Millerknoll, Inc 10-Q for FY2020 Q3

Millerknoll, Inc. (MLKN)

10-Q 2020-04-07 For: 2020-02-29

Added on April 09, 2026

About this 10-Q

Millerknoll, Inc filed this 10-Q on April 7, 2020, covering the quarter ended February 29, 2020 (FY2020 Q3).

Headline figures

Quarter ended February 29, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $665.7M; up 7.5% from $619M a year earlier
Net income: $37.7M; down 3.8% from net income of $39.2M a year earlier
Diluted EPS: $0.64; down 3.0% from $0.66 a year earlier

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Michigan		38-0837640
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MLHR	NASDAQ



Large accelerated filer	x	Accelerated filer	o	Non-accelerated filer	o	Smaller reporting company	☐	Emerging growth company	☐



		Page No.
Part I — Financial Information
	Item 1 Financial Statements (Unaudited)
	Condensed Consolidated Statements of Comprehensive Income — Three and Nine Months Ended February 29, 2020 and March 2, 2019	3
	Condensed Consolidated Balance Sheets — February 29, 2020 and June 1, 2019	4
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended February 29, 2020 and March 2, 2019	5
	Condensed Consolidated Statements of Stockholders' Equity — Nine Months Ended February 29, 2020 and March 2, 2019	6
	Notes to Condensed Consolidated Financial Statements
	Note 1 - Basis of Presentation	8
	Note 2 - Recently Issued Accounting Standards	8
	Note 3 - Revenue from Contracts with Customers	9
	Note 4 - Leases	10
	Note 5 - Acquisitions	12
	Note 6 - Inventories, net	14
	Note 7 - Goodwill and Indefinite-Lived Intangibles	15
	Note 8 - Employee Benefit Plans	15
	Note 9 - Earnings Per Share	16
	Note 10 - Stock-Based Compensation	16
	Note 11 - Income Taxes	16
	Note 12 - Fair Value Measurements	17
	Note 13 - Commitments and Contingencies	20
	Note 14 - Debt	21
	Note 15 - Accumulated Other Comprehensive Loss	22
	Note 16 - Operating Segments	23
	Note 17 - Restructuring Expense	24
	Note 18 - Variable Interest Entities	25
	Note 19 - Subsequent Event	25
	Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3 Quantitative and Qualitative Disclosures about Market Risk	41
	Item 4 Controls and Procedures	41
Part II — Other Information
	Item 1 Legal Proceedings	42
	Item 1A Risk Factors	42
	Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	42
	Item 3 Defaults upon Senior Securities	42
	Item 4 Mine Safety Disclosures	42
	Item 5 Other Information	42
	Item 6 Exhibits	43
	Signatures	44



	Three Months Ended						Nine Months Ended
	February 29, 2020			March 2, 2019			February 29, 2020			March 2, 2019
Net sales	$	665.7		$	619.0		$	2,010.8		$	1,896.2
Cost of sales	422.4			398.0			1,265.9			1,214.5
Gross margin	243.3			221.0			744.9			681.7
Operating expenses:
Selling, general and administrative	170.5			153.7			504.9			476.5
Restructuring expense	3.5			0.3			9.6			1.7
Design and research	18.9			19.2			57.4			56.6
Total operating expenses	192.9			173.2			571.9			534.8
Operating earnings	50.4			47.8			173.0			146.9
Gain on consolidation of equity method investments	—			—			30.5			—
Interest expense	2.9			3.0			8.9			9.1
Interest and other investment income	0.6			0.5			2.0			1.4
Other expense (income), net	0.5			(0.3		)	0.6			0.1
Earnings before income taxes and equity income	47.6			45.6			196.0			139.1
Income tax expense	10.6			7.3			35.8			27.3
Equity income from nonconsolidated affiliates, net of tax	0.3			1.0			3.7			2.8
Net earnings	37.3			39.3			163.9			114.6
Net (loss) earnings attributable to redeemable noncontrolling interests	(0.4		)	0.1			(0.6		)	0.1
Net earnings attributable to Herman Miller, Inc.	$	37.7		$	39.2		$	164.5		$	114.5

Earnings per share — basic	$	0.64		$	0.67		$	2.79		$	1.94
Earnings per share — diluted	$	0.64		$	0.66		$	2.78		$	1.92

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	$	(1.9	)	$	8.0		$	2.5		$	(4.4	)
Pension and post-retirement liability adjustments	0.7			0.6			2.1			1.7
Unrealized losses on interest rate swap agreement	(6.6		)	(4.4		)	(11.9		)	(3.9		)
Unrealized holding gain on available for sale securities	—			0.1			—			—
Other comprehensive (loss) income, net of tax	(7.8		)	4.3			(7.3		)	(6.6		)
Comprehensive income	29.5			43.6			156.6			108.0
Comprehensive (loss) income attributable to redeemable noncontrolling interests	(0.4		)	0.1			(0.6		)	0.1
Comprehensive income attributable to Herman Miller, Inc.	$	29.9		$	43.5		$	157.2		$	107.9



☒	QUARTERLY REPORT PURSUANT TO 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



	February 29, 2020			June 1, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	110.6		$	159.2
Short-term investments	8.9			8.8
Accounts receivable, net of allowances of $3.2 and $3.8	221.7			218.0
Unbilled accounts receivable	37.9			34.3
Inventories, net	200.5			184.2
Prepaid expenses	43.7			45.8
Other current assets	13.0			11.0
Total current assets	636.3			661.3
Property and equipment, at cost	1,121.3			1,084.7
Less — accumulated depreciation	(779.7		)	(736.1		)
Net property and equipment	341.6			348.6
Right of use assets	222.9			—
Goodwill	466.1			303.8
Indefinite-lived intangibles	142.3			78.1
Other amortizable intangibles, net of accumulated amortization of $55.1 and $46.2	125.1			41.1
Other noncurrent assets	51.5			136.4
Total Assets	$	1,985.8		$	1,569.3

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	180.6		$	177.7
Accrued compensation and benefits	74.5			85.5
Accrued warranty	57.4			53.1
Customer deposits	36.9			30.7
Other accrued liabilities	156.7			99.1
Total current liabilities	506.1			446.1
Long-term debt	275.0			281.9
Pension and post-retirement benefits	23.1			24.5
Lease liabilities	188.5			—
Other liabilities	84.6			77.0
Total Liabilities	1,077.3			829.5
Redeemable noncontrolling interests	71.7			20.6
Stockholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, none issued)	—			—
Common stock, $0.20 par value (240,000,000 shares authorized, 58,785,228 and 58,794,148 shares issued and outstanding in 2020 and 2019, respectively)	11.8			11.7
Additional paid-in capital	86.9			89.8
Retained earnings	839.9			712.7
Accumulated other comprehensive loss	(101.5		)	(94.2		)
Deferred compensation plan	(0.3		)	(0.8		)
Total Stockholders' Equity	836.8			719.2
Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity	$	1,985.8		$	1,569.3



	Nine Months Ended February 29, 2020
	Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
June 1, 2019	58,794,148		$	11.7	$	89.8		$	712.7		$	(94.2	)	$	(0.8	)	$	719.2		$	—		$	719.2
Net earnings	—		—		—			48.2			—			—			48.2			(0.2		)	48.0
Other comprehensive loss, net of tax	—		—		—			—			(17.3		)	—			(17.3		)	—			(17.3		)
Stock-based compensation expense	—		—		2.6			—			—			—			2.6			—			2.6
Exercise of stock options	382,898		0.1		12.1			—			—			—			12.2			—			12.2
Restricted and performance stock units released	45,105		—		—			—			—			—			—			—			—
Employee stock purchase plan issuances	14,750		—		0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(173,001	)	—		(7.6		)	—			—			—			(7.6		)	—			(7.6		)
Deferred compensation plan	—		—		—			—			—			0.2			0.2			—			0.2
Dividends declared ($0.21 per share)	—		—		—			(12.5		)	—			—			(12.5		)	—			(12.5		)
Redemption value adjustment	—		—		—			(0.2		)	—			—			(0.2		)	0.2			—
August 31, 2019	59,063,900		$	11.8	$	97.4		$	748.2		$	(111.5	)	$	(0.6	)	$	745.3		$	—		$	745.3
Net earnings	—		—		—			78.6			—			—			78.6			—			78.6
Other comprehensive income, net of tax	—		—		—			—			17.8			—			17.8			—			17.8
Stock-based compensation expense	—		—		2.8			—			—			—			2.8			—			2.8
Exercise of stock options	5,227		—		0.1			—			—			—			0.1			—			0.1
Restricted and performance stock units released	3,653		—		—			—			—			—			—			—			—
Employee stock purchase plan issuances	12,467		—		0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(10,006	)	—		(0.4		)	—			—			—			(0.4		)	—			(0.4		)
Dividends declared ($0.21 per share)	—		—		—			(0.1		)	—			—			(0.1		)	—			(0.1		)
November 30, 2019	59,075,241		$	11.8	$	100.4		$	826.7		$	(93.7	)	$	(0.6	)	$	844.6		$	—		$	844.6
Net earnings	—		—		—			37.7			—			—			37.7			—			37.7
Other comprehensive loss, net of tax	—		—		—			—			(7.8		)	—			(7.8		)	—			(7.8		)
Stock-based compensation expense	—		—		2.5			—			—			—			2.5			—			2.5
Exercise of stock options	35,690		—		1.1			—			—			—			1.1			—			1.1
Restricted and performance stock units released	87,461		—		0.2			—			—			—			0.2			—			0.2
Employee stock purchase plan issuances	20,021		—		0.6			—			—			—			0.6			—			0.6
Repurchase and retirement of common stock	(440,954	)	—		(17.9		)	—			—			—			(17.9		)	—			(17.9		)
Directors' fees	7,769		—		0.3			—			—			—			0.3			—			0.3
Deferred compensation plan	—		—		(0.3		)	—			—			0.3			—			—			—
Dividends declared ($0.21 per share)	—		—		—			(24.5		)	—			—			(24.5		)	—			(24.5		)
February 29, 2020	58,785,228		$	11.8	$	86.9		$	839.9		$	(101.5	)	$	(0.3	)	$	836.8		$	—		$	836.8



	Nine Months Ended March 2, 2019
	Common Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
	Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Deferred Compensation Plan			Herman Miller, Inc. Stockholders' Equity			Noncontrolling Interests			Total Stockholders' Equity
June 2, 2018	59,230,974		$	11.7		$	116.6		$	598.3		$	(61.3	)	$	(0.7	)	$	664.6		$	0.2		$	664.8
Net earnings	—		—			—			35.8			—			—			35.8			—			35.8
Other comprehensive loss, net of tax	—		—			—			—			(7.8		)	—			(7.8		)	—			(7.8		)
Stock-based compensation expense	—		—			2.2			—			—			—			2.2			—			2.2
Exercise of stock options	265,739		0.2			7.9			—			—			—			8.1			—			8.1
Restricted and performance stock units released	335,266		0.1			—			—			—			—			0.1			—			0.1
Employee stock purchase plan issuances	16,805		—			0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(545,866	)	(0.1		)	(20.7		)	—			—			—			(20.8		)	—			(20.8		)
Dividends declared ($0.1975 per share)	—		—			—			(11.6		)	—			—			(11.6		)	—			(11.6		)
Cumulative effect of accounting changes	—		—			—			2.0			(0.1		)	—			1.9			—			1.9
September 1, 2018	59,302,918		$	11.9		$	106.5		$	624.5		$	(69.2	)	$	(0.7	)	$	673.0		$	0.2		$	673.2
Net earnings	—		—			—			39.3			—			—			39.3			—			39.3
Other comprehensive loss, net of tax	—		—			—			—			(3.1		)	—			(3.1		)	—			(3.1		)
Stock-based compensation expense	—		—			2.5			—			—			—			2.5			—			2.5
Exercise of stock options	53,614		—			1.3			—			—			—			1.3			—			1.3
Restricted and performance stock units released	7,511		—			—			—			—			—			—			—			—
Employee stock purchase plan issuances	14,813		—			0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(476,854	)	(0.1		)	(16.5		)	—			—			—			(16.6		)	—			(16.6		)
Dividends declared ($0.1975 per share)	—		—			—			(11.7		)	—			—			(11.7		)	—			(11.7		)
Cumulative effect of accounting changes	—		—			—			(1.5		)	1.5			—			—			—			—
December 1, 2018	58,902,002		$	11.8		$	94.3		$	650.6		$	(70.8	)	$	(0.7	)	$	685.2		$	0.2		$	685.4
Net earnings	—		—			—			39.2			—			—			39.2			0.1			39.3
Other comprehensive income	—		—			—			—			4.3			—			4.3			—			4.3
Stock-based compensation expense	—		—			2.8			—			—			—			2.8			(0.2		)	2.6
Exercise of stock options	3,197		—			—			—			—			—			—			—			—
Restricted and performance stock units released	75,917		—			0.1			—			—			—			0.1			—			0.1
Employee stock purchase plan issuances	16,253		—			0.5			—			—			—			0.5			—			0.5
Repurchase and retirement of common stock	(183,737	)	—			(6.0		)	—			—			—			(6.0		)	—			(6.0		)
Directors' fees	10,185		—			0.3			—			—			—			0.3			—			0.3
Deferred compensation plan	—		—			—			—			—			(0.1		)	(0.1		)	—			(0.1		)
Dividends declared ($0.1975 per share)	—		—			—			(11.5		)	—			—			(11.5		)	—			(11.5		)
March 2, 2019	58,823,817		$	11.8		$	92.0		$	678.3		$	(66.5	)	$	(0.8	)	$	714.8		$	0.1		$	714.9



Standard		Description	Effective Date

2016-13	Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	This guidance replaces the existing incurred loss impairment model with an expected loss model and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.	May 31, 2020
2018-13	Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	This update eliminates, adds and modifies certain disclosure requirements for fair value measurements. Early adoption is permitted.	May 31, 2020
2018-14	Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans	This update eliminates, adds and clarifies certain disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. Early adoption is permitted.	May 30, 2021



	Three Months Ended				Nine Months Ended
(In millions)	February 29, 2020		March 2, 2019		February 29, 2020		March 2, 2019
Net Sales:
Single performance obligation
Product revenue	$	561.1	$	524.5	$	1,699.9	$	1,599.0
Multiple performance obligations
Product revenue	98.9		89.0		294.5		281.7
Service revenue	2.5		2.8		7.8		8.7
Other	3.2		2.7		8.6		6.8
Total	$	665.7	$	619.0	$	2,010.8	$	1,896.2


•	The Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs for all leases.


•	The Company elected to make the accounting policy election for short-term leases resulting in lease costs being recorded as an expense on a straight-line basis over the lease term.


•	The Company elected to not separate lease and non-lease components, for all leases.



	Three Months Ended				Nine Months Ended
(In millions)	February 29, 2020		March 2, 2019		February 29, 2020		March 2, 2019
North America Contract:
Systems	$	132.3	$	128.7	$	424.6	$	420.2
Seating	120.4		122.7		380.3		375.2
Freestanding and storage	96.8		91.4		317.7		282.3
Textiles	27.2		26.5		86.8		84.8
Other	36.7		27.7		113.1		90.3
Total North America Contract	$	413.4	$	397.0	$	1,322.5	$	1,252.8

International Contract:
Systems	$	21.5	$	26.8	$	66.2	$	78.0
Seating	107.1		71.8		235.4		202.7
Freestanding and storage	14.0		14.5		42.5		38.7
Other	13.5		12.9		44.0		40.5
Total International Contract	$	156.1	$	126.0	$	388.1	$	359.9

Retail:
Seating	$	68.7	$	59.2	$	197.9	$	171.0
Freestanding and storage	16.9		15.2		50.6		49.2
Other	10.6		21.6		51.7		63.3
Total Retail	$	96.2	$	96.0	$	300.2	$	283.5

Total	$	665.7	$	619.0	$	2,010.8	$	1,896.2


•	The Company did not elect the land easement practical expedient in determining whether land easements that were not previously accounted for as leases are or contain a lease.



(In millions)
2020	$	12.3
2021	47.7
2022	44.1
2023	39.7
2024	33.9
Thereafter	102.0
Total lease payments*	$	279.7
Less interest	28.1
Present value of lease liabilities	$	251.6



(In millions)
2020	$	51.7
2021	46.8
2022	42.9
2023	39.0
2024	33.5
Thereafter	101.9
Total	$	315.8


•	The Company did not elect the hindsight practical expedient in determining the lease term and in assessing the likelihood that a lessee purchase option will be exercised, for all leases.



(In millions)
Cash	$	12.1
Working capital, net of cash and inventory step-up	12.3
Net property and equipment	0.9
Other assets	3.9
Other liabilities	(3.1		)
Net assets acquired	$	26.1



(In millions)	Valuation Method	Useful Life (years)	Fair Value
Inventory Step-up	Comparative Sales Approach	0.3	$	3.4
Backlog	Multi-Period Excess Earnings	0.3	3.4
Deferred Revenue	Adjusted Fulfillment Cost Method	0.1	(2.0		)
Tradename	Relief from Royalty	Indefinite	56.0
Product Development/Technology	Relief from Royalty	11.0	21.0
Customer Relationships	Multi-Period Excess Earnings	14.0	33.0
Total			$	114.8



	Nine Months Ended		Year Ended
(In millions)	February 29, 2020		June 1, 2019
Net sales	$	2,104.8	$	2,757.3
Net earnings attributable to Herman Miller, Inc.	$	139.9	$	160.8



(In millions)	Goodwill		Indefinite-lived Intangible Assets			Total Goodwill and Indefinite-lived Intangible Assets
June 1, 2019	$	303.8	$	78.1		$	381.9
Foreign currency translation adjustments	—		(0.3		)	(0.3		)
Acquisition of HAY	104.8		56.0			160.8
Acquisition of naughtone	57.5		8.5			66.0
February 29, 2020	$	466.1	$	142.3		$	608.4



(In millions)	February 29, 2020
Beginning Balance	$	—
Increase due to HAY acquisition	72.1
Net income attributable to redeemable noncontrolling interests	(0.4		)
Ending Balance	$	71.7



(In millions)	Cumulative Translation Adjustments			Pension and Other Post-retirement Benefit Plans			Unrealized Gains on Available-for-sale Securities			Interest Rate Swap Agreement			Accumulated Other Comprehensive Loss
Balance at June 1, 2019	$	(48.3	)	$	(45.0	)	$	—		$	(0.9	)	$	(94.2	)
Other comprehensive income (loss), net of tax before reclassifications	2.5			—			—			(12.0		)	(9.5		)
Reclassification from accumulated other comprehensive loss - Other, net	—			2.5			—			0.1			2.6
Tax benefit	—			(0.4		)	—			—			(0.4		)
Net reclassifications	—			2.1			—			0.1			2.2
Net current period other comprehensive income (loss)	2.5			2.1			—			(11.9		)	(7.3		)
Balance at February 29, 2020	$	(45.8	)	$	(42.9	)	$	—		$	(12.8	)	$	(101.5	)

Balance at June 2, 2018	$	(34.1	)	$	(37.2	)	$	0.1		$	9.9		$	(61.3	)
Cumulative effect of accounting change	—			—			(0.1		)	1.5			1.4
Other comprehensive loss, net of tax before reclassifications	(4.4		)	—			—			(4.2		)	(8.6		)
Reclassification from accumulated other comprehensive loss - Other, net	—			2.0			—			0.3			2.3
Tax benefit	—			(0.3		)	—			—			(0.3		)
Net reclassifications	—			1.7			—			0.3			2.0
Net current period other comprehensive (loss) income	(4.4		)	1.7			—			(3.9		)	(6.6		)
Balance at March 2, 2019	$	(38.5	)	(35.5		)	$	—		$	7.5		$	(66.5	)



(In millions)	Severance and Employee-Related			Exit or Disposal Activities			Total
Beginning Balance	$	6.7		$	1.0		$	7.7
Restructuring Costs	1.7			—			1.7
Amounts Paid	(7.9		)	(0.3		)	$	(8.2	)
Ending Balance	$	0.5		$	0.7		$	1.2


•	The effective tax rate was 22.4% compared to 16.0% for the same quarter of the prior year. The rate in the prior year included the final adjustment related to recognizing the impact of the U.S. Tax Cuts and Jobs Act.


•	Diluted earnings per share decreased $0.02 to $0.64, a 3.0% decrease as compared to the prior year. Excluding restructuring expenses and other special charges, adjusted diluted earnings per share were $0.74^(*), a 15.6% increase as compared to the prior year.


•	The Company declared cash dividends of $0.21 per share compared to $0.1975 per share in the same quarter of the prior year.


•	Strategic investment of approximately $79 million was made in acquiring an additional 34% of the outstanding equity of HAY.


•	Throughout most of the third quarter, our business in North America reflected a mixed macro-economic picture. Job growth and architectural billing activity reflect positive trends, while industry order trends as reported by the Business and Institutional Furniture Manufacturers Association ("BIFMA") have varied in recent months.


•	The Company is also navigating the impact of global tariffs. The Company continues to believe, based upon existing circumstances, that pricing, strategic sourcing actions and profit optimization initiatives have fully offset the current level of tariffs imposed on imports from China.



	Three Months Ended					Nine Months Ended
	2/29/20		3/2/19			2/29/20			3/2/19
Earnings per Share - Diluted	$	0.64	$	0.66		$	2.78		$	1.92

Less: Adjustments Related to Adoption of U.S. Tax Cuts and Jobs Act	—		(0.03		)	—			(0.02		)
Add: Inventory step up on HAY equity method investment, after tax	—		—			—			0.01
Less: Gain on consolidation of equity method investments	—		—			(0.51		)	—
Add: Special charges, after tax	0.06		0.01			0.08			0.15
Add: Restructuring expense, after tax	0.04		—			0.12			0.03
Adjusted Earnings per Share - Diluted	$	0.74	$	0.64		$	2.47		$	2.09

Weighted Average Shares Outstanding (used for Calculating Adjusted Earnings per Share) – Diluted	59,218,101		59,127,258			59,266,929			59,448,294



	Three Months Ended							Nine Months Ended
(In millions, except per share data)	February 29, 2020			March 2, 2019		% Change		February 29, 2020			March 2, 2019		% Change
Net sales	$	665.7		$	619.0	7.5	%	$	2,010.8		$	1,896.2	6.0	%
Cost of sales	422.4			398.0		6.1	%	1,265.9			1,214.5		4.2	%
Gross margin	243.3			221.0		10.1	%	744.9			681.7		9.3	%
Operating expenses	192.9			173.2		11.4	%	571.9			534.8		6.9	%
Operating earnings	50.4			47.8		5.4	%	173.0			146.9		17.8	%
Gain on consolidation of equity method investments	—			—		n/a		30.5			—		n/a
Other expenses, net	2.8			2.2		27.3	%	7.5			7.8		(3.8	)%
Earnings before income taxes and equity income	47.6			45.6		4.4	%	196.0			139.1		40.9	%
Income tax expense	10.6			7.3		45.2	%	35.8			27.3		31.1	%
Equity income from nonconsolidated affiliates, net of tax	0.3			1.0		(70.0	)%	3.7			2.8		32.1	%
Net earnings	37.3			39.3		(5.1	)%	163.9			114.6		43.0	%
Net (loss) earnings attributable to redeemable noncontrolling interests	(0.4		)	0.1		n/a		(0.6		)	0.1		n/a
Net earnings attributable to Herman Miller, Inc.	$	37.7		$	39.2	(3.8	)%	$	164.5		$	114.5	43.7	%

Earnings per share — diluted	$	0.64		$	0.66	(3.0	)%	$	2.78		$	1.92	44.8	%
Orders	$	651.7		$	612.8	6.3	%	$	2,003.3		$	1,950.4	2.7	%
Backlog	$	411.2		$	400.5	2.7	%


•	Approximately $50 million due to the acquisition of HAY and naughtone.


•	Incremental list price increases, net of contract price discounting, of approximately $11 million.


•	Decreased sales volumes within the International segment of approximately $14 million, of which approximately $6 million was due to the temporary closure of the Company's China manufacturing facility, stemming from the outbreak of COVID-19.


•	Approximately $54 million due to the acquisition of HAY and naughtone.