Good morning, everyone, and welcome to the Herman Miller, Inc. Second Quarter Fiscal Year 2013 Earnings Results Conference Call. This call is being recorded. This presentation will conclude -- include forward-looking statements that involve risks and uncertainties that could actual -- cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include those risk factors discussed in the company's report on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. Today's presentation will be hosted by Brian Walker, President and Chief Executive Officer; Mr. Greg Bylsma, Executive Vice President and Chief Financial Officer; and by Mr. Jeff Stutz, Treasurer and Chief Accounting Officer. Mr. Walker will open the call with brief remarks, followed by a more detailed presentation of financials by Mr. Bylsma and Mr. Stutz. We will then open the call to your questions. [Operator Instructions] At this time, I would like to begin the presentation by turning the call over to Mr. Walker. Please go ahead.

Good morning, everyone. I'm glad to have you with us today. Let me start by acknowledging there are a lot of moving parts that affected our results this quarter. The short summary is that orders and operating income as a percentage of sales were in line with the guidance we provided in September. However, we underperformed our revenue and EPS guidance. This resulted from an unusually large number of orders that were not converted to revenue during our typical time frame. To offset this shortfall, our folks did a good job of managing expenditures during the quarter. Last, the operating results were offset by a large noncash charge related to our previously announced plan to terminate our defined benefit pension plan. To be frank, we were disappointed with the top line and EPS miss. However, we were pleased with the order growth and the level of activity across each of our reportable segments and the double-digit growth in our backlog. The guidance we provided you back in September called for net sales in the second quarter of between $445 million and $465 million. We based this estimate on our beginning backlog, plus an expectation around the order level in the first 6 weeks of the quarter. As it turned out, the level and pacing of new orders entered throughout Q2 lined up with our expectations. Unfortunately, weather-related delays on the East Coast prevented us from recognizing revenue on a handful of projects. To be specific, the primary issue was projects where we were billing the customer direct. In those cases, we do not recognize revenue until installation is complete. As a result of the disruption and lack of power, installations were delayed. We estimate the storm delayed $5 million to $7 million in revenue. Additionally, some of the orders were…

Thanks, Brian. On a consolidated basis, net sales in the quarter were $442 million. This represents a decline of 1% from the year-ago period and a sequential decrease of 2% from the first quarter of this year. The clear bright spot in our results this period was in the orders, which totaled $476 million on a consolidated basis. This is an 8% increase over the second quarter of last fiscal year and represents a 5% sequential quarter improvement. As Brian described, we again experienced a contrast in demand this quarter between the U.S. federal government and commercial customers. In total, sales within our North American reportable segment of $305 million were down 5% from the prior year. New orders in the second quarter were $329 million, reflecting an increase of more than 7% from the same period last fiscal year. Sequentially, North American segment sales decreased 5%, while orders improved 7% from the first quarter level. Our non-North American reportable segment reported net sales of $93 million for the quarter. This represents a 6% increase over the second quarter of fiscal 2012, and a decrease of approximately 2% from the first quarter of this fiscal year. The revenue growth over last year was driven by the acquisition of POSH. This was partially offset in the quarter by lower sales in Europe compared to Q2 of last year. New orders in the second quarter of $101 million were up 9% on a year-over-year basis. Sequentially, segment orders were up 2% from the first quarter level. Net sales within our Specialty and Consumer segment totaled $44 million in the quarter. That's a 22% improvement over the year-ago period. Segment orders of $46 million were up 11% on a year-over-year basis. Compared to the first quarter of fiscal 2013, sales for this segment…

Okay. Thanks, Greg. Good morning, everyone. Cash flows from operations in the second quarter were approximately $19 million. Net changes in working capital drove a $15 million cash use in the period, with the biggest contributors to this being state and federal tax payments, as well as increases in net inventory and AR balances. Capital expenditures in the second quarter were $13 million, which brought the total year-to-date capital expenditures to $29 million. Dividend payments in the quarter reflected the increased payout level that we announced at the start of the fiscal year. In total, cash dividends paid were approximately $5 million in the quarter, compared to the previously quarterly run rate of just over $1 million. We ended the quarter with total cash and equivalents of $186 million, an increase of approximately $1 million from the end of Q1. As of -- we remain in compliance with all debt covenants and our debt-to-EBITDA ratio was approximately 1.5:1. The available capacity on our bank credit facility remains at $142 million, with the only outstanding usage being related to letters of credit. Given our current cash balance, ongoing cash flows from operations and our total borrowing capacity, we remain confident that we can meet the financing needs of our business as we move forward. And that's the balance sheet and liquidity overview. And I'll now turn the call back over to Greg who will cover our Q3 earnings guidance.

Okay. Thanks, Jeff. We expect our sales to range between $430 million and $450 million in the third quarter. This would imply an anticipated revenue growth between 7.5% and 12.5% over Q3 of last fiscal year. Earnings in the third quarter are expected to be between $0.22 and $0.26 per share on a diluted basis, and this guidance reflects the impact of additional legacy pension expenses in the quarter, which we anticipate will total approximately $5 million, of which 85% will be recorded in operating expenses. Excluding the impact of these pension costs, adjusted earnings per share in the quarter are expected to be between $0.27 and $0.31, and this assumes an effective tax rate of between 32.5% and 34.5%. We're expecting a fairly typical seasonal decrease in our Q3 gross margin due to sequential quarter dip in factory production schedules, and accordingly, we are forecasting a Q3 gross margin, excluding the impact of legacy pension charges, in the area of 33%. Our earnings guidance for the third quarter reflects an increase in spending on investments relating to an array of new products currently in development and other strategic initiatives necessary to achieve our long-term growth targets. In total, operating expenses in the third quarter are expected to range between $114 million and $117 million, excluding the impact of legacy expenses -- pension expenses. And with that, I'll turn the call back over to the operator and we can take your questions.

[Operator Instructions] Our first question is from David MacGregor of Longbow Research.

In the third quarter, typically you see a good December, I know it's kind of quiet in January, and February, and December is typically a budget-flush month. I just wondered how things are shaping up this month versus what you saw in December a year ago?

After the first 2 weeks of data that we have -- obviously we're in the third week right now -- orders are up year-on-year, so far about 5%, I think the number is, David.

Okay, and your thoughts on sort of the balance of the month, how it could shake out?

Yes, it's hard to tell, because these things can rain in from the sky as you know, as people are trying to flush budgets, so it's really hard to predict.

And you also going to have a difference because we're open through the holiday season this year. We don't have as long of a shutdown period. So it's going to be a little bit harder to tell comparisons.

Okay. Now, with respect to the gross margins, I guess you had a September price increase. Did you get any gross margin benefits in these numbers?

Yes, there was a benefit at overall pricing because you got -- you've got to look at that in 2 ways, you've got to look at what was your added price versus your net discount impact? I want to say, sequentially, the number was a positive in the neighborhood of, I think it's $2 million.

Okay. And then in your discussion on gross margins, you referenced changes in product and channel mix. I wonder if I could get you to elaborate a little on that?

Sure. And we obviously, when we sell stuff through e-commerce or the Retail business that comes through with a different margin. So movements in those revenues between a contract customer and Retail and e-commerce can drive a significant shift. And so when the Retail business was as strong as it was, like it was in the quarter, that certainly helps the margin. This was offset by POSH, which like we said in my prepared remarks, revenues of about $12.5 million at much lower gross margins than would be our average.

Now on POSH, how much would the second quarter integration cost that you referenced in the press release? And what happens over the next couple of quarters?

Roughly in the quarter, that was about $500,000. That continues to get better as we move, obviously. This quarter was a big challenge for us because we moved the manufacturing portion of the acquisition that we didn't buy from a -- I get confused of this -- from contract to total but we changed the method by which we were actually buying it. We are now buying the inventory prior to the POSH manufacturer making it for us, and that was a challenge for us as we worked through the quarter, drove some cost.

Greg, it's fair to say that when we talk about the integration, one of the things, David, we did with the acquisition is, as Greg mentioned, is we didn't buy the manufacturing assets. So our gross margins are going to be a little bit lower than normal until we get our long-term manufacturing plan put in place. We knew that was going to take us somewhere between -- it'll phase some products and move faster than others, depending on whether we're building them in a current facility or whether we have to create a new facility. So that we knew was going to take us 12 to 24 months, that we'd see lower gross margins and it's probably going to be closer to that 24 months before we get to the other side of that. Now, of course, we don't have as many assets tied up right now either, as we'll have in the long run as we get to actually owning the manufacturing side. So in some ways, we've got amenities that's acting as a contract manufacturer for us today and they are obviously taking a bit of the profitability until we get through that.

Got it. And then last question, just on Europe, I guess if you try to back into the numbers, my math looks like Europe legacy business was down kind of high single-digits in revenue. And I'm just wondering if you could talk about how much of this is category shrinkage versus how much is potential share loss versus or just how much is just timing.

Are you speaking to Europe, in particular?

Yes. The non-North American.

Okay.

Excluding the POSH.

What we're seeing in Europe is not a category issue. I think it's -- we're looking at the general economic situation in Europe. And I think as you watch each of the competitors who have businesses over there, everybody's talking about it being very difficult on the continent, and quite frankly, in the U.K. as well, where you're seeing the impacts of, I guess you might say their own fiscal cliff that's come to fruition through all the austerity. So it's a general downdraft in the whole market size, rather than it's a category issue. When we look at Europe as an economic unit, really the only place we have significant market share is in the U.K. and we have not seen any change in market share. We have seen a rotation out of the government and into nongovernment customers, commercial, if you will. In the rest of the continent, we play very small in every single market. So market share isn't really the name of the game for us. It's more playing in the niches of those markets than it is a market share issue.

Our next question is from Budd Bugatch of Raymond James.

I'd like to go over a couple of things on the revenue, and then I'd like to understand a bit about the incremental margins providing the guidance and the implications for the revenue and what the incremental margins are. First on the revenue performance for this quarter, I think you gave us the impact from Sandy was about $5 million to $7 million. Is that right, Brian?

Yes. That's correct.

So the government impact and health care impact year-over-year was what in North America?

Well, first of all, if you look at I mean take health care, because the last time, Budd, I think we confused everybody, trying to break down numbers you didn't have a prompt to one. So if you look at the health care in particular, the year-over change in health care was 100% attributed, really, to what's going on in the government sector. So let's just say, what affected negatively the North American segment in total was government. Whether it was health care-related or non-health care-related, that was the negative factor. Does that make sense?

I'm not quite sure. You have a GSA contract and I thought that was a big issue. Because this was like the last quarter where...

Correct, but GSA covers both health care and non-health care is my point to you. And what we're giving you typically is the total reportable North American number, which includes health care, correct?

Yes. Sure.

So if you look at the commercial health care business, it was relatively flat year-over-year.

Okay. And so the government side of that, was that about what?

Well, if you -- let's just talk about government in total. Government in total, Jeff, was down 30...

Round rough number's 30%. Budd, let me just take a look here quick. Yes, we were down 37% revenue with GSA in total.

If you take out government, Budd, we look at sales being up about 0 -- about 0.3% year-over-year for the quarter. Okay? If you take government out completely. Or about 13%, all right?

All right. And so in -- while that 37%, was that about $20 million, Jeff? Or is it about $15 million?

The decrease, Budd?

Yes, sure.

Yes, yes, that's -- yes, that's right.

Is it $15 million or $20 million?

It's right in the middle. It's $18 million.

All right. And then if you look at non-North America, I think David said I guess the -- if you take non-North America, we're looking -- excluding POSH, something like $87 million or last year $87.5 million last year versus $80 million this year? Is that primarily Europe or is it also the Australian issue involved?

It's primarily Europe. Yes, Australia was up year-over-year.

Okay, so didn't you have an issue last quarter with some -- because of the fire...

Yes. Correct, yes. We had some stuff that was hung up in inventory but that actually came through this quarter. That flushed its way through.

Okay. That's good, great. And my last area is if you look at the revenue delta this year, I mean what you're projecting for the third quarter versus last year, it looks to me like the implied operating margin is about 10% to 12% overall incremental margin? Or if you try to exclude POSH, maybe it gets to the high teens? What's going on there? How should we think about incremental operating margin going forward? What are the moving pieces in there? Obviously, you have the issue with the ramp-up for the product introductions at NeoCon and some other things, but you do you have commodity price inflation going your way for the first time in a while. So can you walk us through the moving pieces and how we should think about incremental margin?

Yes, Budd, I think when we launched into our 3-year goals of over $2 billion and 10% operating margins, we said at that time we had traditionally said between, I don't know, 20% to 25% incremental margins and we lowered that number down. The exact range we gave at the time escapes me right now...

It was around 15%, Budd, the number you're at.

15% or so. So the moving parts really are the investment you referred to, which a big product queue coming up for NeoCon, probably bigger than typical. We've got some stuff that we're working through on facilities, customer-facing-facilities. We've got some investments going on in the branding side, as well as on the IT side. We mentioned the Small Business investment as well. So I would say that, as you move forward that, that kind of 15% operating incremental margin is what we could expect to see in the next, I would say short term, I'll call that next 2 or 3 quarters.

Budd, just one thing though, specifically that hits next quarter, which Greg didn't mention is you see a little bit of sequential drop in margins. That is actually because you got a fair amount of -- will take -- the stuff that got hung up this quarter that we've built and that we might have even shipped it to the dealer but we're not going to recognize the revenue because it didn't get fully installed. Of course, what ends up happening is you're going to bring some of that through the balance sheets so you don't get as much leverage on your fixed operating cost next quarter. So it's a little bit lower going from second to third than what we normally expect, and that's because in some ways, we've got a benefit of building stuff and putting in inventory this quarter, it's going flush through. So even though revenue looks flat quarter-to-quarter, production is actually down second to third.

You have some inefficiencies, I take it, unless you're talking about...

Well, inefficiencies, if you will. Well, what you've got is you got a higher utilization of overhead in the second quarter than you get in the third, which is typically true with the holiday season, right? Because you lose that week. That's why you normally see revenue drop and so you'd actually see a much more pronounced drop second to third. This year, it looks like it could be relatively flat second to third, but at the same time, while revenue is flat, production is actually down. So your absorption goes down a bit.

That's what I mean by inefficiencies. It's not -- and can you quantify for us some of those investments you're making? What's the dollar of the investments that you're put -- that Greg was pointing out that were going on? And if you're only giving -- you don't want to parse them, give them to us in total.

Well, I mean the number, if you can look, CapEx is up in -- going to the next quarter, what, $4 million to $5 million. Again, we have a fairly substantial number related to this second phase of redoing the design area, which you know is where we bring a lot of customers when they come to West Michigan. Some of that is the expense side of the facilities investments. You got that going on. We have a ramp-up in some of our R&D costs as we start to move towards taking some of those products from sort of not the drawing board but from mapping models to actually getting them through tooling and those kind of things, where you ramp up a lot more testing cost, that kind of stuff. We also have additional people cost as we start to see the full size of the team that we're building for both the Collection and for Small Business. And so it's really those 3 factors primarily that will see a step up, as well as in the fourth quarter, we'll start to see some of the more marketing money as we get ready for NeoCon. So pretty typical things but it's just more of it than what we normally see coming together at one time. We would have thought some of that may have hit more in the first half than it did if you saw our operating expenses were relatively flat year-over-year, would've thought we have -- would have more of it in the first half. We just pushed some of it back to be a little bit more pronounced in the second -- in the third and fourth quarter.

I may have missed it but did I -- did I miss the number there in terms of the -- investment?

Just now?

Yes.

$4 million in the quarter.

$4 million. Okay. But my last thing, I'll sneak one other one in and I apologize on this, but the ABI has hit kind of an all-time -- not an all-time -- a 4-year high just this month and what are you thinking about that going forward into 2013 or into calendar 2013?

Well, I think it's actually, Budd, that's sort of my point about the macro thing. Overall, even if you looked at -- on Global Insight's recent forecast, when you look at what they had in there, I mean they're pointing towards a fairly strong calendar 2013. Again, this is all very difficult right now because it all assumes we get some of this uncertainty out of the air and we avoid the fiscal cliff. I think you look at the underlying business strength in the third -- in the calendar third quarter of this year, before we all got nervous again, you were starting to see pretty good signs. And when you look at the ABI being up, look at where vacancy rates are, there's a pretty good basis to say, all things considered, next year could be a pretty decent year. Now, I think the problem right now is, and you know this better than I do, you've just got so many crosswinds right now, it's hard to figure out which thing wins the tie, ultimately. So I think you've heard a lot more talk about businesses being nervous here lately and people delaying -- I'm not telling you delays is our issue, but when you read the general press, you hear lot of CEOs talking about posturing for the potential of the fiscal cliff. I don't know if that's where all seeing into the press, or that's really what's going on. And I think that if there's anything that makes you concerned it's what is the ongoing impact of that if we can't get our friends in Washington to get their act together. Assuming that gets though at all, I think it's a pretty good thesis that we should have a decent run on the industry next year.

Our next question is from Matt McCall of BB&T Capital Markets.

Actually, I'll follow-up on that last question from Budd. So the outlook there, that was more of a macro-related question-and-answer. What about internally, some of the indicators of your pipeline health. Would there be visits or lock ups or can you just talk about the pipeline strength right now?

Well, I mean, maybe probably the best thing is to look at -- if you -- I think that's why this quarter was a little difficult on one level, we're disappointed about the miss. On the other hand, we feel -- felt pretty good about where our order levels were. And we were running right about where we thought we'd be from orders and that gave us a fair amount of confidence. Now of course, you've got some underneath news like what's happening in areas like the government and Europe and such, but overall, the U.S. looked relatively good and we hear decent things about activity levels. Customer visits are a little hard to measure right now because we have had a fair amount of down cycle in West Michigan, because we've been in the process of redoing a fair amount of facility. So we've been sort of holding back on things, hey, don't bring as many people here because we just don't have many places to take folks. So I don't know that we got a good read from what we're seeing in the data. It's relatively flat, it's not like it's going nowhere. But of course, we've been restraining it a little bit at the same time. So maybe that's a good sign. It's flat and we've been restraining it through that period.

And so as you look out the -- into I'll call it calendar '13 and there are a couple of things I think -- you talked about the projects that you're going to ship in the second half that were -- they were -- the wins that are going to ship in the second, the orders that were placed -- for orders that were placed this quarter. You also announced a big win, I think with Exxon. You've -- I think I've heard of some other large projects. Talk about the visibility that you have from some of these big wins and when you get in the long lead times. I assume that, that provides just a little bit of revenue visibility. Just talk about first the revenue visibility and then tie that in to the earnings visibility from things outside the top line, specifically I wrote down the POSH integration. What other things will help your margin visibility as you move forward?

Well, first of all, I mean it's always great to think about those big wins. But while we're very happy and proud to have Exxon, when you look at it, it's going to be -- we don't have the orders in-house yet and its going to be split probably over a couple of fiscal years. And so we need time to really break it down and look at it. It's a big win, but when you look at it in the scope of running $1.8 billion to $2 billion, it's really not a big enough chunk of business that it changes dramatically your visibility. It's always nice to have a bundle. I wish we had 10 or 12 Exxon Mobils on our hands that we could see that far in advance. Then I think it would affect your visibility, right? On the other hand, I think anybody who is in this business will tell you, lead times have shrunk. It's not like we have 13-week lead times like in the old days where you could really predict a quarter in advance. We take a lot of business that is going to ship in the next 4 to 8 weeks. And that level of visibility really hasn't changed. I mean, so may the best tenor typically is we looking at activity levels of what's coming in, in orders. If you look when orders are coming in and you can see momentum building, that's usually the best predictor, rather than looking at a couple of big large wins. They're nice to have, they help because you can start to figure out how you're going to schedule those particular orders, which can give you some efficiencies in manufacturing. But I don't think it necessarily helps moving visibility on the top line.

What about on the margin front?

Margin, again, I think certainly, we've got -- we can tell you we know what work is in front of us as it relates to POSH and we know that there are some advantages -- some benefits we'd get as that plays its way through. We've been doing a lot of work as you know, around health care, Nemschoff in particular. We haven't seen benefits from that. So those couple of things we know ultimately are going to help. We can see some mobility in the health care business where we haven't been able to capture price because we were locked in to long contracts, that some of those contracts begin to expire. And if we can move those on to more current price lists, that will give us some boost. So there are things in there, when we look overall, that we can see where we've got some price leverage and cost leverage coming. That will certainly help as we get in the next fiscal year. Most of those won't play very strong this year. It'll probably be next year, or maybe even into the second half of next year before we'll start to see significant benefits from those.

Okay. Let's see, on the Specialty and Consumer side, you called out the Retail business, your Collections business, that 27% growth there, that's pretty good. I mean is there -- is that just -- is that an organic number or around new floors? How should I understand 27% revenue growth, order growth of 11%? Is that just pure success of selling more stuff to more people, or is there something else is going on?

There's no -- it's all organic. There's no -- it's not like we did any acquisitions or we acquired anything. I think it's the combined impact of we had some nice wins on the Geiger side for some projects, which is great because that is really a project-driven business. So if you've got that starting point. Certainly, we're in one of the first heavy selling seasons, i.e. Christmas seasons, back-to-school, all that kind of good stuff, where the Collection was fully there. Meaning we had not only the historical Herman Miller products, we had the reissues there, as well as the new Alliance products. So you have all of those things, Matt, for the first time in our quiver to offer to the retailers. That's a big deal. And of course, we start to put the sales force in place for the Collection. Most of those folks weren't onboard until in the summertime, and we've been ramping that up in terms of number of people and getting them into the right marketplace. And so, I think it's sort of the combination of the factors coming up, the new product launches hitting, having the new sales team in place for the Collection, which of course enables us to actually capture some project wins on the contract side. Because we've got people actually in, pitching those products to both dealers and to the A&D community. So it's the combination that we thought would work, of having great products, building the channel right and getting the marketing right. Those things have worked so far. Now we definitely got some good-sized comps to play with. On the other hand, we've got a good pipeline of new products and we're just really getting the sales team ramped up and integrated into the individual marketplaces.

And that kind of leads to my follow-on, Brian. So the margins from that business are better than the other 2. As you talk about that targeted 10% operating margin, talk about it by segment. What's the expectation there? I'm trying to understand how much of a mix shift you're expecting and/or how much incremental margin improvement you're expecting in each one of those segments to get to 10%.

Well, first of all, remember that the reason that you'll see better margins generally in the Specialty and Consumer business is, particularly the Collection and in the Retail business, both have a heavy emphasis on seating. So whereas, if you looking at both International or the core business, you get a lot of drag on the core workstation business, which we've talked about in the past. They're not quite as good a margin as you're seeing on seating. So when you get seating in Specialty products, you tend to drive better margins overall. You also, in the case of Retail, the pricing is just a little bit better because you're not in the major projects where you're discounting projects in a much bigger way, right? So it's that is what drives the Specialty and Consumer side, which is why we actually went after trying to increase the size of that business. So you've got that going on. The International side, if you look last year, we ran pretty close to the 10%, I think for last fiscal year. It's down a little bit this year as we get through the integration of POSH. Longer term, we actually think we can get that number back up. It'll probably take us a couple, 2 or 3 years because we're now going through an investment phase where, up through last fiscal year, Matt, we were largely leveraging things in International and now we've built infrastructure. So it's going to probably take 24 to 36 months to get it back up in that kind of sniffing 10% range. If you look at the core North American business, it's actually been pretty darn close to that 10% to date. So the places for us to actually get good margin growth are going to be building the mix that we have in Specialty and Consumer, that's going to be important; getting through this investment cycle in International; getting health care back to where we got solid profitability in Nemschoff. If we can get those 3 things done in particular, we can drive to that 10%. That help?

[Operator Instructions] Our next question is from Todd Schwartzman of Sidoti & Company.

You had spoken to the Sandy-related deferrals, about $5 million to $7 million I think it was, has that business shipped in these past 3 weeks thus far? And if not, is that included in your guidance for the quarter?

Todd, this is Greg. Most of it actually shipped already. Because it was tied up and we weren't unable to install, it was either sitting at a dealer, waiting to get to the final customer or at the final customer, waiting to actually get installed. So we would expect that, that $5 million to $7 million ships and either ships partially to the final customer and is recognized in revenue in the third quarter almost completely.

Okay, and also just in terms of quantification, I may have missed this, you may have called it out, but what was the piece of business that was timing-related? That you might have contemplated shipping, but didn't?

It was about another $5 million to $7 million, Todd. It was almost the same number. So in total we were looking at a $10-million-to-$15-million miss because of the storm coupled with the longer lead time orders that we took.

And are the lead times there such that it's still, by late February, should be sufficient to get that through?

That's one way or because one of them is a decent-sized government program, the timing of the recognition of the revenue, it will certainly have shipped. But whether or not it becomes revenue because it's completely installed is a bit of a coin toss at this point. And Todd, important to note point this was not because our lead times were long. It's just because the customer asked for it in a longer time frame that what we would typically see.

And that was one customer?

It was really 2, Todd.

Okay, but they both requested that longer delivery.

Right.

Okay. Perfect. I also -- I just want to get clear on this, the adjusted order number that you gave x government, up 13%, I'm assuming that's just purely North America you're talking about?

It is, yes. Correct. That excludes the Specialty and Consumer as well.

Okay. On the government side, what were the order trends in terms of municipal customers?

This is Jeff, Todd. Yes, I'll call it state and local as a category. Actually, it's been the same story for several quarters now. It hung in there pretty steady. So I mean, really the trends have been remarkably intact and steady. There hasn't been a significant erosion in that all.

Are there any indicators that might suggest you'll see some type of reversal there?

None that I'm aware of at all, Todd. I mean, I think clearly, this budgetary conversation that Brian talked about in his prepared remarks is the biggest question mark out there, but, no. No.

I think the other thing you see in that number is it does tie into [indiscernible] University. So it moves around a lot Todd because they can buy off of that awful lot of those contracts. So you'll see a lot of movement. It's a pretty broad customer base. It's not like it's singular, you're just selling to a state government. It's really broad and there's a lot of people who can buy off of those contract arrangements.

Okay. Since last year, at this time, corporate profits have decelerated somewhat. I'm just curious as to how you might think about that, if for example, is it fully being -- is it fully being realized by the vacancy-driven opportunities that your customers have to move to new facilities? Or are there other factors there?

In what kind of -- first of all, I do think that's probably be one of the potential -- with all the good news that I think you can see for the industry, is a potential headwind that's out there of will people -- because that tends to be one of the first sort of derivatives in the industry is what's happening with corporate profits? I think the good news is they don't know they look like this. They don't look like they're backing up. It just looks like they're kind of flattening out. The question is can we and can customers find places that they can move to that has more attractive rental rates. that for the longtime -- long-term starts to reset their cost structure either because to have lower rates or because they're able to more efficiently put their focus -- and there are a fair amount of those kind of opportunities out there. So I don't think so far we've seen any discussion about that being a big driver right now. But again, I think that a lot of that is going to depend, in my opinion, on what we do as we get into January and February as a country economically. If the economics look positive and the fiscal cliff is there where companies start to see growth again, I think then that profit number will turn around as we get -- and people will begin to believe it's going to turn around again, as we get into the back half of '13 and into '14. If, in fact, there's no prospects for growth, I imagine that will affect the psyche of businesses much more than if they actually say, "Hey, it looks like this thing has gotten, at least, figured out and we've got some time to start to build longer-term plans."

And in terms of your reported results, as well as your orders, to what extent is, perhaps the energy sector and one or 2 others, really doing -- continuing to do the heavy lifting? Can you speak to the strengths and weaknesses by verticals on the commercial side?

Yes. The areas of good growth we've see is financial services, business services, those kind of areas, Todd, in particular, have been quite good, of 2 sort of stand outs. And then we've mentioned sort of the negatives have been government, health care has been relatively flat if you take out the government. So, you look at those 2 areas as being the big drivers, if you will. Not surprising because they tend to have a lot of people.

Okay, and lastly, did you buy any stock -- repurchase any stock in the quarter?

No.

Okay. Any intent to possibly offset the fact that the share count just has been creeping up a little bit for a number of quarters now, maybe just to look to offset option issuance?

We have not had specific discussions about that, Todd. Of course, we're constantly looking at the capital structure and figuring out what to do with the cash that we have. And I think we're still in the same spot, we still have the pension plan, we have to finish up that move so we know that's going to use some of the cash that we have, we are looking at some strategic ideas that we think are interesting that could help accelerate growth. So those become #2 on our list. And then last, the board is constantly looking at the capital structure to make sure we're giving adequate cash returns to the shareholders. And that remains a top topic of discussion at every meeting and we keep looking at those 3 priorities and saying when is the best time and best way for us to go do that.

And I'm not showing any further questions in the queue.

Okay, in closing, folks, we know we face domestic and global economic challenges and we have work to do in fulfilling our strategic vision. But we believe Herman Miller has many years of strength and promise and a plan that leverages and builds on these to our unique advantage. The orders and backlog generated this past quarter are strong validation of both our strategic direction and momentum domestically and internationally, and we hope you share our optimism for the future. Finally, on behalf of all the people of Herman Miller, I want to wish you and your families a wonderful holiday season and a happy and healthy prosperous 2013. Thanks again for joining us and we look forward to talk to you again in March.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.