Operating Segments

Effective in the first quarter of fiscal 2018, the company moved the operating results of its Nemschoff subsidiary, which primarily focuses on healthcare, from its North America Furniture Solutions operating segment to its Specialty operating segment. This change was made to better leverage the skills and capabilities of the company's Specialty business teams, particularly in the areas of craft wood and upholstery manufacturing. Additionally, the company has refreshed its methodology of allocating selling, general and administrative costs to the operating segments. The company has also identified certain corporate support costs that will no longer be allocated to the operating segments and that will be tracked and reported as "Corporate Unallocated Expenses". The company made these changes in the way that it allocates and reports its costs to better reflect the utilization of functional services across its operating segments and to also more closely align to industry practice. Prior year results disclosed in the table below have been revised to reflect these changes.

The company's reportable segments consist of North American Furniture Solutions, ELA ("EMEA, Latin America, and Asia Pacific") Furniture Solutions, Specialty and Consumer. The North American Furniture Solutions segment includes the operations associated with the design, manufacture and sale of furniture products for work-related settings, including office, education and healthcare environments, throughout the United States and Canada. The business associated with the company's owned contract furniture dealers is also included in the North American Furniture Solutions segment. The ELA Furniture Solutions segment includes EMEA, Latin America and Asia-Pacific. ELA includes the operations associated with the design, manufacture, and sale of furniture products, primarily for work-related settings, in these geographic regions. The Specialty segment includes the operations associated with the design, manufacture, and sale of high-craft furniture products and textiles including Geiger wood products, Maharam textiles, Nemschoff and Herman Miller Collection products. The Consumer segment includes operations associated with the sale of modern design furnishings and accessories to third party retail distributors, as well as direct to consumer sales through eCommerce and Design Within Reach retail studios.

The company also reports a “Corporate” category consisting primarily of unallocated expenses related to general corporate functions, including, but not limited to, certain legal, executive, corporate finance, information technology, administrative and acquisition-related costs. Management regularly reviews corporate costs and believes disclosing such information provides more visibility and transparency regarding how the chief operating decision maker reviews results of the Company. The accounting policies of the reportable operating segments are the same as those of the company.

The performance of the operating segments is evaluated by the company's management using various financial measures. The following is a summary of certain key financial measures for the respective fiscal years indicated:



(In millions)	2018			2017			2016

Net Sales:
North American Furniture Solutions	$	1,284.4		$	1,276.6		$	1,269.4
ELA Furniture Solutions	434.5			385.5			412.6
Specialty	305.4			298.0			294.2
Consumer	356.9			318.1			288.7
Corporate	—			—			—
Total	$	2,381.2		$	2,278.2		$	2,264.9

Depreciation and Amortization:
North American Furniture Solutions	$	33.4		$	28.3		$	24.5
ELA Furniture Solutions	10.2			9.4			9.1
Specialty	10.5			9.4			9.4
Consumer	12.1			10.2			8.6
Corporate	0.7			1.6			1.4
Total	$	66.9		$	58.9		$	53.0

Operating Earnings (Losses):
North American Furniture Solutions	$	166.3		$	176.0		$	187.6
ELA Furniture Solutions	35.5			35.9			40.2
Specialty	8.9			8.1			15.0
Consumer	13.9			4.8			8.1
Corporate	(47.1		)	(34.0		)	(39.4		)
Total	$	177.5		$	190.8		$	211.5

Capital Expenditures:
North American Furniture Solutions	$	38.9		$	46.2		$	56.1
ELA Furniture Solutions	11.4			8.5			15.0
Specialty	7.1			10.6			3.8
Consumer	13.2			22.0			10.2
Corporate	—			—			—
Total	$	70.6		$	87.3		$	85.1

Total Assets:
North American Furniture Solutions	$	488.7		$	519.3		$	503.4
ELA Furniture Solutions	283.4			230.3			218.4
Specialty	188.7			172.2			175.6
Consumer	291.2			276.4			245.3
Corporate	227.5			108.1			92.4
Total	$	1,479.5		$	1,306.3		$	1,235.1

Goodwill:
North American Furniture Solutions	$	133.2		$	133.5		$	133.5
ELA Furniture Solutions	40.0			40.1			40.9
Specialty	52.1			52.1			52.1
Consumer	78.8			78.8			78.8
Corporate	—			—			—
Total	$	304.1		$	304.5		$	305.3

The accounting policies of the reportable operating segments are the same as those of the company. Additionally, the company employs a methodology for allocating corporate costs and assets with the underlying objective of this methodology being to allocate corporate costs according to the relative usage of the underlying resources and to allocate corporate assets according to the relative expected benefit. The majority of the allocations for corporate expenses are based on relative net sales. However, certain corporate costs, generally considered the result of isolated business decisions, are not subject to allocation and are evaluated separately from the rest of the regular ongoing business operations.

The company's product offerings consist primarily of office furniture systems, seating, freestanding furniture, storage and casegoods. These product offerings are marketed, distributed and managed primarily as a group of similar products on an overall portfolio basis. The following is a summary of net sales estimated by product category for the respective fiscal years indicated:



(In millions)	2018		2017		2016
Net Sales:
Systems	$	601.5	$	639.0	$	656.8
Seating	965.9		894.8		855.5
Freestanding and storage	465.1		428.8		456.9
Textiles	94.3		96.9		97.6
Other ⁽¹⁾	254.4		218.7		198.1
Total	$	2,381.2	$	2,278.2	$	2,264.9

(1) “Other” primarily consists of uncategorized product sales and service sales.

Sales by geographic area are based on the location of the customer. Long-lived assets consist of long-term assets of the company, excluding financial instruments, deferred tax assets and long-term intangibles. The following is a summary of geographic information for the respective fiscal years indicated. Individual foreign country information is not provided as none of the individual foreign countries in which the company operates are considered material for separate disclosure based on quantitative and qualitative considerations.



(In millions)	2018		2017		2016
Net Sales:
United States	$	1,737.9	$	1,690.1	$	1,757.0
International	643.3		588.1		507.9
Total	$	2,381.2	$	2,278.2	$	2,264.9




Long-lived assets:
United States	$	349.3	$	328.6	$	254.8
International	50.5		45.3		48.1
Total	$	399.8	$	373.9	$	302.9

The company estimates that no single dealer accounted for more than 4 percent of the company's net sales in the fiscal year ended June 2, 2018. The company estimates that its largest single end-user customer accounted for $109.8 million, $102.3 million and $95.7 million of the company's net sales in fiscal 2018, 2017 and 2016, respectively. This represents approximately 5 percent, 5 percent and 4 percent of the company's net sales in fiscal 2018, 2017 and 2016, respectively.

Approximately 5 percent of the company's employees are covered by collective bargaining agreements, most of whom are employees of its Nemschoff and Herman Miller Holdings Limited subsidiaries.