Brian Walker - President and CEO Curt Pullen - EVP and CFO Joe Nowicki - Treasurer and VP,IR

Matt McCall - BB&T CapitalMarkets Chris Agnew - Goldman Sachs Budd Bugatch - Raymond James Todd Schwartzman - Sidoti &Company

Good morning, everyone, andwelcome to the Herman Miller Incorporated second quarter fiscal 2008 earningsresults conference call. Today's call is being recorded. This presentation will includeforward-looking statements that involve risks and uncertainties that couldcause actual results to differ materially from those in the forward-lookingstatements. These risks and uncertainties include those risk factors discussedin the company's reports on Forms 10-K and 10-Q, and the other reports filedwith the Securities and Exchange Commission. Today's presentation will behosted by Mr. Brian Walker, President and Chief Executive Officer and Mr. CurtPullen, Executive Vice President and Chief Financial Officer. Mr. Walker andMr. Pullen are joined by Mr. Joe Nowicki, Treasurer and Vice President,Investor Relations. Ms. Walker and Mr. Pullen will open the call with a briefpresentation, which will be followed by your questions. We will limit today's call to 60minutes and ask that callers limit their questions to allow time for all toparticipate. At this time, I would like to begin the presentation by turningthe call over to Mr. Walker. Please go ahead.

Good morning, everyone. Asalways, I will open our presentation with a few introductory remarks and turnthe call over to Curt and Joe for a more detailed review of our results. As you can tell from our pressrelease, we have been busy this quarter. Our business performance has beenstrong, and we made substantial progress in furthering our mission aroundperformance innovation. We previously shared our intent to improve our underlyingbusiness performance and to accelerate our investment in our growth initiatives.We said we would move quickly, and we have. We've made significant stepsforward in both areas this quarter. First, let's talk about improvingour business performance. We told you there were two areas we were looking toimprove upon, increasing our operating income, and utilizing our balance sheetmore effectively. At the end of November, we described a plan and set specificactions towards a goal of increasing operating income, to 13% of sales. These actions are alwaysdifficult, but we recognize they were necessary to maintain our competitivenessand to enable greater and faster investment in our growth initiatives. Thenyesterday, we outlined a series of actions we are taking to utilize our balancesheet more effectively. We have taken advantage of the current favorableinterest rate environment to change our capital structure. We issued $200 million in privateplacement notes, and we utilized these proceeds to repurchase our stock throughan Accelerated Share Repurchase agreement. We are also increasing oursyndicated revolver to $250 million providing a further financial flexibilityto continue to invest in our strategic growth initiatives. Some of that why now, wemanagement and the Board are confident that we have a compelling strategy andbusiness model that will create long-term value for our shareholders andemployee-owners. We have capacity in our balance sheet, and we believe thevaluation is at a compelling point to invest. One of the strategic growth initiativesis the acquisition of the Brandrud a great strategic fit that will expand ourhealthcare product offer and add management talent and depth to our efforts. Brandrud is a qualitymanufacturer of healthcare furnishings with an emphasis on seating products forpatient rooms, patient treatment areas, and public spaces, such as lobbies andwaiting areas. We have shared a successful marketing alliance with them since2005 and look forward to further gains going forward. I would like to take a moment to recognizethe great work of our employee-owners over this past quarter. Not only did wemove quickly to get traction on some big initiatives, everyone continued todeliver on our day-to-day objectives. This work not the big initiative is whatenabled us to drive solid earnings in EVA growth and a very modest top lineimprovement. Our commercial teams have done aterrific job of finding and closing opportunities. The organization respondedto our call to more closely manage costs and eliminate ways. And ourmanufacturing teams continued to improve productivity and deliver solutions toour customers on time with impeccable quality. While we accomplished a lot thispast quarter, our agenda remains very full. First, our people will be focusedon completing them [fruition] of the changes, we recently announced. While thepeople changes were announced, we still have work to do. Second, we have a veryfull queue of new products for the core business international and healthcare.Many of these products will be introduced over the next 18 months. Third, wewill continue to expand our international business, which is growing in a verygood pace. Last, we will be ramping up ourConvia business. This past quarter, we opened a show-case facility for Conviain Buffalo Grove, Illinoisjust outside of Chicago.This space has really enabled prospective customers to experience the fullpotential and benefits of Convia. As a result, we have a growing [from our] prospectivecustomers and have begun to supply some inventory into the distributionnetwork. We also continue to get externalconformation that Convia is a big idea with real and compelling customerbenefits. Just this past month, architectural record magazine recognized Conviaas one of the most innovative new products of 2007. I’m sure, we will talk moreabout this during the Q&A, but our outlook has not changed. Given the current economicenvironment, we remain conservative in our assessment of the US markets near term growthpotential. The actions we took this past quarter were in part a response tothis assessment. Having said that, they were primarily driven by our long-termgoals. We are very bullish on the long-term potential for Herman Miller and theUSoffice furniture industry. We simply are concerned that the economy facesseveral headwinds that may result in slower growth. If the short-term proves tobe more robust than anticipated, we are well positioned to serve our customersneeds. In summary, while we're watchfulof the mixed economic climate in the near term, we are very confident in ourlong term strategy, and we are taking the necessary steps to secure our future.Now, I’ll let Curt and Joe take you through the details of our second quarterfinancial results.

Thanks, Brian. Good morning, everyone,and thanks for joining us. There is a lot to talk about this quarter so let mebriefly hit the highlights. As we ended the quarter, we experienced an increasein order rates, which proved to be sustainable throughout the quarter. Overall,we ended our second quarter with order rates having increased by more than 18%from first quarter levels. This increased order activityallowed us to end the quarter with sales above our guidance and also drove asignificant increase to our ending backlog. Gross margin improved by 150 basispoints above our first quarter as a result of improved pricing as well asmaterial cost improvements. Reduced program spending and overall great costcontrol reduced operating expenses by 140 basis points from Q1. These elements combined to resultan operating income of 12.9% for the quarter and drove our earnings per shareto a record of $0.67, up 20% from our previous record of $0.56 one year ago.Included in these results is the $5 million restructuring charge, which if removedwould have resulted in operating income of 13.9% and EPS of $0.72, an increaseof 29% over the prior year. We also produced solid cash flow from operationsincreasing over 80% to $56 million for the quarter. Let’s look at sales and orders.Second quarter sales of $506 million represented our 16th quarter in a row ofyear-over-year revenue growth. Although our growth was modest at 1.4%, weexceeded the top of our previously provided guidance of $475 million to $500million. This is due both to an increase in weekly order rates, which we beganto experience at the beginning of the quarter as well as continued stronggrowth from our non-North American segment. Last quarter, we described thatour order rates were down year-over-year, which prompted cautions in ourforecast for our second quarter. As we entered the quarter, we experienced anuplift in activity levels that was greater than our normal seasonal pattern.This improved order pacing contributed to our ability to exceed our revenueexpectations since we are able to translate a portion of these orders intoshipments during the quarter. On a sequential basis, second quarter sales wereup 3% from our first quarter. North American sales were flatyear-over-year as well as sequentially from the first quarter. This wasprimarily the result of slower first quarter order rates. Non-North Americansales continued to experience double-digit growth over the prior year showinggrowth of 18%. This strong performance was led by the UK and China both of which grew at morethan 60% for the quarter. We should note that we experiencedthe benefit to our international sales of approximately $7 million due to theforeign exchange impact with a weakening US dollar. The weak dollar alsoincreased the operating income of our international businesses by approximately$1.6 million. Orders for the second quarter werethe highest level we have seen in seven years ending the quarter at $573million, an increase of over 8% compared to year ago levels. In fact throughoutour second quarter, as I mentioned, we experienced overall weakly average orderrates that were 18% above our first quarter levels. Let's unpack this a little.Orders in North America rose 10% over theprior year and 20% sequentially compared to our first quarter. We realized thebiggest year-over-year gains in our eastern and northern regions of the United States as well as outstanding increasesin Canada and Mexico.Some of this is attributed to seasonal increases in order activity partiallydue to the Federal Government, but we also experienced an increase in a volumeof non-government large project business. Sequentially, it is not unusualfor us to experience a 7% to 8% increase in order rates in our second quarterversus our first quarter due to these seasonal factors. This year our uplift of20% nicely exceeded that trend. Orders for the non-North Americancomponent of our business increased over 12% with the strongest gains in China, Japanand the UK.The growth in order levels throughout the second quarter resulted in a healthyending backlog of $347 million, this is a 7% improvement from year ago levelsand a 24% improvement from the end of our first quarter. Going to gross margin, we arevery pleased that our gross margin performance for the quarter which ended at35.6% and represents an improvement of 150 basis points over the prior year of34.1%. The strong performance was primarily the result of our ability tocapture price improvements as a result of the previously inactive priceincrease as well as favorable material pricing during the quarter. On a sequential basis, grossmargin equally improved by 150 basis points from the 34.1% recorded in ourfirst quarter. The sequential gains were driven by high production volumes anda mix shift towards more profitable product and service lines. Looking forward,we are mindful of recent increases in crude oil prices and the effect that thiscould have on diesel and other commodities. Operating expenses for thequarter totaled a $110 million or 21.7% of sales compared to $112 million or 22.4%of sales last year. This represents a year-over-year decrease of $2 million or70 basis points with only a modest increase in sales. We experiencedyear-over-year increases in compensation costs, FAS 123 stock-based comp costsand tax related accruals. These increases were more than offset by lowerprogram spending and overall cost control. The cost reductions announced atthe end of November resulted in our recording of a $5 million restructuringcharge during the quarter. These one-time costs were all related to employeeseverance. Gains in gross margins and operating expenses drove operating incomeas a percentage of sales to 12.9% for the quarter, the highest level we havereported since May of 1999. Excluding the restructuring charges, operatingincome was 13.9% a quarterly record for the company. Our effective tax rate for thequarter was 34%, which was at the top of the range of 32% to 34% that we wereforecasting and was driven higher by our increased net earnings in the quarter. Consolidated net income for thequarter was $41 million, a 12% increase over the prior year. And we areextremely pleased with our all-time record earnings per share for the quarterof $0.67. Again this includes a $0.05 per share charge from the restructuringactivities, which when excluded, would result in EPS for the quarter of $0.72,a 29% increase over the previous record of $0.56 that we reported at this timelast year. I'll now turn the call over toJoe Nowicki, our Treasurer and VP of Investor Relations. Joe has been extremelybusy this quarter as we worked to realign the capital structure. So Joe, takeus through your work.

Thanks, Curt. Before I jump intothe current quarter metrics, I want to start with the big news on our capitalstructure. We've completed the analysis and implemented the results of the workthat we launched with last quarter's press release. We have announced a seriesof changes, designed to increase the utilization of our balance sheet, tosupport the acceleration of our strategic investments, and value enhancementfor shareholders. First, we have taken advantage ofthe favorable interest rate environment and have agreed to issue $200 million inSenior Unsecured Private Placement Notes, $50 million in Senior Notes of 5.94%due in January 2015 and $150 million in Senior Notes at 6.42% due in January of2018. The proceeds will primarily beused to execute an Accelerated Share Repurchase Program to repurchase 200million of our stock. We'll finally begin the transaction in January of 2008, asmostly probably that an ASR is a tool used by companies to quickly repurchase alarge amount of stocks. The company buys a large block ofstock from an investment bank that has borrowed the stock from third parties.The bank closes on the stock loan position over time and a purchase price tothe company similar to open market purchases. The exact number of repurchasedshares will be determined at the conclusion of the agreement, although themajority of the impact will be included in our share count by the end of thecompany's fiscal third quarter. This approach provides for adegree of certainty in terms of the details of the repurchase by enablingupfront share count reduction for most of the shares, which increases our EPSsooner than a purchase of shares overtime. In addition, we have alsoreplaced our existing $150 million credit facility with a new $250 millionUnsecured Revolving Credit Facility. The new facility will be used to refinanceexisting debt or provide working capital and will allow for a higher level ofoverall financial flexibility as we continue to invest in our strategic growthinitiatives. These actions demonstrate theconfidence we have both in our strategic growth initiatives and the long-termstrength of our business. We are also designed to complement our newlyauthorized 300 million share repurchase and complete the capital structurechanges we discussed in our first quarter financial release. As for the result for thisquarter, cash flow from operations was $56 million in Q2 compared to $31million in the prior year. Higher net income and lower working capitalrequirements in the current quarter were the main drivers of the year-to-yearchange. Working capital requirements drove a use of funds of $3 million in thecurrent year as compared to $17 million in the prior year. Capital expenditures up $10million for the quarter are even with the prior year and well within ourplanned levels. We returned $5.3 million to shareholders this quarter in theform of stock repurchases and another $5.4 million in dividends. In total forthe quarter, we bought back approximately 200,000 shares at an average price ofabout $27 per share. It's important to note that we executed very few sharerepurchases during the quarter because of a self imposed blackout due to ouroperating income and capital structure review work that was underway. As at the end of the quarter, westill have approximately $368 million remaining on our board authorization. Weended the quarter with a cash balance of $74.2 million. Of this amount,approximately $64.2 million is currently located in our international entities. Now, I'll hand it back to Curt.

Thanks, Joe. Let's turn to theoutlook for the third quarter of our fiscal year. We have discussed our strongorder entry during the second quarter, and we're starting the third quarterwith a solid backlog. However, we are remaining somewhat cautious with ourmidterm forecast due to the continued mixed macroeconomic factors, some ofwhich could affect near-term demand in our industry. Also, our sales teams have donean excellent job of winning certain projects that are currently in our backlogbut which are not scheduled to ship until after our third quarter. Additionally,we are scheduled for a full week plant shutdown over the holidays. And althoughwe're expecting to close the Brandrud acquisition sometime in February, it willonly have a minor impact on revenues this quarter. When all of this is combined, weanticipate third quarter sales to be in the range of $475 million to $500million. We anticipate continued favorable impact on gross margins from pricingand continued improvements in the margins of our new products. Commodity pricescould become a bit more challenging during the quarter, and we will also likelylose some leverage due to reduced production volumes during the holiday season. Operating expenses are expectedto remain relatively flat, as cost reductions will be slightly offset by higherplanned program spending. The effective tax rate should again be in the rangeof 32% to 34%. Additionally, as a result of our AcceleratedShare Repurchase Program, our forecast for the quarter also includes areduction in our weighted average shares outstanding of approximately 3 millionshares. In terms of earnings guidance, we expect earnings per share to be inthe range of $0.55 to $0.62 per share for the third quarter, which would representan increase of 10% to 24% over the prior year. I’ll now turn the call back tothe operator, and we’ll take your questions.

(Operator Instructions) We'll gofirst to Matt McCall with BB&T Capital Markets. Matt McCall - BB&T Capital Markets: Thanks. Good morning,everybody.

Good morning, Matt.

Good morning, Matt. Matt McCall - BB&T Capital Markets: Let’s say, first the question,the clarification on the authorization. I think, you just mentioned that youhave got $368 million left on the other authorization, is the acceleratedbuyback. Is that separate from the $368, is that going to reduce that $368 by$200?

No. Matt, it's not separate. Itwill actually reduce to $368, when it's completed. Matt McCall - BB&T Capital Markets: Okay, thank you.

This is a vehicle by which we dosome of that, sometime. Matt McCall - BB&T Capital Markets: Okay. Just wanted to make sure, Iwasn’t double counting.

Right. Matt McCall - BB&T Capital Markets: Help me reconcile the orderscomments, I think you broke down the North American and non-North Americannumbers and I think they were both north of 10%, but orders overall were onlyup 8%? Help me understand what I'm missing?

Yes sure, I will give you acouple, this is Joe. I will give you a couple of pieces of that probably foryou. One of them in looking at some of the components are we have a HermanMiller for the Home Business. That business was slightly down from where wewere year ago, so our Herman Miller of the home component was down. We also, inprior years, had some OEM business, since some OEM sales that we did. And weare no longer doing those and that was a second component that kind of wentaway and also like of decreased number from the components to that 8% in total. Matt McCall - BB&T Capital Markets: Okay. When you breakout NorthAmerica and non-North America,you’re excluding those but you’re excluding the impact to that when you talkabout the overall order rates?

Yes, if you look at our totalorder rates of the 8% increase, there are really three elements to it. TheNorth America that’s up 10%, the non-North America that’s up 12% and the othercomponent which is actually is down year-over-year. Matt McCall - BB&T Capital Markets: Okay. Thanks that's take care...

Does that help? Matt McCall - BB&T Capital Markets: Yes, it does. Curt, I think youjust talked about, I didn't hear if you quantified it, some of the productsthat or some of orders that weren’t shipped until the out quarter did you giveus a number on that?

No, I didn’t give you a number onthat, we just have been very successful Matt, and picking up some jobs thathave a pretty long cycle time item. So they're in the orders they are in thebacklog, but they're not scheduled to go out and sell into the third. So as werolled up our estimates we've taken that into consideration. Matt McCall - BB&T Capital Markets: Okay. And then finally, youtalked about shares moving down three million in the out quarter I guess justlooking at the number in dividing the share price by the $200 million. I knowit’s a rough estimate, but it looks like it could be probably double that inthe reduction in the share count when everything is finished?

Yeah, somewhere in the region,we're not sure what the share price is going to do and that allowed at the end,but we'll take the $200 million and we'll get a big portion of that upfront,despite the way the ASR works. Matt McCall - BB&T Capital Markets: Right.

And then, of course, it's allabout how that weighs out during the timing of things.

Yeah, the three million number isthe impact on the weighted average shares outstanding for the quarter.

Which means you won't even kickoff the agreement until one month is completely done, and by the time you getthe agreement activated, Matt… Matt McCall - BB&T Capital Markets: Okay.

You are probably more thanhalfway through the quarter if you just look at it roughly.

Right. So, I'm looking at theright way when I say 200 million divided by whatever the prices not going toget rough impact.

Yeah.

By the time it's already done.You're right. Matt McCall - BB&T Capital Markets: Got you.

How it lays in it will depend onthe timing of things.

So that the three million is forthe third quarter, we'll see more obviously in the fourth quarter, and thenwhen it's all wrapped up, we'll see the remaining marked portion come through. Matt McCall - BB&T Capital Markets: Okay. Thank you. And then thefinal question. Any update, we've talked a lot about the new square footageenvironment, how a lot new offices are going to be opening. Can you say ifthat's really what's providing some renewed strength in the order patterns, orare you seeing an improving pipeline from where we were, it sounds like youare, from where we were earlier in the year?

Well, Matt, this is Brian. Idon't know if I will relate it to that specifically. First of all, as Curt saidin his comments, it's typical for us to see a bit of a seasonal up tick from Q1to Q2. Matt McCall - BB&T Capital Markets: All right.

That's pretty typical. I think ifyou look under it, it was better than what we expected. Matt McCall - BB&T Capital Markets: All right.

We normally see some of that uptick because of the Federal government, in particular, is stronger in thesecond quarter. This year we had now and the Federal government that we tickup, but we also had really strong activity in terms of some new corporatebusiness that we won. And I don't think those are necessarily related, just anew square footage as much as they were due to competitive situations, where wehad some projects pop into the second quarter. So, overall I'd say our centeris still relatively the same as what we've been talking from the beginning. We had the sales force still seesreasonable activity in terms of client visits, in terms of projects that arecoming up on the board. But I'd still say overall, we are just a littlecautious with what we see going forward given the macroeconomic picture and Ithink our bigger concern is going to be more around employment andprofitability than it is square footage driven. Matt McCall - BB&T Capital Markets: Okay. And I'm sorry, you justdescribed it as reasonable the activity, is that kind of the way you're sayingyou've been describing it for the last couple of quarters?

Yeah, I don’t think -- I thinkcoming out of the first quarter, because of where orders were and especiallygrowth rates than orders. We were a little unsure what we see in the secondquarter. Again it picked up more than we thought, but if you go look at it, weare still running about the kind of year-over-year growth rates in total, youguess it is six months that we expected. It was a little better thisquarter. Yes, it was. Are we happy that we are going with a little strongerbacklog into the third quarter than we originally would have thought, if youwent back in to September, that's true? Personally, I think we'll know a lot aswe get through this third quarter about what the direction is. Often ascompanies are resetting budgets and those kinds of things they had and theywere mostly calendar year end companies. We'll get a much better feel as we seewhat happens with capital spending plans in the New Year. Matt McCall - BB&T Capital Markets: Okay. Thank you all.

And we'll next to Chris Agnewwith Goldman Sachs. Chris Agnew - Goldman Sachs: Thank you. Good morning,gentlemen.

Good morning, Chris.

Good morning, Chris. Chris Agnew - Goldman Sachs: First question on margin, is itpossible to break out the contribution to the uplift you got in this quarter bymix volume price and commodity pressures?

I can give you a rough feel forthat in detailed by number math or Chris if I can give you a rough kind ofbreakdown of it. We did get a benefit from the pricing piece of it clearly thatkind of helped us out year-over-year and the material performance piece of itfrom a commodity costs also is one of the big drivers that helped us out aswell. So from a year-over-year perspective those were the two big drivers to it. Chris Agnew - Goldman Sachs: And then maybe as a follow up tothat and thinking going forward. When are you anniversarying the priceincrease? Are you planning another coming up and you talked about a lot of newproducts in the pipeline is it fair to assume that that is a slightly sort of dilutiveeffect on gross margins initially until you pick up the volume runs?

Price increase last one was donein.

February

February of '07. So, that willanniversary in this next quarter Chris, this is Brian. As far as an additionalprice increase, we are certainly in that mode of evaluating when and to whatdegree. We don't have any specific plans at this point in terms of the timing.So we'll only nail down, we are looking at of course yeah that's one of thequestions we are also trying to figure out where the industry in general isgoing around those issues. So, that's not one that we have, we've made a finaldetermination about yet. As far as new products, I'd tellyou that somewhat depends on what category the new product is in and it alsodepends what's the nature of the new product. By that I mean, in some cases thenew product are derivatives of current platforms, when you are not only tryingto increase customer value, but of course we are also looking at how can, weredesign some of the products that are manufactured to help how they movethrough the plant to actually improve margins. So, I wouldn’t necessarily saythat’s a general thing that new products dampen them. And also, they tend to bea little bit smaller part of the mix in the early life. The products we have inthe pipeline in the near-term are primarily in the areas of storage andseating, which on the seating side, we tend to get ramped up on margins fasterthan we do in some areas like systems products, which are way more complex interms of the whole manufacturing and logistics side. So, at this point, we don'texpect a significant dampening and they will come in waves, so you won't seethem all hit at onetime, they will happen over, they will be spaced outthroughout that 18 months. So, I’m actually fairly confident that we're inpretty good shape there. Chris Agnew - Goldman Sachs: Okay, thanks. And then two sortof quick questions, I will ask both together. The $250 million facility, willyou use that primarily for say long-term strategic objectives. Am I thinkingright in terms of acquisitions or would you also consider using some of thatfacility for additional share buybacks overtime? And then the other question wasyou provided some color in terms of geographic distribution and pockets ofstrength. Is there any by maybe like business line, financial services,healthcare, legal, is there any differentiation in activity that you are seeingin the quarter? Thanks.

Good question. First of all the$250 million, we'll use it for acquisition share. I don’t think it will be oneof those items we've used for share repurchases. But, we should generate somefree cash flow as well, in fact after as we get through the ASR period. So,primarily we use it for acquisitions where we need to invest in capital to growthe business those kinds of things more than it would for the share repurchaseside. On the other hand again, we'llgenerate reasonable cash flow, as you saw this past quarter. So, we shouldactually have some cash for repurchases beyond what we are at when we get tooutside of the ASR period.

I think of the revolver, as moreof the financial flexibility to Chris. So, that as opportunities come up we canuse it to fill in and go out to payoff as we did in the cash flow. Brandrud, isa great example of one that as that one gets kind of closed, we would use therevolver to temporarily fund it and then through cash from operations to beable to come out of it again.

As far as pockets of strength interms of business sectors the business has been pretty even in terms of thesectors. I don't think there has been anyone area that’s been a particularstandout, we've see. We have had some good wins in the insurance area, whichhas been positive for us. We again, this is a heavierperiod in particular for government business, but it’s been pretty well spread,so far from what we've see. That's talking domestically primarily Chris, Idon't know, if you were asking that question specifically about international. Chris Agnew - Goldman Sachs: What I would say is, yeahprincipally domestically, but I mean either? But, no, thanks very much.

Yeah.

And we'll go next to Budd Bugatchwith Raymond James. Budd Bugatch - Raymond James: Good morning, Brian. Goodmorning, Curt. Good morning, Joe.

Good morning, Budd.

Good morning, Budd.

Good morning, Budd. Budd Bugatch - Raymond James: On the composition of business,can you talk a little bit about project versus non-project? You said you hadsome good project wins. What's the, I usually ask what's the compositionpercentage wise of orders or sales this quarter?

Yeah. The project business wasdown slightly, it ran around 41% of the total. So, it was a little bit lessthan what we saw last quarter and the prior quarter. But still in the upper40s, which is still a pretty good place to be. So, that was pretty good. Budd Bugatch - Raymond James: Upper 40s or 41.

41, I’m sorry. But still at apretty good number being in the 40s. Budd Bugatch - Raymond James: Okay.

I think we also did see thoughfrom a composition perspective, a lot more big project. So, we define them bydifferent size. There are a lot more million dollar plus kind of projectscoming in that we have seen in the past. So, that was another interesting notethat was different from the past few quarters. Budd Bugatch - Raymond James: And when you are winning thoseprojects, I take it what's the composition of product is [seating], systems orallover?

It’s all over, but it will be apretty normalized mix generally. Especially the larger ones and of course thoseoften are there is a project and then it plays out overtime in terms of whatyou have been ongoing a relationship with that customer. Budd Bugatch - Raymond James: Understood. When you look atprofitability by geography, I think you normally give us of margin NorthAmerica and non-North America.How does that look?

I don’t know that we normallygive that. I would say that our international profitability is very good andmaybe slightly higher this quarter internationally than domestically. Budd Bugatch - Raymond James: Okay. And if we do the math onyour composition of order growth, it looks like order is down about $5 million year-over-year.Is that about right and is Convia in there?

Yes, Convia is in there. But thatis not a driver to the decrease. The decrease is largely driven by this OEMbusiness that we had before. We were doing some business for one of the whitegoods manufacturers, where we did some metal casework that we decided to exitthat business. That’s the biggest drop off.

And that was, by the way, about$6 million for the quarter that in itself and that was $6 million in lastquarters and last year its zero on this year on it. Budd Bugatch - Raymond James: And next quarter, what would thatbusiness have been when we anniversary the reduction of that? I know, Iremember that business now which -- how much did it run $6 million a quarterfor the next couple of quarters and…

They will do, actually.

Yeah. It was about $6 million aquarter, last quarter we would have seen that. This quarter and I think thereare two more quarters?

Yeah. I think the contract endedright around at the end of our fiscal years, when we exited, but… Budd Bugatch - Raymond James: Okay. And Convia, can you talk alittle bit about revenues, can we get some numbers?

I think, last quarter Curt saidto me. Yes, there were revenues. I think that was the quantification…

The comment would be fairlysimilar this quarter. But it’s still very, very small in terms of actual bookedrevenue. While we have started to see, we will see some more in the thirdquarter because, and I think this business runs a little different than ourcore business where, when a dealer gets an order from a customer they send itto us and we ship at the time and they are looking for the product to beinstalled, if you will. This business in the, because alot of it is going through the electrical contractor deal you actually fill theinventory pipeline into the two step distribution model, so you put it in tothe master distributor, who then is having the local wires picked from thatinventory, if you will. Based on the strength of some ofthe forward activity we see in our third and fourth quarter, we know that thedistributor was going to build a little bit of inventory as we go into thethird quarter based on the project from what they can see out there. What Iwould say to you at this point is, we don’t -- we came in here assuming the revenuenumber would be not really all that material. It’s a good sign that we'restarting to see it. The pipeline is getting there in terms of project and Ithink as we get out of the third quarter what I have really better ability tocome back and quantify for you, how much of that stuff were actually being ableto get over the transom. It's going to be an important coming three, fourmonths for us. Budd Bugatch - Raymond James: Do you as you (inaudible) andthis we call this material for disclosure purposes in terms of segment oradditional reporting?

Yeah. I do, but I'd think that,Budd, that's probably not in the next few years, just in terms of, it's goingto ramp up from, it’s a little different because this is a startup business. Ithink part of the thing is going to be how much do we get crossed over betweenthe infrastructure business and the core furniture business. Budd Bugatch - Raymond James: With your profitability of this,that's got to be a drag on earnings right now, you want to quantify that?

The drag, certainly the drag, I'dsay that it's not huge big and a big scheme alike in terms of netprofitability. The margins are actually pretty decent on it, the gross margins,when we're actually shipping products. So, it's primarily since we got the rampup costs and the operating expense right now. Budd Bugatch - Raymond James: Okay.

A lot of capital involved either.So, this is not heavy capital business at this point. And it's not a heavybusiness from an operating structure. We only, I mean it’s very, very fewpeople, you are really talking about a handful of folks, all of themanufacturing is largely our source. So, we're not talking about major, majorinfrastructure here. Budd Bugatch - Raymond James: Okay. And just final area isBrandrud you kind of joined alliance with them or a strategic alliance withthem I think for a while couple of years, what's the incremental impact onrevenues and earnings from that this year or next year.

Well, it will be fairly smallthis year and of course it won't really get the acquisition done until the endof the third quarter essentially right at the end, probably the last month. Ithink you have seen the reports that Brandrud is around $20 million in sales. Budd Bugatch - Raymond James: And were you booking any of thatnow yourself or is that all their revenues?

We were getting a fee from them.So, it's actually fairly modest in terms of what we had in terms of revenue. Budd Bugatch - Raymond James: Got you. All right Brain, thankyou.

Thanks, Budd.

(Operator Instructions) We will gonext to Todd Schwartzman with Sidoti & Company. Todd Schwartzman - Sidoti & Company: Hi, good morning, gentlemen.

Good morning, Todd. Todd Schwartzman - Sidoti & Company: Just wanted to follow-up on aprevious question internationally, which customer segments are the strongestand the weakest right now?

I think it really, is around apatch we have had continued very strong growth in the UK as we mentioned Todd and Asia and China.I don't know that we really would say in any one particular industry we do agreat job with the government business right now. John Paul, like the guy thatruns the international piece would say that. That government business in the UK haspicked up pretty nicely in the quarter and I don't know what else we do withthat.

We do a lot of business withlarge financial institutions around the globe and a lot of tech companies ofcourse moving stuff to both Chinaand Indiaand those kind of places. So we are serving a lot of our core typical industrysegment things like high-tech banking. We have done some infrastructure folks,I know in Chinaparticularly some of the state owned enterprises have been interesting piece ofthe business for us. So, it's a pretty fair spread. Ithink even in Canada,as Curt talked about had a good quarter as well too. Todd Schwartzman - Sidoti & Company: Sure.

And in Canada, it was actually aninteresting area with several utility companies. So, there is another industrygroup which we saw some strength in.

And that is a good add, becauseinternationally it has also been some of the oil and gas guys, as they haveexpanded internationally. Todd Schwartzman - Sidoti Company: And within China, how much of the total isrepresented by the state owned enterprises?

Yeah. I don’t know if I can giveyou a percentage on that. I don’t know if I've got a percentage of the top ofmy head. But it's been probably a nice little surprise for us at some level asthose folks have been more accessible to us than we probably would have thoughtgoing in.

Yeah. John's comments to me, whenI was talking through the results with him Todd were that there has been verystrong demand from the Chinese companies and as he felt like there was room togrow on that. Particularly some of the seating products that they areinterested in so… Todd Schwartzman - Sidoti Company: Great. And I didn’t catch it, Idon't know if you had mentioned earlier but what was the delta for the quarterof North American shipments versus Q2 a year ago?

North America.

We had said that that was flat Ithink, right year-over-year. Todd Schwartzman - Sidoti Company: Yeah.

Was in my comment, yeah.

That’s correct.

We had flat shipments in North America versus the prior year.

If you look back, we had a verybig jump last year and we had a big comparable, where we took a lot of ordersin the first quarter of last year than shipped. If you go back and look at itsort of bounced between the two. Again, we had more growth this year inshipments in the first quarter and orders looked a little flat. Well, some ofthat spilled over when you look at the comparisons between the two quarters.

And that's also the same hurdle,we run into the third quarter. So the third quarter last year sales were quitehigh comparably. I think they were up 14% or so. So, when you look at this yearfor the third quarter in our forecast keep in mind that we are against thetough comp from the prior year as well. Todd Schwartzman - Sidoti Company: Okay, all right. Regarding the Februaryprice increase, it's now 10 months or so, what are you realizing on average? Irealize it does vary greatly. But what kind of realization are you getting?

Since we've been running, Todd,in the range of somewhere around up. If we asked for the list price increasewas about 4%. And it's been running somewhere around 1% to 1.5% in total. So,we've been getting about a quarter to a third of what we are asking for. Todd Schwartzman - Sidoti Company: That's nearly no difference fromthe recent past, right?

No. Todd Schwartzman - Sidoti Company: Okay.

But what happens, Todd, as thosecontracts renew, you pick up more and more ground, as you're kind of cyclebeyond the announced price increase. So, that's what's really happening. Todd Schwartzman - Sidoti Company: All right, lastly maybe could youshed some light on in discussing some additional opportunities you have to takecost out of the business that haven't really been discussed thus far?

Well, Todd, since this is Brian.Essentially we made a lot of the major people moves that we saw out there. Therest of the stuff is going to be much more, I would call a programmatic and themuch more difficult work that take continuous improvement activities like theHerman Miller production system work. We're constantly working on it in termsof both manufacturing as well as office areas. We also think there is some roomto do some overall simplification of business processes and some of the productlines by looking back at some of the platforms that we have. So, we see somereal benefits in that side of it. Those plans are not completely finalized, butwe think we can do some things around platforming that will actually increasesatisfaction for the dealers and customers at the same time take in some complexityout of both our marketing efforts as well as manufacturing. So that's pretty exciting for usand we’re looking at making some changes in fact, how we go to market from a marketingperspectives that we think will drive some great benefits in terms ofpositioning ourselves more effectively with customers. We actually think bydoing in the right way. We don’t have to increase costs in fact we think therewill be some cost shake out of that. Todd Schwartzman - Sidoti Company: Just wanted to have one finalquestion, are you doing anything in the way of outsourcing production ofseating products. If so, could you maybe elaborate on that?

No more than we have always inthe past. Remember you always have got to keep in mind that we have been alittle different than other folks. Although I think some folks have moved inthat direction. In several products categories we are largely a big assembler. So, when you say outsourcing, wedon't really think of it necessarily as outsourcing, but our primary driver inmanufacturing has been and will be going forward that we design product andsolutions specific to ourselves, we then develop those individual components tofit together as a whole and then we will find folks to make any of thosecomponents. That we can and what we will do internally is those processesenable us to offer the customer speed, reliability and choice. So when you look at what we doaround seating, we assemble the majority of the chair together and we buy thecomponents in that are made to our specification. We have not made anysignificant change there, from a business model perspective. Although there isalways little tweaks going on around the business, but feeding is the one thatis the most clear today and I'd say you'd see the least likelihood of changein. Todd Schwartzman - Sidoti Company: Okay. Thanks very much.

And we will take a follow up fromMatt McCall with BB&T Capital Markets. Matt McCall - BB&T Capital Markets: Thanks. Curt, you just mentionedone interesting point that, you talked about contracts renewing. Can you giveus any color on, I know it was a tough inflationary environment there for acouple of years, what the opportunity is as some of those roll over the nextcouple of years?

Yeah, I don’t know, Matt. If wereally talk about the specifics, I just would say in a general sense wheneverwe announce a price increase there are certain contracts that we are locked into that have durations remaining. So as those renew and that can take months orsometimes longer and it is the renewals where you have that opportunity to thenadjust. So, I think what we're saying isthat the pricing influence that we are able to see this quarter is the effectof whatever was that mix of business going on during the quarter, which is justsort of a normal thing that we all experience.

If you remember, Matt, that inour business, and I'm sure we have one of our friends or neighbors listening.And a lot of time many of those customers are in competitive situation, so it'snot as if we have them a 100% to ourselves and they just automatically roll tonew prices. So we're often looking at thosethings, not only in terms of what can we do pricing, but how do we maintain ourrelationship or build our share with those customers. So, that's a balancingact that really has to make a choice on customer-by-customer,situation-by-situation and there is no real general rule of thumb there. Matt McCall - BB&T Capital Markets: Got you, good point. Thank you,guys.

And there are no furtherquestions at this time. I'd like to turn the conference back over to ourspeakers for any additional or closing remarks.

Thank you all for joining ustoday. In closing, I want to thank you for your sustained interest in HermanMiller throughout this past year. I also want to express my appreciation to allthe Herman Miller employees for their outstanding contributions in 2007, andparticularly in this most recent quarter. Working through the changes toour business was a challenge for all of us, but we're proving we are capable ofachieving still greater results. As we look to the New Year, we are a strongercompany, and well position to further improve our underlying businessperformance, accelerate our growth and utilize our strong balance sheet moreeffectively. I am extremely thankful for thisholiday season to be a part of Herman Miller, a great company with greatfuture. That's it for now. We wish you best of wishes for a joyful holidayseason and a prosperous happy New Year.

Thanks, everyone.

Thank you everyone. And thisconcludes today's conference. You may now disconnect.