Herman Miller, Inc. today announced results for its third quarter ended March 3, 2018. Net sales in the quarter totaled $578.4 million, an increase of 10.2% from the same quarter last fiscal year. New orders in the third quarter of $563.2 million were 3.7% above the prior year level.
Herman Miller reported net earnings of $0.49 per share on a diluted basis in the third quarter compared to diluted earnings per share of $0.37 in the same quarter last fiscal year. Excluding the impact of certain special charges and the one-time impact of the U.S. Tax Cuts and Jobs Act recognized in the period, adjusted earnings per share in the third quarter totaled $0.50, compared to adjusted earnings per share of $0.39 in the third quarter of last fiscal year.
Brian Walker, Chief Executive Officer, stated, "Broad-based sales growth across all of our business segments was a clear highlight for the quarter, led by strong double-digit growth from our International and Consumer business segments. We were particularly encouraged that the acceleration in sales for the Consumer business resulted in meaningful improvement in operating margins for the segment as we execute on this important strategic priority. While order levels in North America reflected the project-based nature of the industry during the quarter, a favorable macro-economic picture and the potential for U.S. tax reform to be a catalyst for industry demand provide a supportive backdrop going forward. Highlighting our strategy of expanding our addressable markets, our International, Consumer and Specialty business segments each delivered strong order growth this quarter. With our collection of leading brands, a global multi-channel distribution capability and focus on our five key strategic priorities, we are well-positioned to drive sustainable long-term growth."
Consolidated gross margin in the third quarter of fiscal 2018 totaled 35.6%, representing a 160 basis point decrease from the level reported in the same quarter of last fiscal year. Operating expenses in the third quarter were $167.5 million compared to $157.8 million in the same quarter a year ago. Operating expenses included certain special charges totaling $3.9 million in the third quarter of fiscal 2018. These items related primarily to costs associated with the planned CEO transition announced in February and external consulting fees associated with the Company's profit enhancement initiatives.
Herman Miller's effective income tax rate in the third quarter was 19.0%, compared to 29.8% in the same quarter last fiscal year. The effective tax rate in the third quarter includes the impact of the recently enacted U.S. Tax Cuts and Jobs Act (the "Act"). In addition to a lower ongoing U.S. tax rate, the third quarter rate reflects adjustments related to the initial application of the Act, including the re-measurement of net current and deferred tax liabilities and the required recognition of tax expense associated with the deemed repatriation of accumulated foreign earnings. Excluding the impact of these initial application adjustments, the adjusted effective tax rate for the quarter was 25.8%.
Jeff Stutz, Chief Financial Officer, noted, "The organization has continued to do a nice job adjusting overall spending levels in response to ongoing gross margin pressures across the business, including the impact of competitive price discounting, commodity cost inflation and shifting product mix. These efforts were aided by further progress towards the overall cost reduction targets we outlined last year. While a portion of these savings are being utilized to help fund growth initiatives and offset inflationary pressures, this initiative remains a key component in achieving our long-term profitability target. The combination of strong operating performance and the benefit of a lower U.S. tax rate helped drive a 28% increase in adjusted earnings per share this quarter."
Mr. Stutz continued, "While we continue to feel our business is poised to benefit from our strategic position and a generally strong economic picture, sluggish order rates in North America this quarter and ongoing discounting, product mix and commodity pressures are reflected in our outlook for the upcoming fourth quarter."
The Company ended the third quarter with total cash and cash equivalents of $193.0 million, an increase of $96.8 million from the balance at the end of fiscal 2017. Cash flow generated from operations in the third quarter of $29.2 million compared to $27.8 millionin the same quarter last fiscal year.
Segment Sales and Orders
The following tables summarize reported and organic segment sales and orders for the third quarter of fiscal 2018:
Fourth Quarter Fiscal 2018 Guidance
Looking forward, Herman Miller expects net sales in the fourth quarter of fiscal 2018 to be in the range of $590 million to $610 million. On an organic basis, adjusted for the impact of dealer divestitures and foreign currency translation, this forecast implies sales growth of 4% compared to the fourth quarter of the prior year at the mid-point of the range.
On a GAAP basis, diluted earnings per share for the fourth quarter of fiscal 2018 is expected to range between $0.49 to $0.53. The Company expects adjusted diluted earnings per share to range between $0.56 to $0.60. Adjusted earnings per share excludes an estimated $6 million to $7 million of pre-tax restructuring and other charges expected in the fourth quarter of fiscal 2018.
This earnings per share guidance reflects an anticipated effective tax rate of 23% to 25% for the fourth quarter of fiscal 2018. Looking ahead, we expect our full year tax rate in fiscal 2019 to be 21% to 23%, which reflects a full year of the lower U.S. federal tax rate, anticipated mix of domestic and foreign earnings and the impact of state income taxes.