Revenue from Contracts with Customers

12 Months Ended

May 30, 2020

Revenue from Contracts with Customers [Abstract]

Revenue from Contracts with Customers

Revenue from Contracts with Customers

Disaggregated Revenue

The Company’s revenue is comprised primarily of sales of products and installation services. Depending on the type of contract, the method of accounting and timing of revenue recognition may differ. Below, descriptions have been provided that summarize the Company’s different types of contracts and how revenue is recognized for each.

• Single Performance Obligation - these contracts are transacted with customers and include only the product performance obligation. Most commonly, these contracts represent master agreements with independent third-party dealers in which a purchase order represents the customer contract, point of sale transactions through the Retail segment, as well as customer purchase orders for the Maharam subsidiary within the North America Contract segment. For contracts that include a single performance obligation, the Company records revenue at the point in time when title and risk of loss has transferred to the customer.

• Multiple Performance Obligations - these contracts are transacted with customers and include more than one performance obligation; products, which are shipped to the customer by the Company and installation and other services, which are primarily fulfilled by independent third-party dealers. For contracts that include multiple performance obligations, the Company records revenue for the product performance obligation at the point in time when control transfers, generally upon transfer of title and risk of loss to the customer. In most cases, the Company has concluded that it is the agent for the installation services performance obligation and as such, the revenue and costs of these services are recorded net within Net sales in the Company’s Consolidated Statements of Comprehensive Income.

In certain instances, entities owned by the Company, rather than independent third-party dealers, perform installation and other services. In these cases, Service revenue is generated by the Company’s entities that provide installation services, which include owned dealers, and is recognized by the Company over time as the services are provided. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on relative standalone selling prices. 

• Other - these contracts are comprised mainly of alliance fee arrangements, whereby the Company earns revenue for allowing other furniture sellers access to its dealer distribution channel, as well as other miscellaneous selling arrangements. Revenue from alliance contracts are recorded at the point in time in which the sale is made by other furniture sellers through the Company’s sales channel.

Revenue disaggregated by contract type has been provided in the table below:

	Year Ended
(In millions)	May 30, 2020		June 1, 2019
Net Sales:
Single performance obligation
Product revenue	$	2,116.6	$	2,155.0
Multiple performance obligations
Product revenue	347.8		390.0
Service revenue	9.7		12.6
Other	12.5		9.6
Total	$	2,486.6	$	2,567.2

Revenue disaggregated by product type and segment has been provided in the table below:

	Year Ended
(In millions)	May 30, 2020		June 1, 2019
North America Contract:
Systems	$	512.7	$	564.4
Seating	459.1		501.8
Freestanding and storage	379.8		384.9
Textiles	138.8		113.8
Other	107.8		121.6
Total North America Contract	$	1,598.2	$	1,686.5
International Contract:
Systems	$	76.6	$	103.6
Seating	321.2		276.1
Freestanding and storage	51.1		53.0
Other	53.9		59.5
Total International Contract	$	502.8	$	492.2
Retail:
Seating	$	261.3	$	235.6
Freestanding and storage	66.0		67.5
Other	58.3		85.4
Total Retail	$	385.6	$	388.5
Total	$	2,486.6	$	2,567.2

Refer to Note 14 of the Consolidated Financial Statements for further information related to our segments.

Contract Assets and Contract Liabilities

The Company records contract assets and contract liabilities related to its revenue generating activities. Contract assets include certain receivables from customers that are unconditional as all performance obligations with respect to the contract with the customer have been completed. These amounts represent trade receivables and they are recorded within the caption “Accounts receivable, net” in the Consolidated Balance Sheets.

Contract assets also include amounts that are conditional because certain performance obligations in contracts with customers are incomplete as of the balance sheet date. These contract assets generally arise due to contracts with customers that include multiple performance obligations, e.g., both the product that is shipped to the customer by the

Company, as well as installation services provided by independent third-party dealers. For these contracts, the Company recognizes revenue upon satisfaction of the product performance obligation. These contract assets are included in the caption "Unbilled accounts receivable" in the Consolidated Balance Sheets until all performance obligations in the contract with the customer have been satisfied.

Contract liabilities represent deposits made by customers before the satisfaction of performance obligation and recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer based on the terms of the contract, the liability for the customer deposit is relieved and revenue is recognized. These customer deposits are included within the caption “Customer deposits” in the Consolidated Balance Sheets. During the year ended May 30, 2020, the Company recognized Net sales of $27.7 million related to customer deposits that were included in the balance sheet as of June 1, 2019.