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Acquisitions and Divestitures | 6 Months Ended
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Nov. 29, 2014
Business Combinations [Abstract] |
Acquisitions and Divestitures | ACQUISITIONS AND DIVESTITURES Design Within Reach Acquisition On July 28, 2014, the company acquired the majority of the outstanding equity of Design Within Reach, Inc. ("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 Sheet 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 $1.8 million. The following table summarizes the fair values of the assets acquired and the liabilities assumed from the acquisition. The allocation of the purchase price is still considered preliminary, and the company is finalizing information related to the valuation and useful lives of intangible assets, deferred income taxes, and goodwill. The final determination of the fair values may result in further adjustments to the values presented below:
Valuation as of July 28, 2014 |  |
(In millions) | At acquisition date - reported as of August 30, 2014 | Measurement Period Adjustments | At acquisition date - reported as of November 29, 2014
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 |
Other current assets | 5.5 |  | — |  | 5.5 |
Long term deferred tax asset | 3.7 |  | — |  | 3.7 |
Goodwill | 74.4 |  | 1.8 |  | 76.2 |
Other intangible assets | 69.6 |  | (0.3 | ) | 69.3 |
Property | 32.0 |  | — |  | 32.0 |
Other long term assets | 2.4 |  | — |  | 2.4 |
Total assets acquired | 238.6 |  | 1.3 |  | 239.9 |
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 |  | 1.1 |  | 17.5 |
Other long term liabilities | 0.4 |  | — |  | 0.4 |
Total liabilities assumed | 52.1 |  | 1.1 |  | 53.2 |
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 $76.2 million was preliminarily recorded as "Goodwill" in the Condensed Consolidated Balance Sheet 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 Design Within Reach were preliminarily valued at $69.3 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 | 12.8 |  | 10 - 16 years
Product Development Designs | 1.2 |  | 7 years
Total Intangible Assets Acquired | $ | 69.3 |  |
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 |  |
|  | Three Months Ended | Six Months Ended
(In millions) | July 28, 2014 - August 30, 2014 | November 29, 2014 | November 29, 2014
DWR Net sales | $ | 21.6 |  | $ | 66.8 |  | $ | 88.4 |
Intercompany sales elimination | (1.6 | ) | (5.8 | ) | (7.4 | )
Net sales impact to Herman Miller, Inc. | $ | 20.0 |  | $ | 61.0 |  | $ | 81.0 |
Net loss | $ | (1.6 | ) | $ | (2.2 | ) | $ | (3.8 | )
DWR Acquisition-related expenses were $0.2 million for the second quarter and were $2.2 million for the six-month period. These expenses included legal and professional services fees. 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. Consideration transferred to acquire the net assets of DGSH consisted of $8.2 million in cash, of which $6.7 million was paid during the second and third quarters of fiscal 2014. The remaining payment is recorded in the Condensed Consolidated Balance Sheets within "Other Accrued Liabilities" and is expected to be made within the next nine months. The Company has finalized the purchase accounting for the acquisition of the China manufacturing and distribution facility. Divestitures During the second quarter of fiscal 2014, the company completed the sale of one wholly-owned contract furniture dealership in Arkansas. The effect of this transaction on the company's consolidated financial statements was not material. The company also completed the sale of one wholly-owned contract furniture dealership in Oregon during the first quarter of fiscal 2014. The effect of this transaction on the company's consolidated financial statements was also not material.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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