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 March 31, 1997
--------------
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
March 31, 1997 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 April 25, 1997: 92,809,012
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
March 31, December 31,
1997 1996
----------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 3.7 $ 3.7
Accounts and notes receivable 406.0 343.9
Allowance for doubtful accounts (9.0) (8.6)
Inventories 386.1 379.6
Other current assets 49.0 44.7
--------- ---------
Total current assets 835.8 763.3
PROPERTY, PLANT & EQUIPMENT, NET 617.8 582.9
OTHER ASSETS
Excess cost of purchased companies over
net assets acquired, less accumulated
amortization of $30.6 in 1997
and $28.4 in 1996 332.4 290.3
Other intangibles, less accumulated
amortization of $30.5 in 1997
and $30.3 in 1996 30.5 30.2
Sundry 43.4 46.2
--------- ---------
Total other assets 406.3 366.7
--------- ---------
TOTAL ASSETS $ 1,859.9 $ 1,712.9
========= =========
CURRENT LIABILITIES
Accounts and notes payable $ 123.7 $ 110.3
Accrued expenses 155.4 140.1
Other current liabilities 44.4 42.4
--------- ---------
Total current liabilities 323.5 292.8
LONG-TERM DEBT 462.3 388.5
OTHER LIABILITIES 36.5 36.0
DEFERRED INCOME TAXES 56.6 54.5
SHAREHOLDERS' EQUITY
Common stock .9 .9
Additional contributed capital 249.6 240.2
Retained earnings 741.5 704.4
Cumulative translation adjustment (6.6) (4.2)
Treasury stock (4.4) (.2)
--------- ---------
Total shareholders' equity 981.0 941.1
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,859.9 $ 1,712.9
========= =========
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)
Three Months Ended
March 31,
----------------------
1997 1996
-------- --------
Net sales $ 673.2 $ 591.2
Cost of goods sold 503.0 446.6
------- -------
Gross profit 170.2 144.6
Selling, distribution and
administrative expenses 82.4 71.9
Interest expense 7.2 7.8
Other deductions (income), net 2.5 3.5
------- -------
Earnings before income taxes 78.1 61.4
Income taxes 29.7 23.7
------- -------
NET EARNINGS $ 48.4 $ 37.7
======= =======
Earnings Per Share (Exhibit 11) $ .51 $ .42
Cash Dividends Declared
Per Share $ .13 $ .11
Average Common and Common
Equivalent Shares Outstanding 94.7 90.2
See accompanying notes to consolidated condensed financial statements.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
Three Months Ended
March 31,
--------------------
1997 1996
------ ------
OPERATING ACTIVITIES
Net Earnings $ 48.4 $ 37.7
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation 20.0 17.5
Amortization 3.3 3.7
Other 2.0 .4
Other changes, net of effects from
purchases of companies
Increase in accounts receivable, net (46.7) (37.9)
Decrease in inventories 5.5 5.1
Increase in other current assets (3.1) (1.1)
Increase in current liabilities 25.2 29.7
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 54.6 55.1
INVESTING ACTIVITIES
Additions to property, plant and equipment (25.2) (26.8)
Purchases of companies, net of cash acquired (75.3) (6.2)
Other 1.1 .4
------- -------
NET CASH USED FOR INVESTING ACTIVITIES (99.4) (32.6)
FINANCING ACTIVITIES
Additions to debt 76.1 2.2
Payments on debt (9.2) (18.4)
Dividends paid (22.9) (9.2)
Other .8 (.6)
------- -------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 44.8 (26.0)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .0 (3.5)
CASH AND CASH EQUIVALENTS - January 1, 3.7 8.2
------- -------
CASH AND CASH EQUIVALENTS - March 31, $ 3.7 $ 4.7
======= =======
See accompanying notes to consolidated condensed financial statements.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions)
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").
2. INVENTORIES
Inventories, using principally the Last-In, First-Out (LIFO) cost method,
comprised the following:
March 31, December 31,
1997 1996
---------- -------------
At First-In, First-Out (FIFO) cost
Finished goods $ 207.5 $ 204.2
Work in process 45.2 39.4
Raw materials 145.4 147.7
------- -------
398.1 391.3
Excess of FIFO cost over LIFO cost 12.0 11.7
------- -------
$ 386.1 $ 379.6
======= =======
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
March 31, December 31,
1997 1996
--------- ------------
Property, plant and equipment, at cost $1,071.4 $1,015.1
Less accumulated depreciation 453.6 432.2
-------- --------
$ 617.8 $ 582.9
======== ========
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
4. CONTINGENCIES
The Company is involved in numerous environmental, employment, intellectual
property and other claims and legal proceedings. When it appears probable in
management's judgement that the Company will incur monetary damages or other
costs in connection with such claims and proceedings, and the costs can be
reasonably estimated, appropriate liabilities are recorded in the financial
statements and charges are made against earnings. No claim or proceeding has
resulted in a material charge against earnings, nor are the total liabilities
recorded material to the Company's financial position. While the results of any
ultimate resolution cannot be predicted, management believes the possibility of
a material adverse effect on the Company's consolidated financial position,
results of operations and cash flows from these claims and proceedings is
remote. The more significant claims and proceedings are briefly described in
the following paragraphs.
One of the Company's subsidiaries is performing an environmental investigation
at a Florida plant site pursuant to a negotiation with local and Federal
environmental authorities. The costs of the investigation and any remediation
actions will be shared equally by the Company and a former joint owner of the
plant site.
In connection with an acquisition, one of the Company's subsidiaries is involved
in an unfair labor complaint filed by the National Labor Relations Board. An
administrative decision has been rendered against the subsidiary, which is still
under appeal.
A former supplier has brought several lawsuits against the Company and others
alleging breach of contract and patent infringement. The Company has
countersued in certain cases. None of these lawsuits have been tried at this
time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
- --------------------------------
The Company's total capitalization at March 31, 1997 and December 31, 1996 is
shown in the table below. The table also shows the amount of unused committed
credit available through the Company's revolving bank credit agreements.
March 31, December 31,
(Dollar amounts in millions) 1997 1996
---------- ------------
Long-term debt outstanding:
Scheduled maturities $ 332.6 $ 332.4
Revolving credit/commercial paper 129.7 56.1
-------- --------
Total long-term debt 462.3 388.5
Deferred income taxes and other liabilities 93.1 90.5
Shareholders' equity 981.0 941.1
-------- --------
Total capitalization $1,536.4 $1,420.1
======== ========
Unused committed credit $ 215.0 $ 215.0
The Company's internal investments to modernize and expand manufacturing
capacity were $25.2 million in the first quarter of 1997. The Company also
invested $75.3 million in cash (net of cash acquired) and issued 79,895 shares
of common stock to make several acquisitions. Cash provided by operating
activities provided slightly more than one-half of the funds required for
these investments. Increased borrowing under the Company's commercial paper
program initially provided the balance. In April 1997, the Company issued
$100 million in medium-term notes. The notes have average lives of 6.25 years
and fixed interest rates averaging 7.24%. Proceeds from the notes were used to
repay commercial paper outstanding.
Working capital at March 31, 1997 was $512.3 million, up from $470.5 million
at year-end. Total current assets increased $72.5 million, due primarily to
increases in accounts and notes receivable attributable to higher sales than
the fourth quarter of 1996. Total current liabilities increased $30.7
million, due primarily to increases in accounts payable and accrued income
taxes.
The Company has substantial capital resources to support projected internal
cash needs and additional acquisitions consistent with management's goals and
objectives. In addition, the Company has the availability of short-term
uncommitted credit from several banks. There was no short-term bank debt
outstanding at quarter-end, or at year-end.
Results of Operations
- ----------------------
The Company's continuing growth resulted in record sales of $673.2 million in
the first quarter of 1997. Earnings per share for the quarter were a record
$.51 per share. Compared with the first quarter of 1996, earnings per share
increased 21% on a 14% increase in sales.
Sales growth reflected ongoing benefits from acquisitions and improved
performance in many existing operations. Acquisitions continued to account
for more of the Company's sales growth than other factors. The balance of the
sales growth primarily reflected increases in unit volumes, as the Company was
able to refrain from raising prices on most products.
Earnings per share grew faster than sales, reflecting year-to-year improvement
in profit margins. The following table shows various measures of earnings as a
percentage of sales in the first quarters of the last two years. It also
shows the effective income tax rates and the coverage of interest expense by
pre-tax earnings plus interest.
Quarter Ended
March 31,
1997 1996
------ ------
Gross profit margin 25.3% 24.5%
Pre-tax profit margin 11.6 10.4
Net profit margin 7.2 6.4
Effective income tax rate 38.0 38.6
Interest coverage ratio 11.8x 8.9x
The net profit margin of 7.2% in this year's first quarter compares favorably
with 1996 margins of 6.4% in the first quarter and 6.9% for the full year
(excluding non-recurring costs). The sustained improvement in the net profit
margin was primarily due to enhanced operating efficiencies. Most of this
improvement is reflected in the increase in the gross profit margin for the
quarter. Reduced interest expense, other expenses (net of other income), and
a modestly lower effective income tax rate also contributed to the increase in
the net margin.
Consistent cash flow, a prudent capital policy and long-term growth have
allowed the Company to sustain a 26-year record of increasing dividends. In
March 1997, shareholders received first quarter dividends at a new quarterly
rate of $.13 per share. This dividend was 8% higher than the previous
quarterly rate and 18% above the dividend for the first quarter of 1996.
Statements of Financial Accounting Standards Not Yet Adopted
- -------------------------------------------------------------
Statement of Financial Accounting Standards No. 128, which will be effective
for the fourth quarter of 1997, establishes new standards for reporting
earnings per share. The new standard requires dual presentation of basic (no
dilution) and diluted (assuming full dilution) earnings per share. The
earnings per share under the new standard will not be significantly different
than what is currently being reported.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the first quarter of 1997 the Company issued 79,895 shares of its common
stock in a transaction which qualified for exemption from registration under the
Securities Act by virtue of Regulation D and Section 4(2) of the Securities Act.
These securities were issued in connection with the acquisition of Die Cast
Products, Inc. on March 27, 1997. The shares were issued to the shareholders of
that company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit 11 - Computations of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(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: May 6, 1997 By: /s/ HARRY M. CORNELL, JR.
-------------------------
Harry M. Cornell, Jr.
Chairman of the Board
and Chief Executive Officer
DATE: May 6, 1997 By: /s/ MICHAEL A. GLAUBER
------------------------
Michael A. Glauber
Senior Vice President,
Finance and Administration
EXHIBIT INDEX
Exhibit Page
- ------- ------
11 Computations of Earnings Per Share 12
27 Financial Data Schedule 13