Company Quick10K Filing
Quick10K
Miller Herman
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$36.93 59 $2,180
10-Q 2018-12-01 Quarter: 2018-12-01
10-Q 2018-09-01 Quarter: 2018-09-01
10-K 2018-06-02 Annual: 2018-06-02
10-Q 2018-03-03 Quarter: 2018-03-03
10-Q 2017-12-02 Quarter: 2017-12-02
10-Q 2017-09-02 Quarter: 2017-09-02
10-K 2017-06-03 Annual: 2017-06-03
10-Q 2017-03-04 Quarter: 2017-03-04
10-Q 2016-12-03 Quarter: 2016-12-03
10-Q 2016-09-03 Quarter: 2016-09-03
10-K 2016-05-28 Annual: 2016-05-28
10-Q 2016-02-27 Quarter: 2016-02-27
10-Q 2015-11-28 Quarter: 2015-11-28
8-K 2019-02-19 Other Events, Exhibits
8-K 2019-01-16 Other Events
8-K 2019-01-16 Officers, Exhibits
8-K 2018-12-19 Earnings, Exhibits
8-K 2018-10-11 Shareholder Rights, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-09-19 Earnings, Exhibits
8-K 2018-08-17 Officers
8-K 2018-07-02 Earnings, Exhibits
8-K 2018-07-02 Other Events
8-K 2018-06-07 Enter Agreement, Regulation FD
8-K 2018-06-06 Regulation FD
8-K 2018-03-21 Earnings, Exhibits
8-K 2018-03-05 Regulation FD, Exhibits
8-K 2018-03-02 Officers
8-K 2018-03-01 Regulation FD
8-K 2018-02-05 Officers, Regulation FD, Exhibits
GWW Grainger W W
HDS HD Supply Holdings
NCR NCR
HNI HNI
PBI Pitney Bowes
KNL Knoll
EBF Ennis
PAR Par Technology
USAT USA Technologies
AEY Addvantage Technologies Group
MLHR 2018-12-01
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Item 4: Controls and Procedures
Part II - Other Information
Item 1: Legal Proceedings
Item 1A: Risk Factors
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Item 3: Defaults Upon Senior Securities
Item 4: Mine Safety Disclosures
Item 5: Other Information
Item 6: Exhibits
EX-10.1 hmi10q12012018ex101.htm
EX-10.2 hmi10q12012018ex102.htm
EX-10.3 hmi10q12012018ex103.htm
EX-10.4 hmi10q12012018ex104.htm
EX-10.5 hmi10q12012018ex105.htm
EX-10.6 hmi10q12012018ex106.htm
EX-10.7 hmi10q12012018ex107.htm
EX-10.8 hmi10q12012018ex108.htm
EX-31.1 hmi10q12012018ex311.htm
EX-31.2 hmi10q12012018ex312.htm
EX-32.1 hmi10q12012018ex321.htm
EX-32.2 hmi10q12012018ex322.htm

Miller Herman Earnings 2018-12-01

MLHR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


FORM 10-Q

[ X ] QUARTERLY 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 Quarter Ended December 1, 2018
 
Commission File No. 001-15141


HERMAN MILLER, INC.

A Michigan Corporation
 
ID No. 38-0837640
 
 
 
855 East Main Avenue, Zeeland, MI 49464-0302
 
Phone (616) 654 3000


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, and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
Yes [ X ] No [_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ X ]
 Accelerated filer [_]
Non-accelerated filer [_]
Smaller reporting company [_]
Emerging growth company [_]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act                 [__]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [_] No [ X ]


Common Stock Outstanding at January 7, 2019 - 58,895,990 shares





Herman Miller, Inc. Form 10-Q
Table of Contents

 
 
Page No.
Part I — Financial Information
 
 
Item 1 Financial Statements (Unaudited)
 
 
Condensed Consolidated Statements of Comprehensive Income — Three and Six Months Ended December 1, 2018 and December 2, 2017
 
Condensed Consolidated Balance Sheets — December 1, 2018 and June 2, 2018
 
Condensed Consolidated Statements of Cash Flows — Six Months Ended December 1, 2018 and December 2, 2017
 
Condensed Consolidated Statements of Stockholders' Equity — Six Months Ended December 1, 2018 and December 2, 2017
 
Notes to Condensed Consolidated Financial Statements
 
 
 
 
 
 
 
 
 
 
 
Note 10 - Income Taxes
 
 
 
Note 13 - Debt
 
 
 
 
 
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3 Quantitative and Qualitative Disclosures about Market Risk
 
Item 4 Controls and Procedures
Part II — Other Information
 
 
Item 1   Legal Proceedings
 
Item 1A Risk Factors
 
Item 2   Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 3   Defaults upon Senior Securities
 
Item 4   Mine Safety Disclosures
 
Item 5   Other Information
 
Item 6   Exhibits
 
Signatures
 

2





Herman Miller, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Dollars in millions, except per share data)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
December 1, 2018
 
December 2, 2017
 
December 1, 2018
 
December 2, 2017
Net sales
$
652.6

 
$
604.6

 
$
1,277.3

 
$
1,184.8

Cost of sales
417.0

 
382.5

 
816.6

 
745.8

Gross margin
235.6

 
222.1

 
460.7

 
439.0

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
163.2

 
153.2

 
322.7

 
300.7

Restructuring and impairment expenses
0.3

 
0.5

 
1.4

 
1.9

Design and research
19.0

 
18.0

 
37.5

 
36.5

Total operating expenses
182.5

 
171.7

 
361.6

 
339.1

Operating earnings
53.1

 
50.4

 
99.1

 
99.9

Other expenses:
 
 
 
 
 
 
 
Interest expense
3.1

 
3.7

 
6.0

 
7.4

Other, net
0.7

 
(0.3
)
 
(0.3
)
 
(1.0
)
Earnings before income taxes and equity income
49.3

 
47.0

 
93.4

 
93.5

Income tax expense
11.2

 
14.3

 
20.0

 
28.5

Equity income from nonconsolidated affiliates, net of tax
1.2

 
0.8

 
1.8

 
1.5

Net earnings
39.3

 
33.5

 
75.2

 
66.5

Net earnings attributable to noncontrolling interests

 

 
0.1

 

Net earnings attributable to Herman Miller, Inc.
$
39.3

 
$
33.5

 
$
75.1

 
$
66.5

 
 
 
 
 
 
 
 
Earnings per share — basic
$
0.66

 
$
0.56

 
$
1.27

 
$
1.11

Earnings per share — diluted
$
0.66

 
$
0.55

 
$
1.26

 
$
1.10

 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(4.5
)
 
$
0.1

 
$
(12.4
)
 
$
4.5

Pension and other post-retirement plans
0.4

 
0.8

 
1.1

 
1.6

Interest rate swaps
1.0

 
2.6

 
0.5

 
1.0

Unrealized holding loss

 

 
(0.1
)
 

Other comprehensive (loss) income
(3.1
)
 
3.5

 
(10.9
)
 
7.1

Comprehensive income
36.2

 
37.0

 
64.3

 
73.6

Comprehensive income attributable to noncontrolling interests

 

 
0.1

 

Comprehensive income attributable to Herman Miller, Inc.
$
36.2

 
$
37.0

 
$
64.2

 
$
73.6


See accompanying notes to condensed consolidated financial statements.


3



Herman Miller, Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions, except per share data)
(Unaudited)
 
December 1, 2018
 
June 2, 2018
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
113.6

 
$
203.9

Short-term investments
8.2

 
8.6

Accounts and notes receivable, net
223.0

 
217.4

Unbilled accounts receivable
32.4

 
1.9

Inventories, net
178.5

 
162.4

Prepaid expenses and other
45.3

 
51.2

Total current assets
601.0

 
645.4

Property and equipment, at cost
1,047.3

 
1,020.8

Less — accumulated depreciation
(714.3
)
 
(689.4
)
Net property and equipment
333.0

 
331.4

Goodwill
303.9

 
304.1

Indefinite-lived intangibles
78.1

 
78.1

Other amortizable intangibles, net
43.9

 
41.3

Other noncurrent assets
149.8

 
79.2

Total Assets
$
1,509.7

 
$
1,479.5

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS & STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
184.6

 
$
171.4

Accrued compensation and benefits
82.0

 
86.3

Accrued warranty
52.4

 
51.5

Customer deposits
27.0

 
27.6

Other accrued liabilities
79.3

 
77.0

Total current liabilities
425.3

 
413.8

Long-term debt
281.9

 
275.0

Pension and post-retirement benefits
13.8

 
15.6

Other liabilities
82.5

 
79.8

Total Liabilities
803.5

 
784.2

Redeemable noncontrolling interests
20.7

 
30.5

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, 58,902,002 and 59,230,974 shares issued and outstanding in 2019 and 2018, respectively)
11.8

 
11.7

Additional paid-in capital
94.3

 
116.6

Retained earnings
650.6

 
598.3

Accumulated other comprehensive loss
(70.8
)
 
(61.3
)
Key executive deferred compensation plans
(0.7
)
 
(0.7
)
Herman Miller, Inc. Stockholders' Equity
685.2

 
664.6

Noncontrolling Interests
0.3

 
0.2

Total Stockholders' Equity
685.5

 
664.8

Total Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity
$
1,509.7

 
$
1,479.5


See accompanying notes to condensed consolidated financial statements.

4



Herman Miller, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
(Unaudited)

Six Months Ended
December 1, 2018

December 2, 2017
Cash Flows from Operating Activities:



Net earnings
$
75.2

 
$
66.5

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
37.6

 
31.8

Stock-based compensation
5.0

 
3.0

Pension and post-retirement expenses
0.6

 
0.7

Pension contributions

 
(12.0
)
Earnings from nonconsolidated affiliates net of dividends received
(0.7
)
 
(0.3
)
Deferred taxes
1.1

 
(1.0
)
Gain on sales of property and dealers

 
(0.8
)
Restructuring and impairment expenses
1.4

 
1.9

Increase in current assets
(44.2
)
 
(15.7
)
Increase in current liabilities
15.1

 
4.4

(Decrease) increase in non-current liabilities
(0.4
)
 
3.0

Other, net
0.8

 

Net Cash Provided by Operating Activities
91.5

 
81.5

 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Proceeds from sale of property and dealers

 
2.0

Marketable securities purchases
(0.3
)
 
(0.4
)
Marketable securities sales
0.7

 
0.4

Equity investment in non-controlled entities
(71.6
)
 

Capital expenditures
(41.1
)
 
(39.8
)
Proceeds from life insurance policy

 
8.1

Purchase of HAY licensing agreement
(4.8
)
 

Net advances on notes receivable
(0.1
)
 
(0.5
)
Other, net
(1.5
)
 
(0.4
)
Net Cash Used in Investing Activities
(118.7
)
 
(30.6
)
 
 
 
 
Cash Flows from Financing Activities:
 
 
 
Dividends paid
(22.4
)
 
(20.9
)
Proceeds from issuance of long-term debt

 
115.4

Payments of long-term debt

 
(115.4
)
Common stock issued
10.4

 
5.9

Common stock repurchased and retired
(37.4
)
 
(17.3
)
Purchase of redeemable noncontrolling interests
(10.1
)
 
(1.0
)
Net (payments) proceeds from supplier financing program
(0.4
)
 
0.4

Payment of contingent consideration
(0.2
)
 
(0.1
)
Other, net
0.3

 
(0.2
)
Net Cash Used in by Financing Activities
(59.8
)
 
(33.2
)
 
 
 
 
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(3.3
)
 
0.7

Net Decrease in Cash and Cash Equivalents
(90.3
)
 
18.4

 
 
 
 
Cash and Cash Equivalents, Beginning of Period
203.9

 
96.2

Cash and Cash Equivalents, End of Period
$
113.6

 
$
114.6


See accompanying notes to condensed consolidated financial statements.

5



Herman Miller, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Dollars in millions, except share data)
(Unaudited)

 
Six Months Ended December 1, 2018
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Key Executive Deferred Compensation
 
Herman Miller, Inc. Stockholders' Equity
 
Noncontrolling Interests
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
 
 
 
 
 
 
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

 
0.1

 
35.9

Other comprehensive loss

 

 

 

 

 
(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

 
$
0.3

 
$
673.3

Net earnings

 

 

 

 
39.3

 

 

 
39.3

 

 
39.3

Other comprehensive loss

 

 

 

 

 
(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

 
$
0.3

 
$
685.5



6



 
Six Months Ended December 2, 2017
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Key Executive Deferred Compensation
 
Herman Miller, Inc. Stockholders' Equity
 
Noncontrolling Interests
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
 
 
 
 
 
 
June 3, 2017
$

 
59,715,824

 
$
11.9

 
$
139.3

 
$
519.5

 
$
(82.2
)
 
$
(1.0
)
 
$
587.5

 
$
0.2

 
$
587.7

Net earnings

 

 

 

 
33.0

 

 

 
33.0

 

 
33.0

Other comprehensive income

 

 

 

 

 
3.6

 

 
3.6

 

 
3.6

Stock-based compensation expense

 

 

 
1.7

 

 

 

 
1.7

 

 
1.7

Exercise of stock options

 
150,556

 
0.1

 
3.8

 

 

 

 
3.9

 

 
3.9

Restricted and performance stock units released

 
220,850

 

 

 

 

 

 

 

 

Employee stock purchase plan issuances

 
18,223

 

 
0.5

 

 

 

 
0.5

 

 
0.5

Repurchase and retirement of common stock

 
(330,963
)
 

 
(11.1
)
 

 

 

 
(11.1
)
 

 
(11.1
)
Dividends declared ($0.1800 per share)

 

 

 

 
(10.8
)
 

 

 
(10.8
)
 

 
(10.8
)
Redemption value adjustment

 

 

 

 
0.2

 

 

 
0.2

 

 
0.2

Cumulative effect of accounting changes

 

 

 
(0.3
)
 
0.2

 

 

 
(0.1
)
 

 
(0.1
)
September 2, 2017
$

 
59,774,490

 
$
12.0

 
$
133.9

 
$
542.1

 
$
(78.6
)
 
$
(1.0
)
 
$
608.4

 
$
0.2

 
$
608.6

Net earnings

 

 

 

 
33.5

 

 

 
33.5

 

 
33.5

Other comprehensive income

 

 

 

 

 
3.5

 

 
3.5

 

 
3.5

Stock-based compensation expense

 

 

 
1.1

 

 

 

 
1.1

 

 
1.1

Exercise of stock options

 
37,469

 

 
0.9

 

 

 

 
0.9

 

 
0.9

Restricted and performance stock units released

 
14,424

 

 

 

 

 

 

 

 

Employee stock purchase plan issuances

 
15,192

 

 
0.6

 

 

 

 
0.6

 

 
0.6

Repurchase and retirement of common stock

 
(177,511
)
 
(0.1
)
 
(6.1
)
 

 

 

 
(6.2
)
 

 
(6.2
)
Dividends declared ($0.1800 per share)

 

 

 

 
(10.8
)
 

 

 
(10.8
)
 

 
(10.8
)
Redemption value adjustment

 

 

 

 
(0.3
)
 

 

 
(0.3
)
 

 
(0.3
)
Cumulative effect of accounting changes

 

 

 

 
(0.1
)
 

 

 
(0.1
)
 

 
(0.1
)
December 2, 2017
$

 
59,664,064

 
$
11.9

 
$
130.4

 
$
564.4

 
$
(75.1
)
 
$
(1.0
)
 
$
630.6

 
$
0.2

 
$
630.8


See accompanying notes to condensed consolidated financial statements.


7



Notes to Condensed Consolidated Financial Statements
Three and Six Months Ended December 1, 2018
(in millions)

1. Basis of Presentation


The condensed consolidated financial statements have been prepared by Herman Miller, Inc. (“the Company”) in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Management believes the disclosures made in this document are adequate with respect to interim reporting requirements.

The accompanying unaudited condensed consolidated financial statements, taken as a whole, contain all adjustments that are of a normal recurring nature necessary to present fairly the financial position of the Company as of December 1, 2018. Operating results for the three and six months ended December 1, 2018, are not necessarily indicative of the results that may be expected for the year ending June 1, 2019. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended June 2, 2018.

2. Recently Issued Accounting Standards

Recently Adopted Accounting Standards
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
Revenue from Contracts with Customers
 
The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The standard allows for two adoption methods, a full retrospective or modified retrospective approach.
 
June 3, 2018
 
The Company adopted the standard effective June 3, 2018 using the modified retrospective method. Refer to Note 3 to the financial statements for further information regarding the adoption of the standard.
 
 
 
 
 
 
 
Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
 
The standard provides guidance for the measurement, presentation and disclosure of financial assets and liabilities. The standard requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any change in fair value in net income. The standard does not permit early adoption and at adoption a cumulative-effect adjustment to beginning retained earnings should be recorded.
 
June 3, 2018
 
The Company adopted the standard effective June 3, 2018 using the modified retrospective method. As a result, the Company reclassified $0.1 million of net gains on mutual fund equity securities, that were formerly classified as available for sale securities before the adoption of the new standard, from Accumulated other comprehensive loss to Retained earnings. The impact of adoption also resulted in certain disclosure changes. Refer to Note 11 of the financial statements for further information.
 
 
 
 
 
 
 
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
 
This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Early adoption is permitted.
 
September 2, 2018
 
The Company early adopted the standard prospectively effective September 2, 2018. The impacts resulting from adoption did not have an impact on the Company’s Financial Statements.


8



Recently Adopted Accounting Standards (Continued)
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
 
This update allows for the reclassification to retained earnings of the tax effects stranded in Accumulated Other Comprehensive Income resulting from The Tax Cuts and Jobs Act. Early adoption is permitted.
 
September 2, 2018
 
The Company early adopted the standard effective September 2, 2018 and reclassified $1.5 million from Accumulated other comprehensive loss to Retained earnings related to the Company’s interest rate swap agreements.
 
 
 
 
 
 
 
Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
 
This standard changes the rules related to the income statement presentation of the components of net periodic benefit cost for defined benefit pension and other postretirement benefit plans. Under the new guidance, entities must present the service cost component of net periodic benefit cost in the same income statement line items as other employee compensation costs related to services rendered during the period. Other components of net periodic benefit cost will be presented separately from the line items that include the service cost. Early adoption is permitted.
 
June 3, 2018
 
The Company retrospectively adopted the standard effective June 3, 2018. Prior to adoption, the Company recorded net periodic benefit costs related to its defined benefit pension and post-retirement medical plans within Selling, general and administrative expenses. As a result of adoption, these costs are recorded within Other, net. The Company retrospectively reclassified these costs in the Condensed Consolidated Statements of Comprehensive Income for the period ending September 2, 2017 from Selling, general and administrative to Other, net. Refer to Note 7 of the financial statements for further information.

Recently Issued Accounting Standards Not Yet Adopted
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities
 
This update amends the hedge accounting recognition and presentation with the objectives of improving the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities and simplifying the application of hedge accounting. The update expands the strategies eligible for hedge accounting, relaxes the timing requirements of hedge documentation and effectiveness assessments and permits the use of qualitative assessments on an ongoing basis to assess hedge effectiveness. The new guidance also requires new disclosures and presentation.
 
June 2, 2019
 
The Company is currently evaluating the impact of adopting this guidance.
 
 
 
 
 
 
 
Leases
 
Under the updated standard a lessee's rights and obligations under most leases, including existing and new arrangements, would be recognized as assets and liabilities, respectively, on the balance sheet. The standard must be adopted under a modified retrospective approach and early adoption is permitted.
 
June 2, 2019
 
The standard is expected to have a significant impact on our Consolidated Financial Statements. The Company does not expect the Statement of Comprehensive Income to be significantly impacted. However, the impact to the balance sheet of recording right of use assets and lease liabilities for the Company’s operating leases, as well as the necessary financial statement disclosures, is expected to be significant. The Company has assembled a project team and is working towards implementation of the lease accounting standard.
 
 
 
 
 
 
 
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
 
The Company is currently evaluating the impact of adopting this guidance.


9



Recently Issued Accounting Standards Not Yet Adopted (Continued)
Standard
 
Description
 
Effective Date
 
Effect on the Financial Statements or Other Significant Matters
 
 
 
 
 
 
 
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, and an entity is also permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until their effective date.
 
May 31, 2020
 
The Company is currently evaluating the impact of adopting this guidance.
 
 
 
 
 
 
 
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 postretirement plans. Early adoption is permitted.

 
May 30, 2021
 
The Company is currently evaluating the impact of adopting this guidance.


3. Revenue from Contracts with Customers

Impact of Adoption
The Company adopted ASC 606 - Revenue from Contracts with Customers at the beginning of fiscal 2019. The Company completed its review of the impact of the new standard and identified certain key accounting policy changes that resulted from adopting the new standard. These included changes to the identification of performance obligations for commercial contracts in which the Company sells directly to end customers. Under previous accounting rules, which were codified under ASC 605, the Company generally delayed revenue recognition until the products were shipped and installed as the Company had concluded that contracts that contained both products and services represented a single, combined deliverable. However, under ASC 606, the Company has determined that products and services are distinct and as such, represent separate performance obligations. The Company also determined that under ASC 606, certain product pricing elements related to its direct customer sales should be recorded within Cost of sales rather than net within Net sales as had been historical practice under ASC 605.
The Company adopted ASC 606 using the modified retrospective approach and applied the guidance therein to all applicable contracts that were not complete as of the date of adoption. As a result of these changes in accounting, the Company recorded a cumulative adjustment to retained earnings of $1.9 million on the date of adoption. With the change in performance obligations under ASC 606, product revenue recognition is accelerated on certain direct commercial customer sales. As a result, the cumulative adjustment recorded upon the adoption of ASC 606 had the impact of reducing inventory for sales transactions that would have been recognized in a prior period under ASC 606 and recording unbilled receivables for the amounts owed prior to invoicing. Additionally, the cumulative adjustment reflects the change in accrued expenses, including income taxes payable, related to these sales transactions. The cumulative impact to our Condensed Consolidated Balance Sheet as of June 3, 2018 was as follows:
 
Balance at
 
Adjustments due
 
Balance at
(In millions)
June 2, 2018
 
to ASC 606
 
June 3, 2018
Balance Sheet
 
 
 
 
 
Assets:
 
 
 
 
 
Unbilled accounts receivable
$
1.9

 
$
11.1

 
$
13.0

Inventories, net
162.4

 
(7.1
)
 
155.3

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Accrued compensation and benefits
86.3

 
0.2

 
86.5

Other accrued liabilities
77.0

 
1.9

 
78.9

 
 
 
 
 
 
Equity:
 
 
 
 
 
Retained earnings
598.3

 
1.9

 
600.2



In accordance with the modified retrospective adoption rules per ASC 606, the Company has disclosed in the tables below the differences in our financial statements due to the adoption of the standard. The “As reported” column represents the financial statement values recorded in

10



accordance with ASC 606, while the “Legacy GAAP” column represents what the financial statement values would have been under ASC 605, had the new standard not been adopted.
 
Three Months Ended December 1, 2018
(In millions)
As reported
 
Performance Obligation Change
 
Gross vs. Net Change
 
Legacy GAAP
Statement