Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from _________ to ___________
For Quarter Ended Commission File Number
June 30, 1994 1-7845
----------------- ----------------------
LEGGETT & PLATT, INCORPORATED
-----------------------------
(Exact name of registrant as specified in its charter)
Missouri 44-0324630
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
No. 1 Leggett Road
Carthage, Missouri 64836
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (417) 358-8131
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Common stock outstanding as of August 1, 1994: 40,857,606
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions, except share
and per share data) June 30, December 31,
1994 1993
-------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 8.8 $ 0.4
Accounts and notes receivable 258.2 211.9
Allowance for doubtful accounts (9.6) (7.2)
Inventories 223.1 209.1
Other current assets 27.0 21.4
---------- ----------
507.5 435.6
PROPERTY, PLANT & EQUIPMENT, NET 340.5 313.1
OTHER ASSETS
Goodwill, net 110.1 93.0
Other intangibles, net 24.6 25.7
Sundry 35.1 34.5
---------- ----------
TOTAL ASSETS $ 1,017.8 $ 901.9
========== ==========
CURRENT LIABILITIES
Accounts and notes payable $ 81.3 $ 74.1
Accrued expenses 88.2 66.9
Other current liabilities 29.0 25.2
---------- ----------
198.5 166.2
LONG-TERM DEBT 196.4 165.8
OTHER LIABILITIES 12.6 11.1
DEFERRED INCOME TAXES 43.2 43.2
SHAREHOLDERS' EQUITY
Common stock - authorized 300,000,000
shares of $.01 par value; issued
40,848,288 and 40,325,961 shares in
1994 and 1993, respectively .4 .4
Additional contributed capital 128.6 117.3
Retained earnings 443.0 401.0
Cumulative translation adjustment (4.9) (2.8)
Treasury stock (229 and 7,578 shares in
1994 and 1993, respectively) - (0.3)
---------- ----------
567.1 515.6
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,017.8 $ 901.9
========== ==========
Items excluded are either not applicable or de minimis in amount and,
therefore, are not shown separately.
See accompanying notes to consolidated condensed financial statements.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in millions, except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
------------------ --------------------
1994 1993 1994 1993
-------- -------- -------- --------
Net sales $ 883.4 $ 734.7 $ 448.8 $ 371.7
Cost of goods sold 680.5 566.8 344.5 286.3
-------- -------- -------- --------
Gross profit 202.9 167.9 104.3 85.4
Selling, distribution and
administrative expenses 107.3 93.8 54.5 47.8
Interest expense 3.8 5.8 2.0 2.8
Other deductions, net 2.4 1.8 1.2 .4
-------- -------- -------- --------
Earnings before income taxes 89.4 66.5 46.6 34.4
Income taxes 35.2 25.9 18.4 13.4
-------- -------- -------- --------
NET EARNINGS $ 54.2 $ 40.6 $ 28.2 $ 21.0
======== ======== ======== ========
Earnings Per Share (Exhibit 11) $ 1.31 $ .99 $ .68 $ .51
======== ======== ======== ========
Cash Dividends Declared Per Share $ .30 $ .26 $ .15 $ .13
======== ======== ======== ========
Average Shares Outstanding 41.4 41.0 41.4 41.0
======== ======== ======== ========
See accompanying notes to consolidated condensed financial statements.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions) Six Months Ended
June 30,
--------------------
1994 1993
-------- --------
OPERATING ACTIVITIES
Net Earnings $ 54.2 $ 40.6
Adjustments to reconcile net earnings to net cash
provided by operations
Depreciation and amortization 26.3 21.2
LIFO expense 2.6 2.0
Deferred income taxes (3.2) (1.9)
Other .6 .9
Other changes, net of effects from acquisitions of
companies
Increase in accounts receivable, net (34.1) (25.4)
(Increase) Decrease in inventories at FIFO cost (10.6) .8
Increase in other assets (3.8) (1.2)
Increase in accounts payable, accrued expenses
and other current liabilities 34.3 23.4
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 66.3 60.4
INVESTING ACTIVITIES
Additions to property, plant and equipment (37.6) (20.6)
Proceeds from sales of property, plant and equipment .6 .7
Acquisitions of companies, net of cash acquired (33.8) (13.9)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (70.8) (33.8)
FINANCING ACTIVITIES
Additions to debt 35.9 -
Payments on debt (11.0) (20.5)
Dividends paid (12.2) (10.0)
Net sales of common stock .6 .7
Other (.4) 1.0
-------- --------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES 12.9 (28.8)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8.4 (2.2)
CASH AND CASH EQUIVALENTS - January 1, .4 5.2
-------- --------
CASH AND CASH EQUIVALENTS - June 30, $ 8.8 $ 3.0
======== ========
Interest paid (net of amounts capitalized) $ 4.2 $ 5.4
======== ========
Income taxes paid $ 29.8 $ 26.8
======== ========
See accompanying notes to consolidated condensed financial statements.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions, except share and per share data)
1. STATEMENT
In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments necessary for a fair statement
of results of operations and financial position of Leggett & Platt,
Incorporated and Consolidated Subsidiaries (the "Company"). The consolidated
condensed financial statements include accounts of the Company and its
majority-owned subsidiaries. As discussed in the Company's 1993 Annual
Report on Form 10-K, previously issued financial statements have been restated
to reflect pooling of interests acquisitions.
2. INVENTORIES
Inventories (principally LIFO method) comprised the following:
June 30, December 31,
1994 1993
------------ --------------
Finished goods $ 122.7 $ 113.3
Work in process 27.0 23.8
Raw materials 86.2 82.2
-------- ----------
235.9 219.3
Less LIFO reserve 12.8 10.2
-------- ----------
$ 223.1 $ 209.1
======== ==========
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
June 30, December 31,
1994 1993
------------ --------------
Property, plant and equipment, at cost $ 618.4 $ 571.2
Less accumulated depreciation 277.9 258.1
-------- ----------
$ 340.5 $ 313.1
======== ==========
4. GOODWILL AND OTHER INTANGIBLES
Goodwill comprised the following:
June 30, December 31,
1994 1993
------------ --------------
Goodwill, at cost $ 122.9 $ 104.4
Less accumulated amortization 12.8 11.4
-------- ----------
$ 110.1 $ 93.0
======== ==========
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. GOODWILL AND OTHER INTANGIBLES (continued)
Other Intangibles comprised the following:
June 30, December 31,
1994 1993
------------ --------------
Other intangibles, at cost $ 34.6 $ 37.0
Less accumulated amortization 10.0 11.3
-------- ----------
$ 24.6 $ 25.7
======== ==========
5. LOAN AGREEMENTS
In connection with various notes payable, the related loan agreements, among
other restrictions, limit the amount of additional debt, require working
capital to be maintained at specified amounts, and restrict payment of
dividends. Unrestricted retained earnings available for dividends at
June 30, 1994 were approximately $148.2.
6. ACQUISITIONS
During the second quarter, the Company acquired certain assets of three small
companies for $33.8, net of cash acquired. Also, subsequent to the end of the
quarter, the Company acquired certain assets of another company for $40.0.
All of these acquisitions were accounted for as "purchases". Proforma results
of operations and financial position are not material.
7. CAPITAL STOCK
On May 12, 1994 the Company's shareholders approved an amendment to the
Company's 1989 Flexible Stock Plan increasing the number of shares authorized
for issuance under the plan by 1,500,000 shares.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's previously issued financial statements have been restated to
reflect poolings of interests acquisitions completed in 1993. Therefore,
the following discussion and analysis reflects the Company's capital resources
and liquidity and results of operations as restated for these acquisitions.
Capital Resources and Liquidity
- - --------------------------------
The Company's employment of debt and equity capital at June 30, 1994 and
December 31, 1993 is shown in millions of dollars in the table below.
June 30, December 31,
1994 1993
------------ --------------
Long-term debt outstanding:
Scheduled maturities 118.6 122.3
Revolving credit 77.8 43.5
--------- ---------
Total long-term debt 196.4 165.8
Shareholders' equity 567.1 515.6
Unused committed credit 122.2 116.5
Cash and cash equivalents 8.8 .4
Capital investments to modernize and expand capacity internally were $37.0
million, net of proceeds from sales of property, plant and equipment in the
first six months of 1994. In addition, the Company purchased certain assets
of three small businesses during the second quarter for $33.8 million, net
of cash acquired. The increase in total long-term debt at June 30, 1994
primarily reflected borrowings for these acquisitions.
As shown above, revolving credit at mid year was $77.8 million, up from
$43.5 million at the end of 1993. Debt with scheduled maturities was $118.6
million, down from $122.3 million. During this year's second quarter, the
Company increased the total amount of committed credit available under its
bank revolving credit agreements to $200 million, up from $160 million at
the end of 1993. Therefore, unused committed credit at June 30, 1994 was
$122.2 million, up from $116.5 million at year end. In addition, cash and
cash equivalents increased to $8.8 million at June 30, 1994, up from $.4
million at year end.
Working capital at June 30, 1994 was $309.0 million, up from $269.4 million
at the end of 1993. Total current assets increased $71.9 million, due
primarily to increases in trade accounts and notes receivable and inventories.
Total current liabilities increased $32.3 million. These increases primarily
reflected higher sales and production volumes during the first six months of
1994. There was no short-term debt outstanding at mid year or at the end of
1993.
Near the end of July 1994, the Company issued $25 million in unsecured
privately placed debt under its medium term note program. These notes were
issued with average lives of approximately 8 years and fixed interest rates
averaging 7.6%. Proceeds from the notes were used to repay a portion of the
Company's revolving credit.
On July 29, 1994, the Company purchased substantially all of the assets of
another business for $40 million in cash. The Company's revolving credit was
increased to make this acquisition. All of the acquisitions completed to date
in 1994 fit very well with the Company's continuing emphasis on manufacturing,
marketing and distributing a broad line of components and related products for
the furnishings industry and diversified markets. The Company continues to
have substantial capital resources and flexibility to pursue management's
goal of increasing efficiencies and profitable growth, both internally and
through additional acquisitions.
Results of Operations
- - ---------------------
The Company had record earnings and sales in the first six months of 1994.
Earnings were $1.31 per share (up 32%) and sales were $883.4 million
(up 20%) --- both compared with the first six months of 1993. Earnings and
sales were also at record second quarter levels in 1994. Earnings were $.68
per share (up 33%) and sales were $448.8 million (up 21%) --- both compared
with the second quarter of 1993.
Overall business conditions during the first six months and the second quarter
of 1994 reflected further growth in the U.S. economy. While interest rates
continued to rise from 1993 lows, overall availability of credit increased.
Consumer confidence remained well above year earlier levels, and consumer
spending on durable goods, including furniture and bedding, generally
increased. Final demand in the diversified, non-furnishings markets the
Company serves also improved.
The Company's sales growth reflected these general economic conditions, plus a
continuing benefit from acquisitions. Excluding acquisitions accounted for as
purchases, sales increased 9% in the first six months and the second quarter
of 1994. Acquisitions completed in the third quarter of 1993 will not
significantly benefit sales growth during the balance of this year. However,
the four previously mentioned 1994 acquisitions will expand the Company's
current annual sales base by approximately $125 million, an increase of about
7%. In addition, projections indicate 1994 acquisitions to date should
enhance annualized earnings by about $.05 per share.
The Company's growth in earnings in the first six months and the second
quarter continued to exceed sales growth, reflecting favorable year-to-year
comparisons of net profit margins. In the first six months, net profit
margins were 6.1% of sales in 1994 and 5.5% in 1993. The net profit margin
in this year's second quarter was 6.3%, up from 5.6% in the second quarter
of 1993.
The following shows various measures of earnings, as a percentage of sales,
for the first six months and the second quarter in both of the last two years.
It also shows the Company's effective income tax rate for each period.
Six Months Ended Quarter Ended
June 30, June 30,
------------------ ---------------
1994 1993 1994 1993
-------- -------- ------ ------
Gross profit margin 23.0% 22.9% 23.2% 23.0%
Pre-tax profit margin 10.1 9.0 10.4 9.3
Net profit margin 6.1 5.5 6.3 5.6
Effective income tax rate 39.4 38.9 39.5 39.0
As shown above, the Company's 1994 gross profit margins improved slightly
when compared with 1993. This improvement reflected increases in overall
manufacturing efficiencies on higher volume. Much of the improvement in
gross margins came from operations producing products other than components
for bedding, furniture and the automotive industry. Margins on these
components generally continue to reflect some 1993 cost increases for raw
materials that the Company has not passed on in its selling prices.
When compared with the first quarter of 1994, the improvement in this year's
second quarter gross margin reflected further increases in efficiencies and
increased sales of some products with above average margins. During the
second quarter, inflation in the Company's raw material costs in general
moderated. However, as the third quarter began, the price of steel scrap
(a key ingredient in several of the Company's raw materials) was increasing.
If this becomes a continuing trend, it could result in additional inflation
in raw material costs.
The increase in 1994 pre-tax profit margins primarily reflected two other
favorable factors. First, the Company's operating expense ratios improved as
administrative, selling and distribution expenses were kept under tight
control and declined as a percentage of sales. Second, interest expense was
reduced, primarily because of the Company's 1993 refinancing of debt after the
acquisition of Hanes Holding Company this past September.
These favorable factors were partially offset by a somewhat higher effective
income tax rate in 1994. The higher tax rate primarily reflected the increase
in corporate federal income tax rates in the third quarter of 1993.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 12, 1994. Matters
voted upon were (1) election of directors, (2) an amendment to the Company's
1989 Flexible Stock Plan increasing the number of shares authorized for
issuance under the plan by 1,500,000 shares and other certain amendments, (3)
ratifying Price Waterhouse as the Company's independent auditors for the year
ending December 31, 1994, and (4) a shareholder proposal whereby more
information regarding the Company's hiring practices of women and minorities
would be disclosed.
The number of votes cast for, against, withheld or broker non-votes, as well
as abstentions, with respect to each matter are set out below.
1. Election of Directors
DIRECTOR FOR WITHHELD
Herbert C. Casteel 33,303,359 456,244
Harry M. Cornell, Jr. 33,310,436 449,167
R. Ted Enloe, III 32,443,314 1,316,289
Richard T. Fisher 33,316,163 443,440
Frank E. Ford, Jr. 33,302,181 457,422
Robert A. Jefferies, Jr. 33,310,473 449,130
Alexander M. Levine 33,310,595 449,008
James C. McCormick 32,739,737 1,019,866
Richard L. Pearsall 33,314,678 444,925
Maurice E. Purnell, Jr. 33,296,443 463,160
Felix E. Wright 33,309,506 450,097
2. Amendment to Flexible Stock Plan
FOR AGAINST BROKER NON-VOTE ABSTAIN
23,136,513 8,857,477 1,585,937 179,676
3. Ratification of Independent Auditors
FOR AGAINST ABSTAIN
33,633,347 79,610 46,646
4. Shareholder Proposal
FOR AGAINST BROKER NON-VOTE ABSTAIN
4,059,808 24,776,327 1,546,436 3,377,032
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibit 11 - Computations of Earnings Per Share
(B) No reports on Form 8-K have been filed during the quarter
for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEGGETT & PLATT, INCORPORATED
DATE: August 12, 1994 By: /s/ HARRY M. CORNELL, JR.
-------------------------
Harry M. Cornell, Jr.
Chairman of the Board
and Chief Executive Officer
DATE: August 12, 1994 By: /s/ MICHAEL A. GLAUBER
----------------------
Michael A. Glauber
Senior Vice President,
Finance and Administration
EXHIBIT INDEX
Exhibit Page
- - -------- ------
11 Computations of Earnings Per Share 14