Acquisitions and Divestitures

Design Within Reach Acquisition

On July 28, 2014, the company acquired the majority of the outstanding equity of DWR, a Stamford, Connecticut based, leading North American marketer and seller of modern furniture, lighting, and accessories primarily serving consumers and design trade professionals. The acquisition of DWR advances the company's strategy of being both an industry brand and a consumer brand by expanding the company's reach into the consumer sector.

The company purchased an ownership interest in DWR equal to approximately 81 percent for $155.2 million in cash. The acquisition was financed by using a combination of existing cash and $127.0 million of borrowings on the company's available, unsecured credit facility. As a result of the transaction, the company estimates it will receive future tax benefits with a present value of approximately $10 million measured as of the date of acquisition. Additionally, certain senior management of DWR received fully-vested stock options, with a value of $1.7 million, in the equity of a newly-formed consumer-facing subsidiary that DWR merged into as a result of the transaction. These fully-vested equity awards are recorded in the Condensed Consolidated Balance Sheets within "Redeemable noncontrolling interests".

Subsequent to the initial transaction, the company acquired an additional 4 percent of DWR stock from the remaining public shareholders for approximately $5.8 million in cash, all of which was paid during the first and second quarters of fiscal 2015. The remaining 15 percent of DWR stock was contributed by DWR executives into the newly formed consumer business subsidiary and the company contributed the assets of the existing Herman Miller Consumer business. After these transactions, the redeemable noncontrolling interests in the newly formed subsidiary, known as Herman Miller Consumer Holdings, Inc. ("HMCH"), was approximately 7 percent. The remaining HMCH shareholders have a put option to require the company to purchase their remaining interest over a five-year period from the date of issuance of such shares. As a result, these noncontrolling interests are not included within Stockholders' Equity within the Condensed Consolidated Balance Sheets, but rather are included within Redeemable noncontrolling interests.

During the measurement period, the company made certain post-closing adjustments related to the final settlement of net working capital, valuation of customer relationship intangible assets, valuation of accounts receivable, and deferred income taxes that resulted in a net increase to goodwill of $1.2 million. The allocation of the purchase price was finalized during the fourth quarter of fiscal 2015.

The following table summarizes the fair values of the assets acquired and the liabilities assumed from the acquisition.

DWR acquisition-related expenses were $2.2 million during fiscal year 2015. These expenses included legal and professional services fees.



Assets Acquired and Liabilities Assumed on July 28, 2014
(In millions)	At acquisition date - reported as of August 30, 2014		Measurement Period Adjustments			At acquisition date - reported as of May 30, 2015
Purchase price	$	155.0	$	0.2		$	155.2
Fair value of the assets acquired:
Cash	1.2		—			1.2
Accounts receivable	2.4		(0.2		)	2.2
Inventory	47.4		—			47.4
Current deferred tax asset	—		1.5			1.5
Other current assets	5.5		—			5.5
Long term deferred tax asset	3.7		(3.7		)	—
Goodwill	74.4		1.2			75.6
Other intangible assets	69.6		(1.1		)	68.5
Property	32.0		—			32.0
Other long term assets	2.4		—			2.4
Total assets acquired	238.6		(2.3		)	236.3
Fair value of liabilities assumed:
Accounts payable	20.8		—			20.8
Current deferred tax liabilities	0.6		(0.6		)	—
Accrued compensation and benefits	1.6		—			1.6
Other accrued liabilities	12.3		—			12.3
Long term deferred tax liability	16.4		(1.9		)	14.5
Other long term liabilities	0.4		—			0.4
Total liabilities assumed	52.1		(2.5		)	49.6
Redeemable noncontrolling interests	25.7		—			25.7
Noncontrolling interests	5.8		—			5.8
Net assets acquired	$	155.0	$	0.2		$	155.2

The goodwill stemming from the transaction in the amount of $75.6 million was recorded as "Goodwill" in the Condensed Consolidated Balance Sheets and allocated to the Consumer reportable segment. The goodwill recognized is attributable primarily to the assembled workforce and expected synergies from DWR and the total amount of this goodwill is not deductible for tax purposes.

Other intangible assets acquired as a result of the acquisition of DWR were valued at $68.5 million. These amounts are reflected in the values presented in the following table:



Intangible Assets Acquired from the DWR Acquisition
(In millions)	Fair Value		Useful Life
Trade Names and Trademarks	$	55.1	Indefinite
Exclusive Distribution Agreements	0.2		1.5 years
Customer Relationships	12.0		10 - 16 years
Product Development Designs	1.2		7 years
Total Intangible Assets Acquired	$	68.5

The following table provides net sales and results of operations from DWR included in the company’s results since the July 28, 2014 acquisition.



DWR Results of Operations

(In millions)	July 28, 2014 - May 30, 2015
DWR Net sales	$	217.0
Intercompany sales elimination	(22.7		)
Net sales impact to Herman Miller, Inc.	$	194.3

China Manufacturing and Distribution Acquisition

On September 30, 2013, the company acquired certain assets from Dongguan Sun Hing Steel Furniture Factory Ltd (DGSH) which together, constituted the acquisition of a business. The acquired business is a manufacturing and distribution operation in Dongguan, China, where product sold under the POSH trade name are produced. Consideration transferred to acquire the net assets of DGSH consisted of $8.2 million in cash, of which $6.7 million was paid during fiscal 2014 and the remainder was paid during fiscal 2015. As of September 29, 2014 the company finalized the purchase accounting for the acquisition of the China manufacturing and distribution facility.

Divestitures

During fiscal 2014, the company completed the sale of four wholly-owned contract furniture dealerships. The sale of these dealerships, that were located in Canada, Arkansas, Oregon, and Oklahoma, was not material to the consolidated financial statements. A gain on sale of $1.3 million was recognized as a result of the sale of the Oklahoma dealership.