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, 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
June 30, 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 July 25, 1997: 95,622,954
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
June 30, December 31,
1997 1996
--------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 7.2 $ 3.7
Accounts and notes receivable 443.6 343.9
Allowance for doubtful accounts (11.0) (8.6)
Inventories 386.1 379.6
Other current assets 46.9 44.7
-------- --------
Total current assets 872.8 763.3
PROPERTY, PLANT & EQUIPMENT, NET 632.1 582.9
OTHER ASSETS
Excess cost of purchased companies over
net assets acquired, less accumulated
amortization of $32.9 in 1997
and $28.4 in 1996 356.1 290.3
Other intangibles, less accumulated
amortization of $31.6 in 1997
and $30.3 in 1996 31.6 30.2
Sundry 45.7 46.2
-------- --------
Total other assets 433.4 366.7
-------- --------
TOTAL ASSETS $ 1,938.3 $ 1,712.9
======== ========
CURRENT LIABILITIES
Accounts and notes payable $ 124.7 $ 110.3
Accrued expenses 153.5 140.1
Other current liabilities 41.3 42.4
-------- --------
Total current liabilities 319.5 292.8
LONG-TERM DEBT 458.7 388.5
OTHER LIABILITIES 36.5 36.0
DEFERRED INCOME TAXES 60.0 54.5
SHAREHOLDERS' EQUITY
Common stock .9 .9
Additional contributed capital 288.3 240.2
Retained earnings 781.6 704.4
Cumulative translation adjustment (6.3) (4.2)
Treasury stock (.9) (.2)
-------- --------
Total shareholders' equity 1,063.6 941.1
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,938.3 $ 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)
Six Months Ended Three Months Ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- ------- -------
Net sales $1,394.4 $1,211.2 $ 721.2 $ 620.0
Cost of goods sold 1,040.8 909.0 537.7 462.4
------- ------- ------ ------
Gross profit 353.6 302.2 183.5 157.6
Selling, distribution and
administrative expenses 170.3 147.7 87.9 75.9
Interest expense 15.3 15.9 8.2 8.0
Merger expense - 26.6 - 26.6
Other deductions (income), net 6.0 6.8 3.5 3.3
------- ------- ------ ------
Earnings before income taxes
and extraordinary item 162.0 105.2 83.9 43.8
Income taxes 61.6 40.9 31.9 17.2
------- ------- ------ ------
Net earnings before
extraordinary item 100.4 64.3 52.0 26.6
Extraordinary item - 12.5 - 12.5
------- ------- ------ ------
NET EARNINGS $ 100.4 $ 51.8 $ 52.0 $ 14.1
======= ======= ====== ======
Earnings Per Share (Exhibit 11)
Net earnings before
extraordinary item $ 1.06 $ .71 $ .55 $ .29
Net earnings $ 1.06 $ .57 $ .55 $ .15
Cash Dividends Declared Per Share $ .26 $ .22 $ .13 $ .11
Average Common and Common
Equivalent Shares Outstanding 94.9 90.7 95.2 91.3
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,
------------------
1997 1996
-------- --------
OPERATING ACTIVITIES
Net Earnings $ 100.4 $ 51.8
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation 43.4 36.2
Amortization 7.9 7.9
Merger expense (non-cash portion) - 24.3
Extraordinary item (non-cash portion) - 4.0
Other 3.9 3.0
Other changes, net of effects from
purchases of companies
Increase in accounts receivable, net (73.1) (67.7)
Decrease in inventories 14.5 7.2
Increase in other current assets (2.0) (.4)
Increase in current liabilities 27.7 7.5
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 122.7 73.8
INVESTING ACTIVITIES
Additions to property, plant and equipment (50.5) (50.3)
Purchases of companies, net of cash acquired (86.2) (76.2)
Other 1.6 (.1)
------ ------
NET CASH USED FOR INVESTING ACTIVITIES (135.1) (126.6)
FINANCING ACTIVITIES
Additions to debt 177.7 257.3
Payments on debt (125.0) (182.6)
Dividends paid (34.8) (19.2)
Sales of common stock 2.4 3.8
Purchases of common stock (3.6) (9.9)
Other (.8) -
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 15.9 49.4
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3.5 (3.4)
CASH AND CASH EQUIVALENTS - January 1, 3.7 8.2
------ ------
CASH AND CASH EQUIVALENTS - June 30, $ 7.2 $ 4.8
====== ======
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:
June 30, December 31,
1997 1996
---------- ------------
At First-In, First-Out (FIFO) cost
Finished goods $ 210.1 $ 204.2
Work in process 46.0 39.4
Raw materials 145.3 147.7
------ ------
401.4 391.3
Excess of FIFO cost over LIFO cost 15.3 11.7
------ ------
$ 386.1 $ 379.6
====== ======
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
June 30, December 31,
1997 1996
---------- ------------
Property, plant and equipment, at cost $ 1,103.0 $ 1,015.1
Less accumulated depreciation 470.9 432.2
------- -------
$ 632.1 $ 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 decision
was recently upheld by the appellate court. The Company is currently
considering additional legal and other actions to resolve this matter.
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 June 30, 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.
June 30, December 31,
1997 1996
--------- ------------
(Dollar amounts in millions)
Long-term debt outstanding:
Scheduled maturities $ 431.9 $ 332.4
Revolving credit/commercial paper 26.8 56.1
------- -------
Total long-term debt 458.7 388.5
Deferred income taxes and other liabilities 96.5 90.5
Shareholders' equity 1,063.6 941.1
------- -------
Total capitalization $ 1,618.8 $ 1,420.1
======= =======
Unused committed credit $ 215.0 $ 215.0
======= =======
The Company's internal investments to modernize and expand manufacturing
capacity were $50.5 million in the first six months of 1997. The Company also
invested $86.2 million in cash (net of cash acquired) and issued 1.1 million
shares of common stock to make several acquisitions. Cash provided by
operating activities provided a majority 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. These 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 June 30, 1997 was $553.3 million, up from $470.5 million at
year-end. Total current assets increased $109.5 million, due primarily to
increases in accounts and notes receivable attributable to increased sales.
Total current liabilities increased $26.7 million, due primarily to increases
in accounts payable and accrued expenses.
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. However, there was no short-term bank
debt outstanding at mid-year, or at year-end.
Results of Operations
- ----------------------
The Company had record sales of $1.39 billion in the first six months of 1997.
Sales for the second quarter increased to an all-time quarterly high of $721.2
million. Compared with the same periods in 1996, sales increased 15% in the
first six months and 16% in the second quarter.
Earnings per share increased to records of $1.06 in the first six months and
$.55 in the second quarter of 1997. Compared to 1996 results before non-
recurring costs, earnings per share were up 19% in the first six months and
17% in the second quarter. The non-recurring costs totaled $.32 per share,
consisting of $.18 per share in merger related costs for the Company's May
1996 acquisition of Pace Holdings, Inc. (Pace), and $.14 per share in an
extraordinary item for the mid-year refinancing of Pace debt. Earnings per
share including the non-recurring costs were $.57 in the first six months and
$.15 in the second quarter of 1996.
Increased 1997 sales reflected ongoing benefits from acquisitions and improved
performance in existing operations. Acquisitions accounted for more of the
Company's sales growth than other factors. The balance of the sales growth
primarily reflected increases in unit volumes in many operations.
Earnings per share continued to grow faster than sales, reflecting year-to-year
improvements in profit margins. The following table shows various measures of
earnings as a percentage of sales for the first six months and the second
quarter of the last two years. It also shows the effective income tax rate
and the coverage of interest expense by pre-tax earnings plus interest in
each respective period.
Six Months Ended Quarter Ended
June 30, June 30,
1997 1996 1997 1996
------ ------ ------ ------
Gross profit margin 25.4% 25.0% 25.4% 25.4%
Pre-tax profit margin-reported 11.6 8.7 11.6 7.1
Impact of non-recurring costs -- 2.2 -- 4.3
----- ----- ----- -----
Excluding non-recurring costs 11.6 10.9 11.6 11.4
Net profit margin-reported 7.2 4.3 7.2 2.3
Impact of non-recurring costs -- 2.4 -- 4.6
----- ----- ----- -----
Excluding non-recurring costs 7.2 6.7 7.2 6.9
Effective income tax rate 38.0 38.9 38.0 39.3
Interest coverage ratio 11.6x 7.6x 11.2x 6.5x
As shown above, gross and pre-tax profit margins were at the same levels in
the first six months and the second quarter of 1997. The effective income tax
rate also was identical in both of these periods, resulting in net profit
margins of 7.2%. These margins compare favorably with the same periods of
last year, including and excluding the impact of non-recurring 1996 costs.
Excluding the non-recurring costs, the net profit margin increased from 6.7%
in the first six months of 1996. Most of the increase to 7.2% was due to an
improvement in the gross profit margin, as many operations continued to
improve production efficiencies. Reduced interest expense and a modestly
lower effective income tax rate also contributed to the year-to-date increase
in the net profit margin.
In the second quarter of 1996, the net profit margin was 6.9%, excluding the
impact of non-recurring costs. The increase to 7.2% reflected a slight
improvement in the operating expense ratio, little change in interest expense,
and a lower effective income tax rate. The gross profit margin for the
quarter was at the same level in both of the last two years.
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 and June of 1997, shareholders received quarterly dividends of $.13 per
share. These dividends were 8% higher than the previous quarterly rate and
18% above the dividends for the first two quarters 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 second quarter of 1997 the Company issued 1,021,681 shares of its
common stock in transactions 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 three businesses. On April 18, 1997, 334,758 shares were issued
to acquire Porter International, Inc. On May 9, 1997, 231,720 shares were
issued to acquire Tarrant Interiors, Inc. On June 11, 1997, 455,203 shares
were issued to acquire Iredell Fiber, Inc. The shares were issued to the
shareholders of those companies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on May 14, 1997. Matters
voted upon were (1) election of directors, (2) amendment of the Company's
Director Stock Option Plan, (3) amendment and restatement of the Company's
1989 Flexible Stock Plan, and (4) ratification of Price Waterhouse as the
Company's independent auditors.
The number of votes cast for, against or withheld, as well as abstentions,
with respect to each matter are set out below.
1. Election of Directors
DIRECTOR FOR WITHHELD
Raymond F. Bentele 78,160,993 853,069
Harry M. Cornell, Jr. 78,171,935 842,127
Robert Ted Enloe, III 78,151,505 862,557
Richard T. Fisher 78,168,656 845,406
Bob L. Gaddy 78,197,675 816,387
David S. Haffner 78,163,227 850,835
Thomas A Hays 78,200,881 813,181
Robert A. Jefferies, Jr. 78,164,995 849,067
Alexander M. Levine 78,212,507 801,555
Richard L. Pearsall 78,197,905 816,157
Duane W. Potter 78,160,789 853,273
Maurice E. Purnell, Jr. 78,163,604 850,458
Felix E. Wright 78,162,499 851,563
2. Amendment of the Company's Director Stock Option Plan
FOR AGAINST ABSTAIN
66,225,637 12,364,079 424,346
3. Amendment and restatement of the Company's 1989 Flexible Stock Plan
FOR AGAINST ABSTAIN
63,040,715 15,565,603 407,744
4. Ratification of Independent Auditors
FOR AGAINST ABSTAIN
78,777,243 47,805 189,014
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: August 4, 1997 By: /s/ HARRY M. CORNELL, JR.
--------------------------
Harry M. Cornell, Jr.
Chairman of the Board
and Chief Executive Officer
DATE: August 4, 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