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Acquisitions | 3 Months Ended
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Aug. 28, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions Knoll, Inc. On July 19, 2021, the Company completed its previously announced acquisition of Knoll, Inc. (“Knoll"), a leader in the design, manufacture, marketing and sale of high-end furniture products and accessories for workplace and residential markets. The Company has included the financial results of Knoll in the condensed consolidated financial statements from the date of acquisition. The transaction costs associated with the acquisition, which included financial advisory, legal, proxy filing, regulatory and financing fees, were approximately $26.7 million and were recorded in general and administrative expenses during the three months ended August 28, 2021. Under the terms of the Agreement and Plan of Merger, each issued and outstanding share of Knoll common stock (excluding shares exercising dissenters rights, shares owned by Knoll as treasury stock, shares owned by the deal parties or their subsidiaries, or shares subject to Knoll restricted stock awards) was converted into a right to receive 0.32 shares of Herman Miller common stock and $11.00 in cash, without interest. The preliminary acquisition date fair value of the consideration transferred for Knoll was approximately $1,887.3 million, which consisted of the following (in millions, except share amounts):
| Knoll Shares |  | Herman Miller Shares Exchanged |  | Fair Value
Cash Consideration: |  |  |  |  |
Shares of Knoll Common Stock issued and outstanding at July 19, 2021 | 49,444,825 |  |  |  |  | $ | 543.9 |
Knoll equivalent shares for outstanding option awards, outstanding awards of restricted common stock held by non-employee directors and outstanding awards of performance units held by individuals who are former employees of Knoll and remain eligible to vest at July 19, 2021 | 184,857 |  |  |  |  | 1.4 |
Total number of Knoll shares for cash consideration | 49,629,682 |  |  |  |  |
Shares of Knoll Preferred Stock issued and outstanding at July 19, 2021 | 169,165 |  |  |  |  | 254.4 |
Consideration for payment to settle Knoll's outstanding debt |  |  |  |  | 376.9 |
Share Consideration: |  |  |  |  |
Shares of Knoll Common Stock issued and outstanding at July 19, 2021 | 49,444,825 |  |  |  |  |
Knoll equivalent shares for outstanding awards of restricted common stock held by non-employee directors and outstanding awards of performance units held by individuals who are former employees of Knoll and remain eligible to vest at July 19, 2021 | 74,857 |  |  |  |  |
Total number of Knoll shares for share consideration | 49,519,682 |  |  | 15,843,921 |  |  | 688.3 |
Replacement Share-Based Awards: |  |  |  |  |
Outstanding awards of Knoll Restricted Stock and Performance units relating to Knoll Common Stock at July 19, 2021 |  |  |  |  | 22.4 |
Total preliminary acquisition date fair value of consideration transferred |  |  |  |  | $ | 1,887.3 |
The aggregate cash paid in connection with the Knoll acquisition was $1,176.6 million. Herman Miller funded the acquisition through cash on-hand and debt proceeds, as described in "Note 14. Short-Term Borrowings and Long-Term Debt." Outstanding unvested restricted stock awards, performance stock awards, performance stock units and restricted stock units with a preliminary estimated fair value of $53.4 million automatically converted into Company awards. Of the total fair value, $22.4 million was preliminarily allocated to purchase consideration and $31.0 million was preliminarily allocated to future services and will be expensed over the remaining service periods on a straight-line basis. Per the terms of the converted awards any qualifying termination within the twelve months subsequent to the acquisition will result in accelerated vesting and related recognition of expense. The transaction was accounted for as a business combination which requires that assets and liabilities assumed be recognized at their fair value as of the acquisition date. The purchase price allocation is preliminary and subject to change, including as a result of the valuation of inventory, property, plant and equipment, intangible assets and income taxes among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:
(In millions) | Fair Value
Cash | $ | 88.0 |
Accounts receivable | 82.3 |
Inventories | 224.4 |
Other current assets | 37.9 |
Property and equipment | 292.1 |
Right-of-use assets | 202.7 |
Intangible assets | 770.4 |
Goodwill | 925.9 |
Other noncurrent assets | 22.7 |
Total assets acquired | 2,646.4 |
Accounts payable | 150.7 |
Other current liabilities | 131.9 |
Lease liabilities | 177.8 |
Other liabilities | 298.8 |
Total liabilities assumed | 759.2 |
Net Assets Acquired | $ | 1,887.2 |
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributed to the assembled workforce of Knoll and anticipated operational synergies. Goodwill related to the acquisition was recorded within the Knoll segment at $925.9 million. Goodwill arising from the acquisition is not expected to be deductible for tax reporting purposes. The fair values assigned to tangible assets acquired and liabilities assumed are preliminary based on management's estimates and assumptions and may be subject to change as additional information is received and certain tax matters are finalized. The primary areas that remain preliminary relate to the fair values of intangible assets acquired, certain tangible assets and liabilities acquired, income and non-income-based taxes and residual goodwill. The Company expects to finalize the valuations as soon as practicable, but not later than one year from the acquisition date. The following table summarizes the acquired identified intangible assets, valuation method employed, useful lives and fair value, as determined by the Company at the acquisition date:
(In millions) | Valuation Method |  | Useful Life (years) |  | Fair Value
Backlog | Multi-Period Excess Earnings |  | Less than 1 Year |  | $ | 53.4 |
Trade name - indefinite lived | Relief from Royalty |  | Indefinite |  | 397.0 |
Trade name - amortizing | Relief from Royalty |  | 5-10 Years |  | 23.0 |
Designs | Relief from Royalty |  | 9-15 years |  | 29.0 |
Customer Relationships | Multi-Period Excess Earnings |  | 2-15 years |  | 268.0 |
Total |  |  |  |  | $ | 770.4 |
The Company's Condensed Consolidated Statements of Comprehensive Income for the period ended August 28, 2021, include $156.4 million of Revenue and $45.9 million of Net Loss associated with the result of operations of Knoll from the acquisition date to August 28, 2021. Pro Forma Results of Operations The results of Knoll's operations have been included in the Consolidated Financial Statements beginning on July 19, 2021. The following table provides pro forma results of operations for the three months ended August 28, 2021 and August 29, 2020, as if Knoll had been acquired as of May 31, 2020. The pro forma results include certain purchase accounting adjustments such as the estimated change in depreciation and amortization expense on the acquired tangible and intangible assets. The impact of these adjustments is subject to change as valuations are finalized. The pro forma results also include the impact of incremental interest expense incurred to finance the merger. Transaction related costs, including debt extinguishment costs related to the transaction, have been eliminated from the pro forma amounts presented in both periods. Pro forma results do not include any anticipated cost savings from the integration of this acquisition. Accordingly, such amounts are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.
|  |  | Three Months Ended
(In millions) |  |  | August 28, 2021 | August 29, 2020
Net sales |  |  | $ | 943.9 |  | $ | 891.8 |
Net earnings attributable to Herman Miller, Inc. |  |  | $ | (30.2) |  | $ | 30.9 |

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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 Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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