Good morning, everyone and welcome to this Herman Miller Incorporated Third Quarter Fiscal Year 2017 Earnings Results Conference Call. This call is being recorded. This presentation will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainness include those risk factors discussed in the Company’s reports on Form 10-K and 10-Q and other reports filed with the Securities and Exchange Commission. Today’s presentation will be hosted by Mr. Brian Walker, President and CEO; Mr. Jeff Stutz, CFO; and Mr. Kevin Veltman, Vice President of Investor Relations and Treasurer. Mr. Walker will open the call with brief remarks followed by a more detailed presentation of the financials by Mr. Stutz and Mr. Veltman. We will then open your call to questions. We will limit today’s call to 60 minutes and ask that callers limit their questions to allow time for all to participate. At this time, I would like to begin the presentation by turning the call over to Mr. Walker. Please go ahead.

Good morning, everyone and thank you for jibing us today. I’d like to begin with an overview of our recent performance and some strategic initiatives and hand the call over to Jeff and Kevin to review the financial in greater detail. Yesterday, we announced our financial results for the third quarter of fiscal 2017. Consolidated sales and orders for the quarter were $525 million and $543 million respectively. And GAAP earnings per share were $0.37 per share. Revenue was within the range we expected, and adjusted EPS of $0.39 exceeded our expectations due to well-managed operating expenses as part as we began implementing a portion of the cost savings we alluded to last quarter. While organic sales growth was flat compared to the same quarter last year, we were encouraged by the acceleration in consolidated order pacing throughout the quarter, which in total came in 5% above last year on an organic basis. When we look broadly at our business, the project nature of the industry was reflected in the order levels by segment. Strong order growth in the North American Contract business was partially offset by lower demand levels in our specialty and international businesses. The focused effort within our consumer business to accelerate growth across digital, physical and wholesale channels continued to gain traction. That business again delivered solid sales and order increases relative to last year. Earlier in the quarter, we announced several changes to our organizational structure aimed at better positioning us to execute against our growth strategy. I’d like to highlight a few key aspects of this realignment. First, as we continue to increase our market opportunities through geographic and customer segment expansion, we’re being deliberate in our efforts to identify and capitalize on the natural synergies between business segments. This will enable greater leverage…

Okay. Thank you, Brian, and good morning, everyone. Consolidated net sales in the third quarter of $525 million were 2% below the same quarter last year. On an organic basis, which excludes the impact of foreign currency translation and dealer divestitures, sales were essentially flat with last year’s level. Orders in the period of $543 million were 7% higher than the same quarter last year. As we outlined in our press release yesterday afternoon, we believe that timing of our most recent price increase had an impact on order pacing between our third and fourth quarters. At the beginning of February, we increased our general list prices on average of 2%. As a result, we estimate orders totaling approximately $21 million were pulled ahead into this quarter that would have otherwise been entered in Q4. On an organic basis, which includes adjusting for this pull-ahead impact, orders increased approximately 5% in the third quarter of last year. This impact was also reflected in our reported backlog for the quarter, which was 6% higher than last year. Last year’s backlog included approximately $25 million in orders related to dealers that have subsequently been divested including the sale of a dealer based in Australia at the start of this fiscal year and the sale of a dealer based in Philadelphia, earlier this quarter. Excluding the impacts from dealer divestitures and the order pull-ahead, backlog ended the third quarter more than 7% higher than last year, evidencing the strong order pacing during the back half of the quarter. Within our North American segment, sales were $310 million in the third quarter, representing a decrease of 1% from the same quarter a year ago. New orders in this segment were $333 million for the quarter, reflecting an increase of 12% from last year. On…

Good morning. We ended the quarter with total cash and cash equivalents of $78 million, which reflected an increase of $7 million from last quarter. Cash flows from operations in the period were $28 million compared to $53 million in the same quarter of last year. Changes in working capital balances resulted in a net cash outflow of $17 million this quarter, driven primarily by lower accounts payable and accrued liabilities along with higher inventory levels. By comparison, in the year ago period, changes in working capital driven net cash inflow of approximately $5 million. Capital expenditures were 24 million in the quarter and $70 million year-to-date. We anticipate capital expenditures of $90 million to $95 million for the full fiscal year. Cash dividends paid in the quarter were $10 million and we repurchased approximately $5 million of shares during the quarter. Since November 2015, our share repurchase activity has been primarily aimed at offsetting dilution. However, we have recently increased our target for cash returns to investors, a metric which we measure by interest expense, dividend payments and share repurchases as a percent of trailing three-year EBITDA. While investing in our business remains our number one priority, based on our strong cash flow generation and consistent with our goals of delivering improved shareholder value, we’ve increased our target for cash returns to investors from 20% to 25% of EBITDA to 30% to 35% of EBITDA. While we have an upcoming capital structure review with the Board to finalize the specifics of the approach we will take, we expect to achieve this target through a combination of higher dividend and share repurchase activity. We remain in compliance with all debt covenants. And as of quarter end, our gross debt to EBITDA ratio was approximately 0.9 to 1. The available capacity on our bank credit facility stood at $357 million at the end of the quarter, which includes $150 million set aside to repay the private placement notes that are due in January 2018. As a reminder, we also entered into forward study interest rate swap in September 2016 with a notional amount of $150 million that will be effective in January 2018. While the swap does not impact our interest expense in fiscal 2017, it will fix our interest rate on that portion of our debt at 2.8% and reduce our annual interest expense run rate by approximately $5 million, starting in January 2018. Given our current cash balances, ongoing cash flows from operations and our total borrowing capacity, we believe we continue to be well-positioned to meet the financing needs of the business moving forward. With that, I’ll turn the call back over to Jeff to cover our sales and earnings guidance for the fourth quarter of fiscal 2017.

All right. With respect to the forecast, we anticipate sales in the fourth quarter to range between $575 million and $595 million. We estimate the year-over-year unfavorable impact of foreign exchange on sales for the quarter to be approximately $5 million. On an organic basis, adjusted for dealer divestitures and the impact of foreign exchange translation, this forecast implies a revenue increase of about 4% compared to last year at the midpoint of the range. As mentioned earlier, we sold our Philadelphia contract dealership at the beginning of January. This transaction will impact year-over-year sales and order comparisons going forward. Net of intercompany eliminations, that dealer contributed approximately $6 million of revenue in Q4 of last year and about $25 million of revenue on an annual basis. Consolidated gross margin in the fourth quarter is expected to range between 37% and 38%, reflecting the sequential improvement in the gross margin in the fourth quarter from production leverage and higher sales volumes. Operating expenses in the fourth quarter are expected to range between $165 million and $169 million, and we anticipate earnings per share to be between $0.53 and $0.57 for the period, and this assumes an effective tax rate of between 31% and 33%. With that overview, I’ll now turn the call back over to the operator, and we’ll take the questions.

Thank you. [Operator Instructions] And our first question comes from Kathryn Thompson with Thompson Research Group. Your line is now open.

Good morning, guys. This is Steven on for Kathryn. I had a couple of questions in relation to the cost reduction plan. How do you expect that to impact each segment’s operating margin over the timeframe? And should we expect that to hit the operating expense line only, or should we expect the benefit in the cost of goods side as well?

Hey, Steven. This is Jeff. Great question. So, we’re going to be -- I will tell you, we are developing the detailed plan behind this. We’ve got line of sight to, as Brian said, $25 million to $35 million of savings over the three-year period. What I can tell you is that these cost savings, they span the business, so they will touch every segment; it’s not concentrated in any one segment. But, of course, as it evolves over time, it will hit segment profitability to varying degrees. In total, I think you can generally expect those cost savings to phase in relatively evenly or ratably over the three-year period. But, you’re going to need to stay tuned for those details.

Excellent. And then, a follow-up to that. Would you describe this $25 million to $35 million range as conservative and very achievable, or would you consider that more of the stretch goal number?

Steven, this is Brian. I think, obviously, we gave the range because we believe we can get within that range. So, I don’t think it’s a giant stretch. And obviously, we don’t think we’ll be done when we get there. We’ve got more work to go do. That’s what we’ve got a pretty good line of sight to today. And we told you guys last quarter, we thought this would get firmer and firmer as we got throughout the fiscal year from where we were last quarter, I think we got a pretty good view of the actions we have to take. Some of those things we got to finish the implementation plans and what the cost is to go and get it. Of course some of it will get offset over time, as I said with other inflationary costs and things like that. But we’re intent on -- we’re going to go find that and we’re also asking ourselves what are the other places we can go drive efficiencies to make sure that we can handle what we think is going to be a little bit of an inflationary period, as well as in the event we have slower growth, we want to be able to still get to our profitability targets.

Excellent and to confirm, these cost cuts are achievable, in spite of what sales do?

Yes. I mean, of course, how you see them, show up in profitability, does vary based on what you see with sales. But of course, they’re not; these aren’t costs that are variable with revenue necessarily. But at the same time, of course when you start to look at if you’re doing it in a modeling, you’re just adding it up, there’s a difference what your profitability will be, depending on volume growth.

And our next question comes from Budd Bugatch. Your line is now open.

Good morning. This is David on for Budd. Thanks for taking my question, guys. I wanted to dig in on the OpEx a little bit as well. So, in the quarter, OpEx came in lower than your guidance. And going in, I’m sure you had line of sight on some of the moving parts, the incentive comp and the divestiture and the initiation of the savings plan. Can you give a little detail on what other variances caused it to come in better than you plan?

Well, first, David, you have a line of sight that you’re trying to get the organization moving and some reason. To be frank, I think we got some of the benefits on the cost side faster than we thought we might. And that’s partially, I’ve always said, Herman Miller is an organization, if you can point in the right direction, you give it a compelling reason, they’ll go do amazing things. And I think it’s just the beginning of the team getting after some of those things, was a chunk of the variants, on top of the ones that you mentioned, which of course some of those depend on what especially the incentive comp, depends a little bit on what your current level of profitability is because it’s very much tied to that.

And then, going forward in terms of the guidance for operating expense and the cost coming out next quarter. Right now, what are the main drivers of that of the year-over-year decline in OpEx?

So, David, this is Jeff. I just want to make sure I get your question right. Are you talking for the fourth quarter or is this more in relation to the longer term savings that we outlined?

Well, kind of both. Initially the fourth quarter and then going forward where the major -- one of the major buckets that you’re looking to reduce costs or maybe think you can take costs out?

So, let me take the longer term question first and then I’ll pull back to the guide. So, we’re thinking of these cost reductions in kind of four primary categories. The first one I’d point to would be synergies within and across our business units. I think some of this is being driven by the organizational alignment that Brian outlined earlier on the call, some of that we think is going to help streamline costs. We did make some restructuring moves in the quarter that were somewhat tied to that category. So, that’s kind of one general bucket of savings. There are some facility related savings that we are pursuing and these -- some of these are going to be in the longer term category because those take some time but there’s some facility consolidation related actions that are being considered, one of which will occur in the UK that was announced earlier in the quarter for us and our team in the UK pushing a couple of our existing facilities together there. There is a logistics component to this cost savings plan that here too this is going to be -- some of these are going to be nearer term, some of those are a bit longer term and they spread out over the three-year time period. Some of this by the way is within the consumer business. So, to the earlier question around business unit operating margin impact, this would be one that we do believe we’ve got some opportunity in the consumer business but it doesn’t end there; there are logistics opportunities elsewhere. And then the fourth category I would say is just general cost rationalization. And some of that is the nearer term impact, David. So, I think as we move forward into the fourth quarter, obviously we won’t be able to capture some of those longer term or longer lead categories. But some of that synergy related to the business units will be more near-term impact that relates to the restructuring we announced earlier this quarter. And then, we’re really looking across the business at pulling back in a range of activities that we expect will -- are implied in our guidance for the fourth quarter.

Okay. Thanks for that. And then, I want to turn to gross margin now and some of the price increases. You’re guiding gross margin down year-over-year but you put through the price increase this quarter. I know that takes some time to flow through, but -- how long do you think till we see some of the benefit from the price increase and how much more do you have to go or how much long do you think you’re going to feel some price inflation in raw materials? Because I know you’re offset a little bit in terms of the buying based on your contracts.

So, this is Jeff again, David. So, on the price increase, as you know but it’s worth highlighting, that doesn’t just happen overnight; it layers itself into the organization or into the results over a period of time as customer contracts expire and then new pricing takes effect. We generally see some impact in the immediate quarter following, if price increase. But it takes about six months to really start to ramp that up or the benefits of that increase up. I would imagine somewhere in the $1 million or maybe $1.5 million range for the fourth quarter would be achievable and implied in our guidance, by the way, in the margin. That being said, we do expect, as you alluded to, some pressure continuing from commodities. Steel pricing, if you look at the steel pricing index, we ended the month of February at about on the cold rolled index at about $830 a ton. Just to frame that for you, a year ago, it was closer to 560 to 570 a ton. So, now, we -- our pricing is we’ve got a bit of a natural hedge because our suppliers give us about -- we’re on three-month lag pricing that we get set on. So, it doesn’t -- that increase doesn’t all reflect in our guide for Q4 but it does average its way in. I think we’ve got another couple of quarters of tougher comps on the year-on-year steel pricing. And that assumes pricing doesn’t move widely from where it is today. We should start to feel some relief on the comp as we roll for the end of our fourth quarter, maybe towards the midpoint of Q1; it should start to ease for us.

Okay. And then, last question from me. You hinted on about the pricing environment in the prepared remarks, but where are you seeing the most pressure in pricing right now in terms of the competiveness in the project business or the contract pipeline, I guess?

David, it’s obviously in the heart of the contract business. And I don’t think it’s just in the U.S., I think it’s -- we are in a very competitive industry; people can move from place-to-place. If there is one product category that I think is often highly contested is obviously in the workstation side where often that’s the anchor to win the rest of the account. So, people fight fiercely to go get that. And there’s I would say downward pressure on particular things like height adjustable tables where folks have been really fighting it out and that’s a hot category. So, it’s one of those you got to stay in front out; you got to constantly look at value engineering; you got to look at ways to differentiate yourselves; you got to work like creating your supply base. And that’s part of the reason for us saying, hey, we think this is ongoing thing. We have to get better-and-better over time.

I’m showing no further questions. I would now like to turn the call back to Mr. Walker for any further remarks.

Thanks for joining the call today. We appreciate your continued interest in Herman Miller and look forward to updating you next quarter. Have a great day.

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.