTICLE III
SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders shall be held at
the registered office of the Corporation or at such other place, within or
outside the State of Michigan, as may be determined from time to time by the
Board of Directors, provided however, if a meeting of shareholders is to be
held at a place other than the registered office of the Corporation, the notice
of the meeting shall designate such place.
Section 2. Annual Meeting. Annual meetings of shareholders for election of
directors and for such other business as may come before the meeting shall be
held at a date designated by the Board of Directors within five months after
the end of each fiscal year of the Corporation. If the annual meeting is not
held on the date so designated, the Board of Directors shall cause the meeting
to be held as soon thereafter as convenient.
Section 3. Special Meetings. Special meetings of shareholders may be
called by the chairman or vice chairman of the Board, the president or the
secretary and shall be called by one of them pursuant to resolution therefor by
the Board of Directors, or upon receipt by them of a request in writing,
stating the purpose or purposes thereof, and signed by any five of the
directors.
Section 4. Record Date for Notice and Vote. For the purpose of determining
shareholders entitled to notice of and to vote at a meeting of shareholders or
an adjournment of a meeting, the Board of Directors may fix a record date which
shall not precede the date on which the resolution fixing the record date is
adopted by the Board. The date shall be not more than sixty (60) nor less than
ten (10) days before the date of the meeting. If a record date is not fixed,
the record date for determination of shareholders entitled to notice of or to
vote at a meeting of shareholders shall be the close of business on the day
next preceding the day on which notice is given or, if no notice is given, the
day next preceding the day on which the meeting is held. When a determination
of shareholders of record entitled to notice of or to vote at a meeting of
shareholders has been made as provided in this Section 4, the determination
applies to any adjournment of the meeting, unless the Board fixes a new record
date under this section for the adjourned meeting.
For the purpose of determining shareholders entitled to express consent to
or to dissent from a proposal without a meeting, the Board of Directors may fix
a record date which shall not precede the date on which the resolution fixing
the record date is adopted by the Board and shall be not more than ten (10)
days after the Board resolution. If a record date is not fixed and prior action
by the Board is required with respect to the corporate action to be taken
without a meeting, the record date shall be the close of business on the day on
which the resolution of the Board is adopted. If a record date is not fixed and
prior action by the Board is not required, the record date shall be the first
date on which a signed written consent is delivered to the Corporation as
provided in Section 407 of the Michigan Business Corporation Act.
Section 5. Notice of Shareholder Meetings. Written notice of the time,
place and purposes of any meeting of shareholders shall be given not less than
ten (10) nor more than sixty (60) days before the date of the meeting to each
shareholder of record entitled to vote at the meeting. Such notice may be given
either by delivery in person to such shareholders or by mailing such notice to
shareholders at their addresses as the same appear on the stock books of the
Corporation.
A shareholder's attendance at a meeting, in person or by proxy,
constitutes a waiver of the shareholder's objection to lack of notice or
defective notice of the meeting unless, at the beginning of the meeting, the
shareholder objects to holding the meeting or transacting business
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at the meeting, and constitutes a waiver of the shareholder's objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
Section 6. Voting Lists. The Corporation's officer or agent having charge
of its stock transfer books shall prepare and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof, which list shall be arranged alphabetically within each class and
series, and shall show the address of and number of shares held by each
shareholder. The list shall be produced at the time and place of the meeting of
shareholders and be subject to inspection by any shareholder at any time during
the meeting. The list shall be prima facie evidence as to who are the
shareholders entitled to examine the list or to vote at the meeting. If for any
reason the requirements with respect to the shareholder list specified in this
Section 6 of Article III have not been complied with, any shareholder, either
in person or by proxy, who in good faith challenges the existence of sufficient
votes to carry any action at the meeting, may demand that the meeting be
adjourned and the same shall be adjourned until the requirements are complied
with, provided however, that failure to comply with such requirements does not
affect the validity of any action taken at the meeting before such demand is
made.
Section 7. Voting. Except as may otherwise be provided in the Articles of
Incorporation or bylaws of the Corporation, each shareholder entitled to vote
at a meeting of shareholders, or to express consent or dissent without a
meeting, shall be entitled to one (1) vote, in person or by proxy, for each
share of stock entitled to vote held by such shareholder, provided however, no
proxy shall be voted after three (3) years from its date unless such proxy
provides for a longer period. A vote may be cast either orally or in writing as
announced or directed by the chairperson of the meeting prior to the taking of
the vote. When an action other than the election of directors is to be taken by
vote of the shareholders, it shall be authorized by a majority of the votes
cast by the holders of shares entitled to vote thereon, unless a greater vote
is required by express requirement of the Michigan Business Corporation Act or
of the Articles of Incorporation, in which case such express provision shall
govern and control the decision of such question. Except as otherwise expressly
required by the Articles of Incorporation, directors shall be elected by a
plurality of the votes cast at an election.
Section 8. Quorum. Except as may otherwise be provided in the Articles of
Incorporation, shares entitled to cast a majority of the votes at a meeting
constitute a quorum. Meetings at which less than a quorum is represented may be
adjourned by a vote of a majority of the shares present to a further date
without further notice other than the announcement at such meeting, and, when
the quorum shall be present upon such adjourned date, any business may be
transacted which might have been transacted at the meeting as originally
called. Shareholders present in person or by proxy at any meeting of
shareholders may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
Section 9. Conduct of Meetings. The chairman of the Board of Directors or
the chairman's designee shall call meetings of the shareholders to order and
shall act as chairman of such meetings. The secretary of the Corporation shall
act as secretary of all meetings of shareholders but, in the absence of the
secretary at any meeting of shareholders or the secretary's inability or
election not to act as secretary, the presiding officer may appoint any person
to act as secretary of the meeting.
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Section 10. Inspector of Elections. The Board of Directors may, in advance
of a meeting of shareholders, appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, or an
appointed inspector fails to appear or act, the person presiding at the meeting
of shareholders may and, on request of a shareholder entitled to vote thereat,
shall appoint one or more persons to fill such vacancy or vacancies, or to act
as inspector. The inspector(s) shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine challenges and questions arising
in connection with the right to vote, count and tabulate votes, ballots or
consents, determine the results, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders.
Section 11. Notification of Nominations. Nominations for the election of
directors may be made by the Board of Directors or by a shareholder entitled to
vote in the election of directors. A shareholder entitled to vote in the
election of directors, however, may make such a nomination only if written
notice of such shareholder's intent to do so has been given, either by personal
delivery or by United States mail, postage prepaid, and received by the
Corporation (a) with respect to an election to be held at an annual meeting of
shareholders, not later than sixty (60) days in advance of the date of such
meeting, and (b) with respect to an election to be held at a special meeting of
shareholders called for that purpose, not later than the close of business on
the tenth (10th) day following the date on which notice of the special meeting
was first mailed to the shareholders by the Corporation.
Each shareholder's notice of intent to make a nomination shall set forth:
(a) the names and addresses of the shareholder who intends to
make the nomination and of the person or persons to be nominated;
(b) a representation that the shareholder (i) is a holder of
record of stock of the Corporation entitled to vote at such meeting,
(ii) will continue to hold such stock through the date on which the
meeting is held, and (iii) intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the
notice;
(c) a description of all arrangements or understandings between
the shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination is
to be made by the shareholder;
(d) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated by the Board of
Directors; and
(e) the consent of each nominee to serve as a director of the
Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person nominated by a shareholder whose nomination is not made in compliance
with the foregoing procedure.
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Section 12. Notification of Other Shareholder Proposals. The Board of
Directors of the Corporation shall submit for consideration and vote by the
shareholders, at any meeting of the shareholders, only those proposals that are
first brought before the meeting by or at the direction of the Board of
Directors, or by any shareholder entitled to vote at such meeting (a) who
submits to the Corporation a timely Notice of Proposal in accordance with the
requirements of this Section 12 and the proposal is a proper subject for action
by shareholders under Michigan law, or (b) whose proposal is included in the
Corporation's proxy materials in compliance with all the requirements set forth
in the applicable rules and regulations in the Securities and Exchange
Commission.
Each shareholder's Notice of Proposal shall set forth:
(a) The name and address of the shareholder submitting the
proposal, as they appear on the Corporation's books and records;
(b) A representation that the shareholder (i) is a holder of
record of stock of the Corporation entitled to vote at such meeting,
(ii) will continue to hold such stock through the date on which the
meeting is held, and (iii) intends to appear in person or by proxy
at the meeting to submit the proposal for shareholder vote;
(c) A brief description of the proposal desired to be submitted
to the meeting for shareholder vote and the reasons for conducting
such business at the meeting; and
(d) A description of any financial or other interest of such
shareholder in the proposal.
A Notice of Proposal must be given, either by personal delivery or by
United States mail, postage prepaid, and received by the Corporation not less
than thirty (30) days prior to the date of the originally scheduled meeting,
regardless of any adjournments thereof to a later date; provided that, if less
than forty (40) days' notice of the shareholder meeting is given by the
Corporation, the Notice of Proposal must be received by the Corporation not
later than the close of business on the tenth (10th) day following the date on
which the notice of the scheduled meeting was first mailed to the shareholders.
The secretary of the Corporation shall notify a shareholder in writing
whether his or her Notice of Proposal has been made in accordance with all the
requirements of this Section 12. The chairman of the meeting may refuse to
acknowledge the proposal of any shareholder not made in compliance with all
such requirements.
ARTICLE IV
DIRECTORS
Section 1. Authority and Size of Board. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The number of directors of the Corporation (exclusive of directors
to be elected by the holders of any one or more series of the preferred stock
voting separately as a class or classes) that shall constitute the Board of
Directors shall be eleven (11), unless otherwise determined from time to time
by resolution adopted by the affirmative vote of:
(a) At least eighty percent (80%) of the Board of Directors,
and
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(b) A majority of the Continuing Directors (as defined in
Article IX of the Articles of Incorporation).
Section 2. Classification of Board and Filling of Vacancies. Subject to
applicable law, the directors shall be divided into three (3) classes, each
class to be as nearly equal in number as possible. The directors of the first
class shall hold office until the annual meeting of stockholders to be held in
1984 and until their respective successors are duly elected and qualified or
their resignation or removal. The directors of the second class shall hold
office until the annual meeting of stockholders to be held in 1985 and until
their respective successors are duly elected and qualified or their resignation
or removal. The directors of the third class shall hold office until the annual
meeting of stockholders to be held in 1986 and until their respective
successors are duly elected and qualified or their resignation or removal.
Subject to the foregoing and to the last sentence of this first paragraph of
Section 2 of Article IV, at each annual meeting of stockholders, commencing at
the annual meeting to be held in 1984, the successors to the class of directors
whose term shall then expire shall be elected to hold office until the third
succeeding annual meeting and until their successors shall be duly elected and
qualified or their resignation or removal. Any vacancies in the Board of
Directors for any reason, and any newly created directorships resulting from
any increase in the number of directors, may be filled only by the Board of
Directors, acting by vote of a majority of the Continuing Directors and at
least eighty percent (80%) of the Board of Directors, and any directors so
chosen shall hold office until the next annual meeting of stockholders and
until their respective successors shall be duly elected and qualified or their
resignation or removal. No decrease in the number of directors shall shorten
the term of any incumbent director. No person shall be elected as a director
(a) after he or she attains age seventy (70) or (b) for a term which expires
later than the annual meeting of stockholders at or before which such person
attains age seventy (70).
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of preferred stock shall have
the right, voting separately as a class, to elect one or more directors of the
Corporation (a) the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of stockholders and
vacancies created with respect to any directorship of the directors so elected
may be filled in the manner specified by such preferred stock, and (b) this
Section 2 of Article IV shall be deemed to be construed and/or modified so as
to permit the full implementation of the terms and conditions relating to
election of directors of any series of preferred stock that has been or may be
designated by the Board of Directors.
Section 3. Resignation and Removal of Directors. A director may resign by
written notice to the Corporation, which resignation is effective upon its
receipt by the Corporation or at a subsequent time as set forth in the written
notice of resignation. Notwithstanding any other provisions of the Articles of
Incorporation or the Bylaws of the Corporation, any one or more directors of
the Corporation may be removed at any time, with or without cause, but only by
either (a) the affirmative vote of a majority of the Continuing Directors and
at least eighty percent (80%) of the Board of Directors, or (b) the affirmative
vote, at a meeting of the stockholders called for that purpose, of the holders
of at least eighty percent (80%) of the voting power of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors voting together as a single class.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of preferred stock shall have
the right, voting separately as a class, to elect one or more directors of the
Corporation, the provision of this Section 3 of Article IV shall not apply with
respect to the director or directors elected by such holders of preferred
stock.
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Section 4. Place of Meetings and Records. The directors shall hold their
meetings and maintain the minutes of the proceedings of meetings of
shareholders, Board of Directors, and committees, if any, and keep the books
and records of account for the Corporation in such place or places, within or
outside the State of Michigan, as the Board may from time to time determine.
Section 5. Annual Meetings of Directors. The newly elected directors shall
hold their first meeting, without notice other than this bylaw, at the same
place and immediately after the annual meeting of the shareholders at which
they are elected, or the time and place of such meeting may be fixed by consent
in writing of all the directors.
Section 6. Regular Meetings of the Board. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board or by the chairman or vice
chairman of the Board of Directors, or the president. Any notice given of a
regular meeting need not specify the business to be transacted or the purpose
of the meeting.
Section 7. Special Meetings of the Board. Special meetings of the Board
may be called by the chairman or vice chairman of the Board of Directors or the
president on at least two (2) days' notice to each director by mail or
overnight courier or twenty-four (24) hours' notice either personally, by
telephone, by telegram, by facsimile or by electronic or digital transmission.
Special meetings shall be called by any one of them in like manner and on like
notice on the written request of any two (2) directors. The notice need not
specify the business to be transacted or the purpose of the special meeting.
The notice shall specify the place of the special meeting.
Section 8. Meeting Attendance or Participation as Waiver of Notice. A
director's attendance at or participation in a meeting waives any required
notice to him or her of the meeting unless he or she at the beginning of the
meeting, or upon his or her arrival, objects to the meeting or the transacting
of business at the meeting and does not thereafter vote for or assent to any
action taken at the meeting.
Section 9. Meeting Participation by Means of Communication Equipment.
Members of the Board of Directors or any committee designated by the Board of
Directors may participate in a meeting of the Board of Directors or of such
committee by means of a conference telephone or similar communication equipment
by means of which all persons participating in the meeting can communicate with
the other participants, and participation in a meeting pursuant to this
paragraph shall constitute presence in person at such meeting.
Section 10. Quorum and Vote. At all meetings of the Board or a committee
thereof, a majority of the members of the Board of Directors then in office or
members of such committee, but not less than two (2) (if there are at least two
members of the Board or such committee) shall constitute a quorum for the
transaction of business. The act of a majority of the members present at any
meeting at which there is a quorum shall be the act of the Board of Directors
or the committee. If a quorum shall not be present at any meeting of the Board
of Directors or a committee, the members present may adjourn the meeting from
time to time and to another place without notice other than announcement at the
meeting until a quorum shall be present.
Section 11. Action Without Meeting. Any action required or permitted to be
taken pursuant to authorization voted at a meeting of the Board of Directors,
or of any committee thereof, may be taken without a meeting if, before or after
the action, all members of the Board of Directors then in office or of such
committee consent thereto in writing. Such written
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consent shall be filed with the minutes of the proceedings of the Board of
Directors or committee. The consent has the same effect as a vote of the Board
of Directors or such committee for all purposes.
Section 12. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member of any
committee. In the absence or in the event of the disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. A committee and
each member thereof shall serve at the pleasure of the Board.
Any committee, to the extent provided in the resolution of the Board or in
these Bylaws, shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. No committee, however, shall have the power or authority to amend
the Articles of Incorporation or Bylaws of the Corporation, adopt an agreement
of merger or share exchange, recommend to the shareholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommend to the shareholders a dissolution of the Corporation or a revocation
of a dissolution, or fill vacancies in the Board of Directors. The committee
shall not have the power or authority to declare a distribution, dividend or
authorize the issuance of shares unless such power is granted to such committee
by specific resolution of the Board of Directors. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. The committees shall keep regular
minutes of their proceedings and report the same to the Board when required. If
a committee is designated as an Executive Committee, its members shall consist
of the Chief Executive Officer, and such other directors as shall be designated
by the Board of Directors.
Section 13. Compensation. By affirmative vote of a majority of directors
in office, and irrespective of the personal interest of any of them, the Board
of Directors may establish reasonable compensation for directors for services
to the Corporation as directors, officer, or members of committees. Directors
may be paid a fixed sum for attendance at each meeting of the Board or of a
committee, or an annual salary or retainer, or issued shares of company common
stock or any combination of the above. Directors may also be reimbursed for
reasonable expenses incurred in attending each meeting of the Board or meeting
of a committee.
Section 14. Directors Emeritus. A director who has served the Corporation
with distinction and who has retired from the Board may be elected a Director
Emeritus by the affirmative vote of a majority of the full Board of Directors.
A Director Emeritus shall be elected for life, subject only to his or her
resignation or removal by vote of a majority of the full Board of Directors. A
Director Emeritus shall not have any of the responsibilities or liabilities of
a director, or any of a director's rights, powers, privileges or compensation.
Reference in these Bylaws to "directors" shall not mean or include Directors
Emeritus.
Section 15. Evaluation of Certain Offers. The Board of Directors shall not
approve, adopt or recommend any offer of any person or entity, other than the
Corporation, to make a tender or exchange offer for any capital stock of the
Corporation, to merge or consolidate the Corporation with any other entity or
to purchase or otherwise acquire all or substantially all of the assets or
business of the Corporation unless and until the Board of Directors shall have
first evaluated the offer and determined that the offer would be in compliance
with all applicable laws and that the
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offer is in the best interests of the Corporation and its stockholders.
In connection with its evaluation as to compliance with laws, the Board of
Directors may seek and rely upon an opinion of legal counsel independent from
the offeror and it may test such compliance with laws in any state or federal
court or before any state or federal administrative agency which may have
appropriate jurisdiction. In connection with its evaluation as to the best
interests of the Corporation and its stockholders, the Board of Directors shall
consider all factors which it deems relevant, including without limitation:
(a) The adequacy and fairness of the consideration to be
received by the Corporation and/or its stockholders under the offer
considering historical trading prices of the Corporation's stock,
the price that might be achieved in a negotiated sale of the
Corporation as a whole, premiums over trading prices which have been
proposed or offered with respect to the securities of other
companies in the past in connection with similar offers and the
future prospects for this Corporation and its business;
(b) The potential social and economic impact of the offer and
its consummation on this Corporation, its employees, customers and
vendors; and
(c) The potential social and economic impact of the offer and
its consummation on the communities in which the Corporation and any
subsidiaries operate or are located.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the Corporation shall consist of a
president, a treasurer, and a secretary, all of whom shall be elected by the
Board of Directors. In addition, the Board of Directors may elect a chairman of
the Board of Directors, a vice chairman of the Board of Directors, one or more
vice presidents (the number thereof to be determined by the Board of Directors)
and such assistant secretaries and assistant treasurers as desired. Each
officer shall hold his office until his successor is elected and qualified or
until his earlier resignation or removal. None of the officers of the
Corporation, other than the chairman, the vice chairman, and the president need
be directors. The officers shall be elected at the first meeting of the Board
of Directors after each annual meeting of Shareholders and may be elected at
any other meeting. Any two or more offices may be held by the same person, but
an officer shall not execute, acknowledge or verify any instrument in more than
one capacity if the instrument is required by law to be executed, acknowledged
or verified by two or more officers.
Section 2. Other Officers and Agents. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors. The Board
may, by specific resolution, empower the chairman, the president or the
Executive Committee, if such a committee has been designated by the Board, to
appoint such officers or agents.
Section 3. Removal. The chairman, vice chairman and president may be
removed at any time, with or without cause, but only by the affirmative vote of
a majority of the whole Board of Directors. All vice presidents, the secretary
and the treasurer may be removed at any time, with or without cause, by the
president or by majority vote of directors present at any meeting. Any
assistant secretary or assistant treasurer, or subordinate officer or agent
appointed pursuant to Section 2 of this Article, may be removed at any time,
with or without cause, by majority vote of
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directors present at any meeting, by the president, or by any committee or
other officer empowered so to do by resolution of the Board.
Section 4. Chairman and Vice Chairman. The chairman of the Board of
Directors shall preside at all meetings of the Board of Directors and at all
meetings of shareholders. The chairman shall also perform such other duties as
from time to time may be assigned to him or her by the Board of Directors.
If the chairman dies or is unable to perform the duties of the chairman
for any other reason, the vice chairman shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors. The vice chairman
shall not succeed to any of the other rights, powers or duties of the chairman.
The vice chairman shall also perform such other duties as from time to time may
be assigned to him or her by the Board of Directors.
Section 5. President. The president shall be the chief executive officer
of the corporation, shall have general supervision, direction and control of
the business of the Corporation and shall have the general powers and duties of
management usually vested in or incident to the office of the president and
chief executive officer of a corporation. The president shall be a member of
the Executive Committee, if such a committee is designated by the Board of
Directors. In the absence or inability to act of the chairman and vice chairman
of the Corporation, the president shall preside at all meetings of the
shareholders and all meetings of the Board of Directors. The president shall
also have such other powers and duties as from time to time may be assigned to
him or her by the Board of Directors. Except as the Board of Directors shall
authorize the execution thereof in some other manner, the president shall
execute bonds, mortgages and other contracts in behalf of the Corporation and
shall cause the seal to be affixed to any instrument requiring it. If the
president dies or becomes unable to perform the duties of this office for any
other reason, the Board of Directors shall appoint a successor to be the
president of the Corporation.
Section 6. Vice Presidents. Each vice president shall have such powers and
shall perform such duties as shall be assigned to him or her by the Board of
Directors, and may be designated by such special title as the Board of
Directors shall approve.
Section 7. Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The treasurer
shall deposit all monies and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or the president, taking proper vouchers for
such disbursements. The treasurer shall render to the president and Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his or her transactions as treasurer and of
the financial condition of the financial condition of the Corporation. In
general, the treasurer shall perform all the duties incident to the office of
treasurer and such other duties as may be assigned to him or her by the Board
of Directors of the president.
Section 8. Secretary. The secretary shall give, or cause to be given,
notice of all meetings of shareholders and directors required by law or by
these Bylaws, and all other notices so required. If the secretary is absent or
refuses or neglects, so to do, any such notice may be given by any person
directed to do so by the chairman or vice chairman of the Board of Directors,
the president, or by the directors upon whose written request the meeting is
called as provided in these Bylaws. Unless otherwise directed by the Board of
Directors, the secretary shall record all the proceedings of the meetings of
the Corporation and of the directors in one or more books to
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be kept for that purpose, and shall perform all duties incident to the
office of the secretary and such other duties as may be assigned to him or her
by the directors, the chairman of the Board of Directors, or the president. The
secretary shall have the custody of the seal of the Corporation and shall affix
the same to all instruments requiring it, when authorized by the directors, the
chairman of the Board of Directors, or the president, and attest the same.
Section 9. Assistant Treasurers and Assistant Secretaries. Assistant
treasurers and assistant secretaries, if any shall be elected, shall have such
powers and shall perform such duties as shall be assigned to them,
respectively, by the treasurer or the secretary, respectively, or by the
president or the Board of Directors.
Section 10. Salaries. The salaries and other compensations of the officers
shall be fixed from time to time by or under the direction of the Board of
Directors. No officer shall be prevented from receiving a salary or other
compensation by reason of the fact that he or she is also a director of the
Corporation.
Section 11. Bonds. If the Board of Directors shall so require, the
treasurer, any assistant treasurer and any other officer or agent of the
Corporation shall give bond to the Corporation in such amount and with such
surety as the Board of Directors may deem sufficient, conditioned upon the
faithful performance of their respective duties and offices and any other
conditions approved by the Board of Directors.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents to enter into any contract or execute and delivery
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation, and no evidences of indebtedness shall be issued in its name,
unless authorized by a resolution of the Board of Directors. Such authorization
may be general or confined to specific instances.
Section 3. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VII
MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of this Corporation shall end on
the Saturday nearest the 31st day of May in each year.
Section 2. Notices. Whenever any written notice is required to be given
under the provisions of any law, the Articles of Incorporation for this
Corporation, or by these Bylaws, it shall not be construed or interpreted to
mean personal notice, unless expressly so stated, and any notice so required
shall be deemed to be sufficient if given in writing by facsimile, overnight
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courier or first class mail, by depositing the same in a United States
Post Office box, postage prepaid, addressed to the person entitled thereto at
his address as it appears on the records of the Corporation, and such notice
shall be deemed to have been given on the day of such mailing. Shareholders not
entitled to vote shall not be entitled to receive notice of any meetings,
except as otherwise provided by law or these Bylaws.
Section 3. Waiver of Notice. Whenever any notice is required to be given
under the provisions of any law, or the Articles of Incorporation for this
Corporation, or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Section 4. Voting of Securities. Securities of another corporation,
foreign or domestic, standing in the name of this Corporation, which are
entitled to vote shall be voted, in person or by proxy, by the chairman of the
Board or the president of this Corporation or by such other or additional
persons as may be designated by the Board of Directors.
Section 5. Seal. The corporate seal of the Corporation shall be in such
form as may be authorized and adopted by the Board of Directors. Said seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Directors and officers of the Corporation shall be indemnified as of right
to the fullest extent now or hereafter permitted by law in connection with any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit or proceeding (whether brought by or in the name of
the Corporation, a subsidiary or otherwise and whether formal or informal) in
which a director or officer is a witness or which is brought against a director
or officer in his or her capacity as a director, officer, employee, agent or
fiduciary of the Corporation or of any corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which the director or officer
was serving at the request of the Corporation. Persons who are not directors or
officers of the Corporation may be similarly indemnified in respect of such
service to the extent authorized at any time by the Board of Directors of the
Corporation. The Corporation may purchase and maintain insurance to protect
itself and any such director, officer or other person against any liability
asserted against him or her and incurred by him or her in respect of such
service whether or not the Corporation would have the power to indemnify him or
her against such liability by law or under the provisions of this Article. The
provisions of this Article shall be applicable to actions, suits or
proceedings, whether arising from acts or omissions occurring before or after
the adoption hereof, and to directors, officers and other persons who have
ceased to render such service, and shall inure to the benefit of the heirs,
executors and administrators of the directors, officers and other persons
referred to in this Article. The right of indemnity provided pursuant to this
Article shall not be exclusive and the Corporation may provide indemnification
to any person, by agreement or otherwise, on such terms and conditions as the
Board of Directors may approve. Any agreement for indemnification of any
director, officer, employee or other person may provide indemnification rights
which are broader or otherwise different from those set forth in, or provided
pursuant to, or in accordance with, this Article. Any amendment, alteration,
modification, repeal or adoption of any provision in these Bylaws inconsistent
with this Article VIII shall not adversely affect any indemnification right or
protection of a director, officer, employee or other person of the Corporation
existing at the time of such amendment, alteration, modification, repeal or
adoption.
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ARTICLE IX
AMENDMENTS
These Bylaws may be added to, altered, amended or repealed and new and
other bylaws may be made, altered or added to by a vote of a majority of the
members of the Board of Directors then in office at any regular or special
meeting of the Board, and without prior notices of intent to do so, except that
neither Section 1, 2 or 3 of Article IV shall be amended unless such amendment
is adopted by the affirmative vote of a majority of the Continuing Directors
and at least eighty percent (80%) of the Board of Directors, and these Bylaws
may also be added to, altered, amended or repealed and new or other bylaws made
and adopted by vote of the holders of a majority of the voting shares of
capital stock issued and outstanding at any annual or special meeting, unless a
greater plurality is required by law or by the Articles of Incorporation, if
notice of the proposed alteration or repeal of the bylaw to be made is
contained in the notice of such meeting.
The foregoing Bylaws, adopted by the Board of Directors of Herman Miller,
Inc. on March 18, 1986, have been restated in their entirety to incorporate
amendments adopted by the Board of Directors on November 17, 1987, December 22,
1987, May 10, 1988, July 11, 1990, and October 4, 1990, and January 6, 1997.
_______________________________
Secretary
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EXHIBIT 4d
[HERMAN MILLER LOGO]
Dividend Reinvestment Plan
for Shareholders
of Herman Miller, Inc.
Administered by
First Chicago Trust
Company of New York
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To Our Shareholders:
We are pleased to offer you the opportunity to reinvest your Herman Miller
dividends and to invest voluntary cash payments, in additional shares of Herman
Miller common stock.
Our plan provides a convenient and economical way to increase your investment
in Herman Miller. Participation in the plan is entirely voluntary and you may
join or withdraw at any time.
Please read the complete description of the plan contained in this brochure to
determine whether the plan meets your investment needs. If you decide to
participate, simply complete, sign, and return the enclosed authorization card
to First Chicago Trust Company, the administrators of the plan.
Michael A. Volkema
President and Chief Executive Officer
DIVIDEND REIMBURSEMENT PLAN
The Dividend Reimbursement Plan offers you, as a shareholder of Herman Miller,
an opportunity to buy additional shares of Herman Miller common stock
automatically with your common stock cash dividends. In addition, the Plan
permits you to buy still more shares with voluntary cash payments. The Plan is
administered by First Chicago Trust Company of New York.
ELIGIBILITY
Any registered shareholder of Herman Miller may participate.
HOW THE PLAN WORKS
To join the Plan you need only complete, sign, and mail the card enclosed with
this notice. Be sure to sign exactly as your name appears on the card. (All
joint owners must sign.)
The card authorizes First Chicago, as your agent, to receive your cash
dividends automatically and to use them, together with any voluntary cash
payments you may choose to make, for the purchase of shares of Herman Miller
common stock.
You will receive a statement each time shares are purchased for you, showing
the total shares credited to your account under the Plan, the dividend and/or
the amount of any cash payment invested, the number of shares purchased, and
the price per share for that period.
As the number of shares you hold grows, dividends paid on the increased number
of shares are automatically reinvested, as long as you continue in the Plan.
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YOU MAY, AT ANY TIME, ELECT TO RECEIVE DIVIDENDS IN CASH UPON WRITTEN NOTICE TO
FIRST CHICAGO. UNLESS YOU INSTRUCT OTHERWISE, FIRST CHICAGO WILL RETAIN CUSTODY
OF ALL SHARES CREDITED TO YOUR PLAN ACCOUNT. TO BE EFFECTIVE FOR A GIVEN
DIVIDEND PAYMENT, YOUR NOTICE MUST BE RECEIVED BY FIRST CHICAGO BEFORE THE
RECORD DATE FOR THAT PAYMENT.
VOLUNTARY CASH PAYMENTS
As a participant, you may make a voluntary cash payment when joining the Plan
by enclosing it with the card. Thereafter, voluntary cash payments should be
accompanied by the form provided with your statement of account. These payments
should be made by check or money order payable to "First Chicago--Herman
Miller." Voluntary cash payments to the plan must be at least $25 and there is
a $60,000 maximum limit per calendar year.
Voluntary investments may also be made through automatic monthly deductions
from your checking or savings account with a $1.00 transaction fee subtracted
from the amount drawn from your bank account prior to each investment. The
minimum monthly deduction is $25. The combined amount of automatic monthly
deductions and voluntary cash investments cannot exceed $60,000 per calendar
year. Only participants with accounts at U.S. banks and financial institutions
may authorize automatic monthly deductions. Once automatic monthly deductions
are initiated, funds will be drawn from your account three business days prior
to each investment date.
Your voluntary cash payments will be invested beginning on or about the 15th
day of each month following receipt by First Chicago and dividends ordinarily
paid on the 15th day of January, April, July, and October will be concurrently
invested.
No interest will be paid on funds held by First Chicago pending investment.
You can obtain a refund of any voluntary cash payment sent to First Chicago if
a written request for such a refund is received by First Chicago not less than
48 hours before the next scheduled investment.
It is entirely up to you whether you wish to buy additional shares of common
stock with voluntary cash payments. If you do purchase additional shares, you
do not have to send in the same amount each time.
WHEN THE PLAN STARTS
You can sign up for the Plan at any time. If your signed card is received by
First Chicago before the record date for a dividend payment, the Plan will go
into effect for you with that payment.
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COST OF THE PLAN TO YOU
There are no brokerage commissions, fees, or service charges connected with the
purchase of shares with reinvested dividends under the Plan. These costs are
paid by Herman Miller on your behalf.
For each voluntary cash investment and automatic monthly deduction invested,
you pay your proportionate share of brokerage commissions on the shares
purchased, plus a service charge equal to 5 percent of the amount invested
(with a $3.00 maximum on the service charge). An additional $1.00 transaction
fee will be subtracted from the amount of any automatic monthly deduction.
These charges will be deducted prior to investment.
If you sell shares held in your Plan account, you pay any brokerage
commissions, a service fee, and any other costs of sale.
INCOME TAX INFORMATION
Even though your dividends will be reinvested, they are subject to income taxes
as if they were paid to you in cash. In addition, the Internal Revenue Service
has ruled that the amount of brokerage commissions paid by Herman Miller on
your behalf is to be treated as dividend income to you. The service has further
ruled that the amount paid for brokerage commission is includable in your cost
basis of shares purchased. An information return will be sent to you and the
IRS at year end, which will show the amount paid on your behalf.
FRACTIONAL SALES
When you are a participant in the Plan, the entire amount of your dividend and
any voluntary cash payment is invested. If the total amount is not equal to an
exact number of full shares, the proper fraction of a share is credited to your
account along with the full shares. A fractional share participates
proportionately in all subsequent dividends.
ISSUANCE OF STOCK CERTIFICATES
Shares bought under the Plan will be held for you by First Chicago without
charge. Stock certificates for full shares, credited to your account, will be
delivered to you upon written request.
DEPOSIT OF STOCK CERTIFICATES
For safekeeping purposes, you may deposit with First Chicago any Herman Miller
common stock certificates now or hereafter registered in your name for credit
under the Plan. Thereafter, such shares will be treated in the same manner as
shares purchased through the Plan. There is no charge for this custodial
service, and by making the deposit, you will be relieved of the responsibility
for loss, theft, or destruction of the certificates.
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If you wish to deposit your common stock certificates, you must mail them along
with a written request for deposit to First of Chicago. The certificates should
not be endorsed. To insure against loss resulting from mailing certificates,
First Chicago will provide mail insurance free of charge to you. To be eligible
for certificate mailing insurance, certificates must be mailed in brown,
preaddressed return envelopes supplied by First Chicago, which can be obtained
by contacting them as noted in this brochure. Certificates mailed in this
manner will be insured for up to $25,000, current market value, provided they
are mailed first class. First Chicago will promptly send you a statement
confirming each deposit of your common stock certificates. First Chicago must
be notified of any lost certificate claim within thirty (30) calendar days of
the date the certificates were mailed. To submit such a claim, you must be a
participant in the Plan or a current record holder of common stock. In the
latter case, you must enroll in the Plan at the time the insurance claim is
processed. The maximum insurance protection provided is $25,000 and the
coverage is available only when the certificate(s) are sent in accordance with
the guidelines described above.
Insurance covers the replacement of shares of stock, but in no way protects
against any loss resulting from fluctuations in the value of such shares from
the time the certificates are mailed until such time as a replacement can be
effected.
If you choose not to use the brown preaddressed envelope provided by First
Chicago, certificates should be mailed to the address listed below and insured
for possible mail loss for 2 percent of the market value, with a minimum of
$20.00; this amount represents the replacement cost that will be charged to you
if your certificates are lost.
VOTING
You can vote full shares acquired under the Plan whether the shares are held by
First Chicago or by you. Fractional shares will not be voted.
SALE OF PLAN SHARES
You may at any time, including upon withdrawal from the Plan, request the sale
of all or any full shares held by First Chicago in your Plan account. Any such
request may be made either by writing to First Chicago or calling 1 800 446
2617. First Chicago will make every effort to process all sales orders on the
day the orders are received, provided
that instructions are received before 1:00 p.m. Eastern Time on a business day
during which First Chicago and the relevant securities market are open. The
proceeds from such sale, less any brokerage commissions, a service fee, and any
other costs of sales, will be remitted to you. Each sale request will be
processed and a check for the net proceeds will be mailed as promptly as
possible after First Chicago receives such sale request.
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TO DISCONTINUE
You may terminate your participation in the Plan at any time either by writing
to First Chicago or calling First Chicago at 1 800 446 2617. Terminations made
after the record date for a dividend may not be effective as to that stock
purchase.
Upon discontinuing, unless you instruct First Chicago otherwise, you will
receive a stock certificate for the number of full shares credited to your Plan
account and a check for the fraction of a share, valued at the then current
market price of the stock less any brokerage commission, any service fee, and
any other cost of sale. If you prefer, First Chicago will sell all or part of
the shares that are held for you under the Plan, and send you a check for the
proceeds less any applicable brokerage commissions, a service fee, and any
other costs of sale.
CORRESPONDENCE
Any notices, questions, or other communications regarding the Plan should be
addressed to:
First Chicago Trust Company of New York
Dividend Reinvestment Plan
PO Box 2598
Jersey City, NJ 07303-2598
Be sure to include a reference to Herman Miller, Inc.
Telephone
Shareholder customer service, including sale of shares: 1 800 446 2617.
Normal hours: 8:00 a.m. - 10:00 p.m., Eastern time each business day
8:00 a.m. - 3:30 p.m., Eastern time, Saturdays
Customer Service Representatives are available:
8:30 a.m. - 7:00 p.m., Eastern time, each business day
Foreign language translation service is available in over 140 foreign languages
as part of our shareholder service to better support the needs of Herman
Miller's worldwide shareholder base.
INTERNET: Messages forwarded on the Internet will be responded to within one
business day. The First Chicago Internet address is:
HTTP://www.fctc.com:
E-MAIL: First Chicago Trust's E-Mail address is: [email protected]
TDD: 1-201-222-4955 Telecommunications device for the hearing impaired
FOR COMPLETE DETAILS PLEASE READ THE TERMS AND CONDITIONS.
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TERMS AND CONDITIONS
1. First Chicago Trust Company of New York ("First Chicago"), acting as
agent for each participant in the Dividend Reinvestment Plan, will apply
all voluntary cash payments ($25 minimum, $60,000 maximum per calendar
year) received from such participant, to the purchase of additional shares
of Herman Miller, Inc. ("Herman Miller") common stock for such
participant, and either:
a. pay the participant any cash dividends payable on all of the
shares of Herman Miller common stock now or hereafter registered in
the name of the participant and on all of the shares of Herman Miller
common stock held by First Chicago for the account of the
participant, or
b. apply all of any cash dividends payable to the participant to the
purchase of additional full and fractional shares of Herman Miller
common stock.
Those purchases may be made on any securities exchange where
such shares are traded, in the over-the-counter market, or by
negotiated transactions and may be subject to such terms of price,
delivery, etc., to which First Chicago may agree. Neither Herman
Miller nr any participant shall have any authority or power to direct
the time or price at which shares may be purchased, or the selection
of the broker or dealer through or from whom purchases are to be
made. Any voluntary cash payment will be refunded if the
participant's written request for a refund is received by First
Chicago not less than 48 hours before the next succeeding investment.
2. Voluntary cash payments prior to the 15th day of any month will be
be invested beginning on such day or the next succeeding
business day. In the months in which the dividends are paid,
voluntary cash payments and dividends will be invested concurrently
on the dividend payment date (or the next business day if such date
is not a business day). The price per share purchased for each
participant's account shall be the average price of all shares
purchased for that month. For purchasers with voluntary cash
investments only, such average price shall include brokerage
commissions and any other costs of purchase. First Chicago will hold
the total shares purchased for all participants in its name or the
name of its nominee and will have no responsibility for the value of
such shares after their purchase.
3. First Chicago will make every effort to invest voluntary cash payments
and any dividends it receives promptly on each investment date,
and in no event later than 30 days from such date except where
required under any applicable Federal securities laws or regulations.
A service charge of 5 percent of any voluntary cash investment,
up to a maximum charge of $3.00, will be deducted prior to the
purchase of shares. In the case of automatic monthly deductions only,
an additional $1.00 transaction fee will be subtracted from the
amount withdrawn from the participant's bank account prior to each
investment.
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4. A statement describing cash dividends and/or voluntary cash payments
received, the number of shares purchased, the price per share,
and total shares accumulated under the Plan will be mailed to each
participant by First Chicago as soon as practicable after completion
of each investment for a participant's account.
5. Each participant may obtain, without charge, a certificate or
certificates for all or part of the full shares credited to the
participant's account at any time by making a request in writing or
by telephone to First Chicago.
Participants who wish to do so may deposit certificates
registered in their names for credit as shares held under the Plan.
There is no charge for such deposits.
First Chicago provides insurance coverage on up to $25,000
current market value of certificates mailed by shareholders to First
Chicago for safekeeping in the participant's account in certain
instances as described above.
6. Participation in the Plan may be terminated by a participant at any
time by written or telephone instructions to that effect to
First Chicago. Such instructions will be processed as promptly as
possible after receipt. If a notice to terminate is received by First
Chicago on or after the record date for a dividend payment, First
Chicago in its sole discretion, may either pay such dividend in cash
or reinvest it in shares on behalf of the terminating participant. If
such dividend is reinvested, First Chicago may sell the shares
purchased and remit the proceeds to the participant, less any
brokerage commission, any service fee, and any other costs of the
sale. First Chicago may terminate a participant's participation in
the Plan upon mailing a notice to terminate to the participant at the
participant's address as it appears on First Chicago's records. Upon
termination (unless otherwise instructed by the participant), a
participant will receive certificates for the full shares of common
stock credited to the participant's account. Upon withdrawal of
shares from the Plan (whether or not a participant has requested
termination), a participant may instruct First Chicago to sell
all or part of such shares. Such sale may, but need not, be made by
purchase of the shares for the account of other participants and any
such transaction shall be deemed to have been made at the then
current market price less any brokerage commission, a service fee,
and any other costs of sale. Fractional shares credited to a
terminating account will be paid by check at the then current market
price less any brokerage commission, any service fee, and any other
costs of sale. All sale instructions received by First Chicago will
be processed promptly thereafter (except where deferral is necessary
under applicable federal or state laws or regulations).
7. A participant will have the sole right to vote full shares credited to
the participant's account under the Plan on the record date for
a vote. Proxies with respect to shares of common stock sent to a
participant by First Chicago, as Transfer Agent, will include the
number of full shares held for the participant under the Plan.,
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8. Any stock dividends or split shares of common stock distributed on
shares held by First Chicago for a participant will be credited to the
participant's account. In the event that Herman Miller makes available to
its shareholders rights to subscribe to additional shares, debentures, or
other securities, the full shares held for a participant under the Plan
will be added to other shares held by the participant in calculating the
number of rights to be issued to such participant.
9. The fact that dividends are reinvested does not relieve participants of
liability for income taxes that may be payable on such dividends.
Dividends paid on the accumulated shares and the amount of brokerage
commissions paid on behalf of a participant by Herman Miller, will be
included in the Form 1099 DIV, a copy of which will be sent to the
Internal Revenue Service and to each participant.
10. First Chicago shall not be liable under the Plan for any act done in good
faith or for any good faith omission to act including, without limitation,
any claims for liability 1) arising out of failure to terminate an
individual's participation in the Plan upon the participant's death prior
to receipt of notice in writing of such death, and 2) with respect to the
prices at which shares are purchased or sold for participant's accounts
and the time such purchases or sales are made.
11. The terms and conditions of the Plan and its operation shall be governed
by the laws of the State of New York.
12. The Tax Equity and Fiscal Responsibility Act 1982 imposes certain
reporting obligations upon brokers and other middlemen. As a result, First
Chicago is required to report to the IRS and to the participant any sales
of stock by it on behalf of the participant.
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HERMAN MILLER, INC.
KEY EXECUTIVE DEFERRED COMPENSATION PLAN
1. PURPOSE.
The purposes of the Herman Miller Key Executive Deferred Compensation Plan
(the "Plan") are (i) to provide key executives of Herman Miller, Inc. or any of
its affiliates or subsidiaries (the "Company") the opportunity to acquire an
equity interest in the Company, (ii) to attract and retain well-qualified
individuals, and (iii) to align the interests of management and the
shareholders of the Company. The Plan shall permit employees selected by the
Committee, in the manner set forth in Section 3 of the Plan, to participate in
the Plan ("Participants") to defer receipt of all or a portion of the
Participant's EVA Cash Incentive. A Participant's interest under the Plan shall
be expressed in Stock Units equivalent to shares of the Company's Common Stock,
par value $.20 per share ("Shares"). The Plan may be adopted by any of the
Company's affiliates or subsidiaries with the consent of the Board of Directors
of the Company (the "Board").
2. TERM AND PLAN YEAR.
The Plan shall be effective when adopted by the Board. The Plan shall
remain in effect until terminated by the Board. The issuance of Shares under
the Plan may be conditioned upon the effectiveness of a registration statement
covering the Shares. The Plan Year shall be the period beginning on the first
day of the Company's fiscal year and ending on the last day of its fiscal year.
3. ELIGIBILITY AND PARTICIPATION.
Within 15 days after the Plan becomes effective and annually thereafter,
on or before the thirtieth (30th) day preceding the first day of each Plan
Year, the Executive Compensation Committee of the Board (the "Committee") will
determine those key executives who are eligible to become Participants. At the
same time, the Committee will establish the limits which shall apply to each
Participant's participation (the "Limits"). These Limits shall be: (i) the
maximum percentage of the EVA Cash Incentive which may be deferred by each
Participant; (ii) the maximum amount of EVA Cash Incentive which will be
subject to a Premium Percentage for each Participant; and, (iii) the amount of
the Premium Percentage for each Participant. An eligible key executive will
become a Participant by submitting a Deferral Election within 30 days after the
Plan becomes effective and thereafter prior to the first day of the Plan Year.
A key employee's eligibility to submit a Deferral Election, and the annual
Limits shall not carry over from year to year. Each key executive must have his
or her eligibility to submit a Deferral Election and the Limits determined
annually by the Committee.
4. DEFERRAL OF EVA CASH INCENTIVE.
(a) DEFERRAL ELECTIONS: Subject to the Limits established by the
Committee, each eligible key executive may elect to defer the payment of
all or part of any EVA Cash Incentive which otherwise would be paid for a
Plan Year. The Deferral Elections (i) must be in writing, (ii) must
designate the percentage (not less than 15%) of the EVA Cash Incentive to
be deferred for the Plan Year (the "Deferral Percentage"), (iii) must
specify the year of payment, and (iv) must designate the type of payment
in accordance with Section 7 ("Payment Election"). The Deferral
Percentage may change from Plan
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Year to Plan Year; however, the Deferral Percentage for a particular Plan
Year may not be changed after the beginning of the Plan Year to which the
election relates. The Payment Election may be changed, but not later than
24 months prior to the date the payment is to commence. Except in the
initial year of the Plan, each Deferral Election must be received by the
Committee prior to the first day of the Plan Year for which the EVA Cash
Incentive will be paid. Provided that the key executive is again
determined to be eligible to participate with identical participation
Limits, a Deferral Election will continue in effect for subsequent Plan
Years unless the Deferral Percentage is changed or revoked, in writing,
on or before the first day of the next Plan Year.
(b) CREDITING DEFERRAL AMOUNTS TO ACCOUNTS: Amounts deferred
pursuant to Section 4(a) ("Deferrals") shall be credited in Stock Units
as of the last day of the month in which such amount would have been paid
in cash to a bookkeeping reserve account maintained by the Company
("Stock Unit Account"). The Stock Unit Account shall consist of a Basic
Account and a Premium Account. The number of Stock Units credited to a
Participant's Basic Account shall equal one hundred percent (100%) of the
Deferral, divided by the Fair Market Value (as defined in Section 10
hereof) of a Share on the last day of the month in which such Deferral
would have been paid but for the Deferral Election pursuant to Section
4(a). The number of Stock Units credited to a Participant's Premium
Account shall equal the Premium Percentage applicable to the Participant,
multiplied by the Deferral, divided by the Fair Market Value of a Share
on the last day of the month in which such Deferral would have been paid
but for the Deferral Election pursuant to Section 4(a). Such calculations
shall be carried to three decimal places.
(c) The value of the Stock Units credited to the Participant's Stock
Unit Account shall constitute the Participant's entire benefit under this
Plan.
5. ADDITIONS TO DEFERRED ACCOUNTS.
As of each dividend payment date, with respect to Shares, there shall be
credited to each Participant's Stock Unit Account certain Dividend Units which
will be an additional number of Stock Units equal to (i) the per-share dividend
payable with respect to a Share on such date multiplied by (ii) the number of
Stock Units held in the Stock Unit Account as of the close of business on the
first business day prior to such dividend payment date and, if the dividend is
payable in cash or property other than Shares, divided by (iii) the Fair Market
Value of a Share on such business day. For purposes of this Section 5, the term
dividend shall include all dividends, whether normal or special, and whether
payable in cash, Shares or other property. The calculation of additional Stock
Units shall be carried to three decimal places.
6. VESTING OF ACCOUNTS.
(a) BASIC ACCOUNTS: All Stock Units credited to a Participant's
Basic Account (and the Dividend Units attributable thereto) pursuant to
this Plan shall be at all times fully vested and nonforfeitable.
(b) PREMIUM ACCOUNTS: All Stock Units credited to a Participant's
Premium Account pursuant to this Plan (and the Dividend Units
attributable thereto) shall become thirty-three and one-third percent (33
1/3%) vested and nonforfeitable on the first day of the Plan Year next
following the date the Stock Units are credited to the Participant's
Premium Account, provided that the Participant is then an employee
of the Company's Premium Account. An additional thirty-three and
one third percent (33 1/3%) will become vested and nonforfeitable
on the first day of each Plan Year thereafter, provided that the
Participant
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is then an employee of the Company. In the event that the Participant
dies, becomes disabled, retires at the normal retirement age (determined
by the Committee) or terminates employment for any reason within
twenty-four (24) months following a Change of Control (as defined in the
Company's Plan for Severance Compensation After Hostile Takeover, as
Amended and Restated), all unvested Stock Units and Dividend Units will
immediately become one hundred percent (100%) vested and nonforfeitable.
Additionally, the Committee, in its sole discretion, may accelerate a
Participant's vested percentage if it determines that such action would
be in the best interest of the Company.
7. PAYMENT OF ACCOUNTS.
(a) TIME OF DISTRIBUTION: Payment of the vested Stock Units to a
Participant shall commence in January of the year of payment specified by
the Participant in the Deferral Election. In the event of the death of
the Participant before the Participant's Stock Unit Account has been
fully distributed, an immediate lump sum distribution of the Stock Unit
Account shall be made to the Participant's Beneficiary or Beneficiaries
in the proportions designated by such Participant.
(b) FORM OF DISTRIBUTION: The total number of vested whole Stock
Units in a Participant's Stock Unit Account shall be paid to the
Participant in an equal number of whole Shares. If installment payments
are elected, the number of Shares to be paid shall be determined
initially by dividing the number of vested Stock Units in the Stock Unit
Account by the number of installment payments to be paid rounded to the
nearest number of whole Stock Units; each subsequent installment payment
shall be determined by dividing the number of then vested Stock Units
remaining in the Stock Unit Account by the number of installments
remaining to be paid and rounding to the nearest number of whole Stock
Units. The Company shall issue and deliver to the Participant Share
certificates for payment of Stock Units as soon as practicable following
the date on which the Stock Units, or any portion thereof, become
payable.
(c) TYPE OF DISTRIBUTION: Distributions will be made from the Stock
Unit Account of a Participant in whichever of the following methods the
Participant elects at the time of the deferral election:
(ii) A single sum.
(iii) Annual installments over a period not to exceed 10
years, as the Participant shall elect.
If all or any portion of the Stock Unit Account is to be distributed
in installments, the portion of the Participant's Stock Unit Account
being held for future distribution shall continue to be credited with
additional Dividend Units as provided in Section 5.
8. SHARES SUBJECT TO THE PLAN.
Shares that may be issued under the Plan shall be acquired by the Company
in open-market transactions, consistent with all applicable rules and
regulations regarding the repurchase of securities.
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9. ADJUSTMENTS AND REORGANIZATION.
In the event of any stock dividend, stock split, combination or exchange
of Shares, merger, consolidation, spin-off, recapitalization or other
distribution (other than normal cash dividends) of Company assets to
shareholders, or any other change affecting Shares or the price of Shares, such
proportionate adjustments, if any, as the Committee in its sole discretion may
deem appropriate to reflect such change shall be made with respect to the
aggregate number of Shares that may be issued under the Plan, and each Stock
Unit or Dividend Unit held in the Stock Unit Accounts. Any adjustments
described in the preceding sentence shall be carried to three decimal places.
10. FAIR MARKET VALUE.
Fair Market Value of a Share for all purposes under the Plan shall mean,
for any particular date, (i) for any period during which the Share shall be
listed for trading on a national securities exchange or the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), the
closing price per Share on such exchange or the NASDAQ as of the close of such
trading day or (ii) for any period during which the Share shall not be listed
for trading on a national securities exchange or NASDAQ, the market price per
Share as determined by a qualified appraiser selected by the Board. If Fair
Market Value is to be determined on a day when the markets are not open, Fair
Market Value on that day shall be the Fair Market Value on the most recent
preceding day when the markets were open.
11. TERMINATION OR AMENDMENT OF PLAN.
(a) IN GENERAL: The Board may, at any time by resolution, terminate,
suspend or amend this Plan. If the Plan is terminated by the Board, no
deferrals may be credited after the effective date of such termination,
but previously credited Stock Units and Dividend Units shall remain in
effect in accordance with the terms and conditions of the Plan.
(b) WRITTEN CONSENTS: No amendment may adversely affect the right of
any Participant to have Dividend Units credited to a Stock Unit Account
or to receive any Shares pursuant to the payout of such accounts, unless
such Participant consents in writing to such amendment.
12. COMPLIANCE WITH LAWS.
(a) The obligations of the Company to issue any Shares under this
Plan shall be subject to all applicable laws, rules and regulations and
the obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Board.
(b) Subject to the provisions of Section 11, the Board may take such
changes in the design and administration of this Plan as may be necessary
or appropriate to comply with the rules and regulations of any government
authority.
13. MISCELLANEOUS.
(a) UNFUNDED PLAN: Nothing contained in this Plan and no action
taken pursuant to the provisions hereof shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the
Company and Participant, the Participant's designee
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or any other person. The Plan shall be unfunded with respect to the
Company's obligation to pay any amounts due, and a Participant's rights
to receive any payment with respect to any Stock Unit Account shall be
not greater than the rights of an unsecured general creditor of the
Company.
The Company may establish a Rabbi Trust to accumulate Shares to fund
the obligations of the Company pursuant to this Plan. Payment from the
Rabbi Trust of amounts due under the terms of this Plan shall satisfy the
obligation of the Company to make such payment. In no event shall any
Participant be entitled to receive payment of an amount from the Company
that the Participant received from the Rabbi Trust.
(b) ASSIGNMENT; ENCUMBRANCES: The right to have amounts credit to a
Stock Unit Account and the right to receive payment with respect to such
Stock Unit Account under this Plan are not assignable or transferable and
shall not be subject to any encumbrances, liens, pledges, or charges of
the Participant or to claims of the Participant's creditors. Any attempt
to assign, transfer, hypothecate or attach any rights with respect to or
derived from any Stock Unit shall be null and void and of no force and
effect whatsoever.
(c) DESIGNATION OF BENEFICIARIES: A Participant may designate in
writing a beneficiary or beneficiaries to receive any distribution under
the Plan which is made after the Participant's death; provided, however,
that if at the time any such distribution is due, there is no designation
of a beneficiary in force or if any person (other than a trustee or
trustees) as to whom a beneficiary designation was in force at the time
of such Participant's death shall have died before the payment became due
and the Participant has failed to provide such beneficiary designation
for any person or persons to take in lieu of such deceased person, the
person or persons entitled to receive such distribution (or part thereof,
as the case may be) shall be the participant's executor or administrator.
(d) ADMINISTRATION: The Committee shall administer the Plan,
including the adoption of rules or the preparation of forms to be used in
its operation, and to interpret and apply the provisions hereof as well
as any rules which it may adopt. In addition, the Committee may appoint
other individuals, firms or organizations to act as agent of the Company
carrying out administrative duties under the Plan. Except as may be
provided in a Rabbi Trust, the decisions of the Committee, including, but
not limited to, interpretations and determinations of amounts due under
this Plan, shall be final and binding on all parties.
(e) GOVERNING LAW: The validity, construction and effect of the Plan
and any actions taken or relating to the Plan, shall be determined in
accordance with the laws of the State of Michigan without regard to its
conflict of law rules, and applicable federal law.
(f) RIGHTS AS A SHAREHOLDER: A Participant shall have no rights as a
stockholder with respect to a Stock Unit until the Participant actually
becomes a holder of record of Shares distributed with respect thereto.
(h) NOTICES: All notices or other communications made or given
pursuant to this Plan shall be in writing and shall be sufficiently made
or given if hand delivered, or if mailed by certified mail, addressed to
the Participant at the address contained in the records of the Company or
to the Company at its principal office, as applicable.
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DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made and entered into this__________day of_____
, 1997, by and between HERMAN MILLER, INC., a Michigan corporation (the
"Company"), and ________________________________________________________
________________________, an employee of the Company ("Employee").
WITNESSETH
A. The Committee of the Company's Key Executive Deferred Compensation Plan
(the "Plan") has determined that Employee is eligible to be a Participant in
the Plan. Employee has elected to participate in the Plan and has submitted a
Deferral Election, a copy of which is attached to this Agreement as Appendix I.
B. Pursuant and subject to the terms and conditions of the Plan, the terms
of Employee's Deferral Election and the Limits applicable to Employee's
participation in the Plan (attached as Appendix II to this Agreement), the
Company and Employee have agreed upon the deferral of certain compensation
payable by the Company to Employee and desire to set forth that understanding
fully and completely in writing.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the Company and Employee agree:
1. DEFERRAL OF EVA CASH INCENTIVE. Employee agrees to defer that
percentage of EVA Cash Incentive, otherwise payable by the Company, at the rate
set forth in the attached Deferral Election applicable to the Plan Year
designated in the Deferral Election (the "Deferral Percentage"). The amount of
Employee's EVA Cash Incentive for a Plan Year, multiplied by the prevailing
Deferral Percentage for that Plan Year, constitutes the Deferred Cash Amount.
The Deferral Percentage may not be changed after the beginning of the Plan Year
to which the election relates, and the Deferral Percentage may not be for less
than 15% of that year's EVA Cash Incentive.
2. CREDITING DEFERRAL AMOUNTS TO ACCOUNTS. The Company shall credit the
Deferred Cash Amounts in Stock Units, as of the last day of the month in which
such Deferred Cash Amount would have been paid in cash, to a bookkeeping
reserve account maintained by the Company ("Stock Unit Account"). The Stock
Unit Account shall include a Basic Account and a Premium Account.
(a) BASIC ACCOUNT. The number of Stock Units credited to Employee's
Basic Account shall equal one hundred percent (100%) of the Deferred Cash
Amount, divided by the Fair Market Value (as defined in Paragraph 7
hereof) of a Share on the last day of the month in which such deferral
amount would have been paid but for the Deferral Election.
(b) PREMIUM ACCOUNT. The number of Stock Units credited to
Employee's Premium Account shall equal the Premium Percentage (as
designated in Appendix II) applicable to Employee, multiplied by the
Deferred Cash Amount (subject to the maximum amount of EVA Cash Incentive
that is subject to a Premium Percentage, as specified in Appendix II),
divided by the Fair Market Value of a Share on the last day of the month
in which such deferral amount would have been paid but for the Deferral
Election.
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Such calculations shall be carried to three decimal places. The
value of the Stock Units credited to Employee's Stock Unit Account shall
constitute Employee's entire benefit under the Plan.
3. ADDITIONS TO DEFERRED ACCOUNTS. As of each dividend payment date
with respect to Shares, Dividend Units shall be credited to Employee's
Stock Unit Account equal to (i) the per-share Dividend payable with respect to
a Share on such date, multiplied by (ii) the number of Stock Units held in the
Stock Unit Account as of the close of business on the first business day prior
to such Dividend payment date and, if the Dividend is payable in cash or
property other than Shares, divided by (iii) the Fair Market Value of a Share
on such business day. For purposes of this Agreement, "Dividend" shall include
all dividends, whether normal or special, and whether payable in cash, Shares
or other property. The calculation of Dividend Units shall be carried to three
decimal places.
4. VESTING OF ACCOUNTS.
(a) BASIC ACCOUNT VESTING. All Stock Units credited to Employee's
Basic Account (and the Dividend Units attributable thereto) shall be at
all times fully vested and nonforfeitable.
(b) PREMIUM ACCOUNT VESTING. Commencing on the first day of the
Plan Year immediately following the Plan Year for which Stock Units are
credited to Employee's Premium Account ("Initial Vesting Date") and on
the first and second anniversary of the Initial Vesting Date (each a
"Vesting Date"), all Stock Units credited to Employee's Premium Account
(and the Dividend Units attributable thereto) shall become thirty-three
and one-third percent (33 1/3%) vested and nonforfeitable, provided that
Employee is employed by the Company as of the applicable Vesting Date.
In the event that Employee dies, becomes disabled, retires at the normal
retirement age specified in the Company's qualified retirement plan or
terminates employment for any reason within twenty-four (24) months
following a Change of Control (as defined in the Plan), all unvested
Stock Units and Dividend Units will immediately become one hundred
percent (100%) vested and nonforfeitable. Additionally, the Committee,
in its sole discretion, may accelerate an Employee's vested percent if it
determines that such action would be in the best interest of the Company.
5. PAYMENT OF ACCOUNTS.
(a) TIME OF DISTRIBUTION. Payment of the vested Stock Units to
Employee shall commence in January of the year of payment specified in
the Deferral Election. In the event of the death of Employee before the
Stock Unit Account has been fully distributed, an immediate lump sum
distribution of the Stock Unit Account shall be made to Employee's
Beneficiary or Beneficiaries in the proportions designated by Employee.
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(b) FORM OF DISTRIBUTION: The total number of vested whole Stock
Units in Employee's Stock Unit Account shall be paid to Employee in an
equal number of whole Shares. If installment payments are elected in
Employee's Deferral Election, the number of Shares to be paid shall be
determined initially by dividing the number of vested Stock Units in the
Stock Unit Account by the number of installment payments to be paid,
rounded to the nearest number of whole Stock Units; each subsequent
installment payment shall be determined by dividing the number of then
vested Stock Units remaining in the Stock Unit Account by the number of
installments remaining to be paid and rounding to the nearest number of
whole Stock Units. The Company shall issue and deliver to Employee Share
certificates for payment of Stock Units as soon as practicable following
the date on which the Stock Units, or any portion thereof, become
payable. If all or any portion of the Stock Unit Account is to be
distributed in installments, the portion of Employee's Stock Unit Account
being held for future distribution shall continue to be credited with
additional Dividend Units as provided in Paragraph 3 of this Agreement.
6. ADJUSTMENTS AND REORGANIZATION. In the event of any stock dividend,
stock split, combination or exchange of Shares, merger, consolidation,
spin-off, recapitalization or other distribution (other than normal cash
Dividends) of Company assets to shareholders, or any other change affecting
Shares or the price of Shares, such proportionate adjustments, if any, as the
Committee in its sole discretion may deem appropriate to reflect such change
shall be made with respect to each Stock Unit or Dividend Unit held in the
Stock Unit Accounts. Any adjustments described in the preceding sentence shall
be carried to three decimal places.
7. FAIR MARKET VALUE. Fair Market Value of a Share for all purposes under
the Plan and this Agreement shall mean, for any particular date, (i) for any
period during which the Shares shall be listed for trading on a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the closing price per Share on such exchange or
the NASDAQ as of the close of such trading day, or (ii) for any period during
which the Shares shall not be listed for trading on a national securities
exchange or NASDAQ, the market price per Share as determined by a qualified
appraiser selected by the Board. If Fair Market Value is to be determined on a
day when the markets are not open, Fair Market Value on that day shall be the
Fair Market Value on the most recent preceding day when the markets were open.
8. COMPLIANCE WITH LAWS. The obligations of the Company to issue Shares
under the Plan shall be subject to all applicable laws, rules and regulations
and the obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Board. Subject to the provisions of
Section 11 of the Plan, the Board may take such changes in the design and
administration of this Plan as may be necessary or appropriate to comply with
the rules and regulations of any government authority.
9. SUBJECT TO PLAN. This Agreement is subject to the terms and provisions
of the Plan, as amended from time to time, to which reference is made. The
terms defined in this Agreement shall have the meanings set forth in the Plan
or in this Agreement. If any inconsistency exists between the provisions of
this Agreement and the Plan, the Plan shall govern.
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<PAGE> 9
10. MISCELLANEOUS.
(a) UNFUNDED PLAN. Nothing contained in this Agreement or the Plan
and no action taken pursuant to the provisions of the Agreement or the
Plan shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and Employee, the Employee's
designee or any other person. The Plan shall be unfunded with respect to
the Company's obligation to pay any amounts due, and Employee's rights to
receive any payment with respect to any Stock Unit Account shall be not
greater than the rights of an unsecured general creditor of the Company.
The Company may establish a Rabbi Trust to accumulate Shares to fund the
obligations of the Company pursuant to this Agreement and the Plan.
(b) ASSIGNMENT; ENCUMBRANCES. The right to have amounts credited to
a Stock Unit Account and the right to receive payment with respect to
such Stock Unit Account under this Agreement shall not be assignable or
transferable and shall not be subject to any encumbrances, liens,
pledges, or charges of Employee or to claims of Employee's creditors.
Any attempt to assign, transfer, hypothecate or attach any rights with
respect to or derived from any Stock Unit or Shares held in a Stock Unit
Account shall be null and void and of no force and effect whatsoever.
(c) DESIGNATION OF BENEFICIARIES. Employee may designate in writing
a beneficiary or beneficiaries to receive any distribution under this
Agreement and the Plan which is made after Employee's death; provided,
however, that if at the time any such distribution is due, there is no
designation of a beneficiary in force or if any person (other than a
trustee or trustees) as to whom a beneficiary designation was in force at
the time of Employee's death shall have died before the payment became
due and Employee has failed to provide such beneficiary designation for
any person or persons to take in lieu of such deceased person, the person
or persons entitled to receive such distribution (or part thereof, as the
case may be) shall be the Employee's executor or administrator.
(d) GOVERNING LAW; AMENDMENT. The validity, construction and effect
of this Agreement shall be determined in accordance with the laws of the
State of Michigan without regard to its conflict of law rules and
applicable federal law. This Agreement may not be amended except by
written instrument signed by Employee and the Company.
(e) RIGHTS AS A SHAREHOLDER. Employee shall have no rights as a
shareholder with respect to a Stock Unit until Employee actually becomes
a holder of record of Shares distributed with respect thereto.
(f) NOTICES. All notices or other communications made or given
pursuant to this Agreement shall be in writing and shall be sufficiently
made or given if hand delivered, or if mailed by certified mail,
addressed to Employee at the address contained in the records of the
Company or to the Company at its principal office, as applicable.
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<PAGE> 10
IN WITNESS WHEREOF, this Agreement has been executed the date first
written above.
EMPLOYEE: _____________________________
_______________________________________
(SIGNATURE)
HERMAN MILLER, INC.
BY ____________________________________
ITS ____________________________________
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<PAGE> 11
DEFERRAL ELECTION
FOR THE HERMAN MILLER, INC.
KEY EXECUTIVE DEFERRED COMPENSATION PLAN (THE "PLAN")
The undersigned employee ("Employee") hereby elects the following,
pursuant to the terms of the attached Agreement and the Plan:
1. Deferral Percentage. The following percentage of my EVA Cash Incentive
("Deferred Percentage"), for the Plan Year specified below, shall be deferred
and paid in accordance with the Agreement and the Plan: 50% (NOT LESS THAN
15%).
2. Plan Year. This Deferral Election shall apply to the year ending:
1997, ("Plan Year") and each subsequent Plan Year, unless this Deferral
Election is modified or revoked, in writing. No modification or revocation
shall be effective for a Plan Year after the first day of that Plan Year.
3. Year of Payment. Payment of my Stock Unit Account shall commence in
January of 2011.
4. Type of Payment. Payment of my Stock Unit Account shall be made as
follows (check one):
a. Lump Sum
---
x b. Annual Installments over a period of 5 years (not to exceed 10).
---
Dated: February 28, 1997 EMPLOYEE: Michael A. Volkema
----------------------------
(signature)
APPENDIX I
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PARTICIPATION LIMITS
THE HERMAN MILLER, INC. KEY EXECUTIVE
DEFERRED COMPENSATION PLAN
The following Limits shall apply to Employee's Deferral Election and the
attached Agreement:
<TABLE>
<S><C>
1. Maximum Deferral Percentage. The Maximum Percentage of EVA
Cash Incentive which may be deferred by Employee: 100%
2. Maximum Amount Subject to Premium Percentage. The Maximum
Amount of EVA Cash Incentive that shall be subject to the Premium
Percentage: 50%
3. Premium Percentage. 30%
</TABLE>
APPENDIX II
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<PAGE> 13
DEFERRAL ELECTION
FOR THE HERMAN MILLER, INC.
KEY EXECUTIVE DEFERRED COMPENSATION PLAN (THE "PLAN")
The undersigned employee ("Employee") hereby elects the following,
pursuant to the terms of the attached Agreement and the Plan:
1. Deferral Percentage. The following percentage of my EVA Cash Incentive
("Deferred Percentage"), for the Plan Year specified below, shall be deferred
and paid in accordance with the Agreement and the Plan: 50% (NOT LESS THAN
15%).
2. Plan Year. This Deferral Election shall apply to the year ending:
1997, ("Plan Year") and each subsequent Plan Year, unless this Deferral
Election is modified or revoked, in writing. No modification or revocation
shall be effective for a Plan Year after the first day of that Plan Year.
3. Year of Payment. Payment of my Stock Unit Account shall commence in
January of 2011.
4. Type of Payment. Payment of my Stock Unit Account shall be made as
follows (check one):
x a. Lump Sum
---
b. Annual Installments over a period of year(s) (not to exceed 10).
--- -----
Dated: February 28, 1997 EMPLOYEE: Brian C. Walker
----------------------------
(signature)
APPENDIX I
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<PAGE> 14
PARTICIPATION LIMITS
THE HERMAN MILLER, INC. KEY EXECUTIVE
DEFERRED COMPENSATION PLAN
The following Limits shall apply to Employee's Deferral Election and the
attached Agreement:
<TABLE>
<S><C>
1. Maximum Deferral Percentage. The Maximum Percentage of EVA
Cash Incentive which may be deferred by Employee: 100%
2. Maximum Amount Subject to Premium Percentage. The Maximum
Amount of EVA Cash Incentive that shall be subject to the Premium
Percentage: 50%
3. Premium Percentage 30%
</TABLE>
APPENDIX II
-92-
<PAGE> 15
DEFERRAL ELECTION
FOR THE HERMAN MILLER, INC.
KEY EXECUTIVE DEFERRED COMPENSATION PLAN (THE "PLAN")
The undersigned employee ("Employee") hereby elects the following,
pursuant to the terms of the attached Agreement and the Plan:
1. Deferral Percentage. The following percentage of my EVA Cash Incentive
("Deferred Percentage"), for the Plan Year specified below, shall be deferred
and paid in accordance with the Agreement and the Plan: 50% (NOT LESS THAN
15%).
2. Plan Year. This Deferral Election shall apply to the year ending:
1997, ("Plan Year") and each subsequent Plan Year, unless this Deferral
Election is modified or revoked, in writing. No modification or revocation
shall be effective for a Plan Year after the first day of that Plan Year.
3. Year of Payment. Payment of my Stock Unit Account shall commence in
January of 2003.
4. Type of Payment. Payment of my Stock Unit Account shall be made as
follows (check one):
x a. Lump Sum
---
b. Annual Installments over a period of year(s) (not to exceed 10).
--- -----
Dated: February 28, 1997 EMPLOYEE: Christopher A. Norman
-------------------------------
(signature)
APPENDIX I
-93-
<PAGE> 16
PARTICIPATION LIMITS
THE HERMAN MILLER, INC. KEY EXECUTIVE
DEFERRED COMPENSATION PLAN
The following Limits shall apply to Employee's Deferral Election and the
attached Agreement:
<TABLE>
<S><C>
1. Maximum Deferral Percentage. The Maximum Percentage of EVA
Cash Incentive which may be deferred by Employee: 100%
2. Maximum Amount Subject to Premium Percentage. The Maximum
Amount of EVA Cash Incentive that shall be subject to the Premium
Percentage: 50%
3. Premium Percentage. 30%
</TABLE>
APPENDIX II
-94-
<PAGE> 17
DEFERRAL ELECTION
FOR THE HERMAN MILLER, INC.
KEY EXECUTIVE DEFERRED COMPENSATION PLAN (THE "PLAN")
The undersigned employee ("Employee") hereby elects the following,
pursuant to the terms of the attached Agreement and the Plan:
1. Deferral Percentage. The following percentage of my EVA Cash Incentive
("Deferred Percentage"), for the Plan Year specified below, shall be deferred
and paid in accordance with the Agreement and the Plan: 50% (NOT LESS THAN
15%).
2. Plan Year. This Deferral Election shall apply to the year ending:
1997, ("Plan Year") and each subsequent Plan Year, unless this Deferral
Election is modified or revoked, in writing. No modification or revocation
shall be effective for a Plan Year after the first day of that Plan Year.
3. Year of Payment. Payment of my Stock Unit Account shall commence in
January of 2002.
4. Type of Payment. Payment of my Stock Unit Account shall be made as
follows (check one):
x a. Lump Sum
---
b. Annual Installments over a period of year(s) (not to
--- exceed 10). -----
Dated: February 28, 1997 EMPLOYEE: Gary S. Miller
-------------------------
(signature)
APPENDIX I
-95-
<PAGE> 18
PARTICIPATION LIMITS
THE HERMAN MILLER, INC. KEY EXECUTIVE
DEFERRED COMPENSATION PLAN
The following Limits shall apply to Employee's Deferral Election and the
attached Agreement:
<TABLE>
<S><C>
1. Maximum Deferral Percentage. The Maximum Percentage of EVA
Cash Incentive which may be deferred by Employee: 100%
2. Maximum Amount Subject to Premium Percentage. The Maximum
Amount of EVA Cash Incentive that shall be subject to the Premium
Percentage: 50%
3. Premium Percentage. 30%
</TABLE>
APPENDIX II
-96-
<PAGE> 19
DEFERRAL ELECTION
FOR THE HERMAN MILLER, INC.
KEY EXECUTIVE DEFERRED COMPENSATION PLAN (THE "PLAN")
The undersigned employee ("Employee") hereby elects the following,
pursuant to the terms of the attached Agreement and the Plan:
1. Deferral Percentage. The following percentage of my EVA Cash Incentive
("Deferred Percentage"), for the Plan Year specified below, shall be deferred
and paid in accordance with the Agreement and the Plan: 50% (NOT LESS THAN
15%).
2. Plan Year. This Deferral Election shall apply to the year ending:
1997, ("Plan Year") and each subsequent Plan Year, unless this Deferral
Election is modified or revoked, in writing. No modification or revocation
shall be effective for a Plan Year after the first day of that Plan Year.
3. Year of Payment. Payment of my Stock Unit Account shall commence in
January of 2010.
4. Type of Payment. Payment of my Stock Unit Account shall be made as
follows (check one):
a. Lump Sum
---
x b. Annual Installments over a period of 4 years (not to exceed 10).
---
Dated: February 28, 1997 EMPLOYEE: Andrew C. McGregor
-----------------------------
(signature)
APPENDIX I
-97-
<PAGE> 20
PARTICIPATION LIMITS
THE HERMAN MILLER, INC. KEY EXECUTIVE
DEFERRED COMPENSATION PLAN
The following Limits shall apply to Employee's Deferral Election and the
attached Agreement:
<TABLE>
<S><C>
1. Maximum Deferral Percentage. The Maximum Percentage of EVA
Cash Incentive which may be deferred by Employee: 100%
2. Maximum Amount Subject to Premium Percentage. The Maximum
Amount of EVA Cash Incentive that shall be subject to the Premium
Percentage: 50%
3. Premium Percentage. 30%
</TABLE>
APPENDIX II
-98-
<PAGE> 1
EXHIBIT 10m
August 2, 1996
Dr. Alan Fern
3605 Raymond
Chevy Chase, MD 20815
Dear Alan
CONSULTING AGREEMENT
I wish to confirm the following provisions for the Consulting Agreement between
Herman Miller, Inc., and you which will become effective on Wednesday, October
2, 1996, which will be the date of your official retirement from the Herman
Miller Board of Directors.
A. Term of Agreement--The agreement will be effective for two years
beginning October 2, 1996, and renewable thereafter on a quarterly basis
based on agreement between Herman Miller, Inc., and you.
B. Reporting Relationship--During the term of this agreement, you will
report directly to the chairman of the Board.
C. Compensation--During the term of this agreement, you will be compensated
with an annual retainer of $50,000 per year which will be paid quarterly
with the first payment being made on October 2, 1996. Herman Miller, Inc.,
will also be responsible for your travel and other business expenses
incurred in connection with your consulting duties.
D. Consulting Agreements--The priority of consulting assignments will be
established by the chairman of the Board and the chief executive officer.
The following is a list of initial assignments.
1. Analysis of HMI Archival Collections--This will involve an
analysis with subsequent recommendations to the Board of Directors as
to the appropriate long-term management and disposition of the HMI
archival collections.
2. Library of Congress Charles Eames Exhibit--This will involve
the oversight of the Charles Eames Exhibition which will begin in
1997 with joint sponsorship by Vitra, IBM, and Herman Miller. During
this assignment you will serve as the representative of the Board of
Directors.
-99-
<PAGE> 2
page 2
3. Evaluation of the Herman Miller Design Foundation--This will
involve an analysis with recommendations to the Board of Directors as
to the future benefits and required investments for the foundation to
become successful in the future. This will also include an analysis
of other alternatives to accomplish comparable objectives.
4. Participation in HMI Design Reviews of both HMI Products and
Services--This will involve participation in design reviews as
arranged by the chairman of the Board with subsequent comments and
recommendations being made to the full Board of Directors.
5. Formal Reports to the Board--The intent of this consulting
agreement is that you will make a formal report in person to the
Board of Directors on an annual basis or whenever appropriate as
scheduled by the chairman of the Board.
In summary, the intent of this agreement is that you will be spending
approximately the same number of days of consulting as the time commitment
which you previously committed as a member of the Board of Directors for the
preparation time and attendance at Board meetings and Board committee meetings.
It is understood that if the time requirements are significantly greater as
assignments change, the compensation will be adjusted by agreement between the
chairman and you.
Best regards
David L. Nelson
Chairman of the Board
-100-
<PAGE> 1
EXHIBIT 11
HERMAN MILLER, INC., AND SUBSIDIARIES
Exhibit 11
Statement Regarding Computation of Per Share Earnings
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
May 31, June 1, June 3,
1997(b) 1996(b) 1995(a)
---------- ---------- ----------
NET INCOME APPLICABLE
TO COMMON SHARES $74,398 $45,946 $4,339
========== ========== ==========
Weighted Average Common
Shares Outstanding 47,313,886 50,003,120 49,441,276
Net Common Shares
Issuable Upon Exercise
of Certain Stock Options 748,214 254,350 142,838
---------- ---------- ----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING AS
ADJUSTED 48,062,100 50,257,470 49,584,114
========== ========== ==========
NET INCOME PER SHARE $1.55 $.91 $.09
===== ==== ====
</TABLE>
Earnings per share on a fully diluted basis are not significantly different
from reported primary amounts.
(a) Represents a 53-week period
(b) Represents a 52-week period
-101-
<PAGE> 1
EXHIBIT 22
HERMAN MILLER, INC., SUBSIDIARIES
Subsidiaries
The Company's principal subsidiaries are as follows:
<TABLE>
<CAPTION>
Jurisdiction
Name Ownership of Incorporation
<S> <C> <C>
Coro, Inc. 100% Company Michigan
Herman Miller (Australia) Pty., Ltd. 100% Company Australia
Herman Miller B.V. (Netherlands) 100% Company Netherlands
Herman Miller Canada, Inc. 100% Company Canada
Herman Miller Ltd. Niederlassung Deutschland, Inc. 100% Company Germany
Herman Miller Et Cie 100% Company France
Herman Miller Italia S.p.A. 100% Company Italy
Herman Miller Japan, Ltd. 100% Company Japan
Herman Miller Limited 100% Company England, U.K.
Herman Miller Mexico S.A. de C.V. 100% Company Mexico
Herman Miller Transportation Company 100% Company Michigan
Integrated Metal Technology, Inc. 100% Company Michigan
Meridian Incorporated 100% Company Michigan
Milcare, Inc. 100% Company Michigan
Milsure Insurance Limited 100% Company Barbados
Miller SQA, Inc. 100% Company Michigan
Powder Coat Technology, Inc. 100% Company Michigan
The Resource Alliance, Inc. 100% Company Canada
</TABLE>
-102-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-02-1996
<PERIOD-END> MAY-31-1997
<CASH> 106161
<SECURITIES> 0
<RECEIVABLES> 192185
<ALLOWANCES> 12943
<INVENTORY> 53877
<CURRENT-ASSETS> 385864
<PP&E> 555582
<DEPRECIATION> 290355
<TOTAL-ASSETS> 755587
<CURRENT-LIABILITIES> 285611
<BONDS> 0
0
0
<COMMON> 9207
<OTHER-SE> 277855
<TOTAL-LIABILITY-AND-EQUITY> 755587
<SALES> 1495885
<TOTAL-REVENUES> 1495885
<CGS> 961961
<TOTAL-COSTS> 961961
<OTHER-EXPENSES> 391896
<LOSS-PROVISION> 7302
<INTEREST-EXPENSE> 8843
<INCOME-PRETAX> 125883
<INCOME-TAX> 51485
<INCOME-CONTINUING> 74398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74398
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.55
</TABLE>
