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, 2000
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, 2000 1-7845
LEGGETT & PLATT, INCORPORATED
(Exact name of registrant as specified in its charter)
Missouri 44-0324630
(State or other (I.R.S. Employer Identification No.)
jurisdiction of
incorporation or
organization)
No. 1 Leggett Road
Carthage, Missouri 64836
(Address of principal executive (Zip Code)
offices)
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, 2000: 196,579,920
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,
2000 1999
CURRENT ASSETS
Cash and cash equivalents $ 17.7 $ 20.6
Accounts and notes receivable 693.4 572.7
Allowance for doubtful accounts (14.0) (13.3)
Inventories 676.9 605.8
Other current assets 71.8 70.4
- --------------------------------------------------------------------
Total current assets 1,445.8 1,256.2
PROPERTY, PLANT & EQUIPMENT, NET 981.8 915.0
OTHER ASSETS
Excess cost of purchased companies over
net assets acquired, less accumulated
amortization of $77.5 in 2000 and $67.3
in 1999 851.0 714.3
Other intangibles, less accumulated
amortization of $35.1 in 2000 and $32.6
in 1999 54.2 45.2
Sundry 54.2 46.8
- --------------------------------------------------------------------
Total other assets 959.4 806.3
- --------------------------------------------------------------------
TOTAL ASSETS $3,387.0 $2,977.5
====================================================================
CURRENT LIABILITIES
Accounts and notes payable $ 183.1 $ 146.1
Accrued expenses 227.0 194.2
Other current liabilities 87.4 91.2
- --------------------------------------------------------------------
Total current liabilities 497.5 431.5
LONG-TERM DEBT 1,031.5 787.4
OTHER LIABILITIES 43.4 43.9
DEFERRED INCOME TAXES 66.2 68.5
SHAREHOLDERS' EQUITY
Common stock 2.0 2.0
Additional contributed capital 425.0 424.8
Retained earnings 1,388.7 1,278.1
Accumulated other comprehensive income (28.7) (18.9)
Treasury stock (38.6) (39.8)
- --------------------------------------------------------------------
Total shareholders' equity 1,748.4 1,646.2
- --------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,387.0 $2,977.5
====================================================================
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,
2000 1999 2000 1999
Net Sales $2,139.2 $1,822.8 $1,095.6 $ 935.2
Cost of goods sold 1,579.2 1,337.0 807.1 681.8
- -------------------------------------------------------------------------
Gross profit 560.0 485.8 288.5 253.4
Selling, distribution and
administrative expenses 277.1 233.5 143.1 120.8
Other deductions (income),net 15.5 14.1 8.4 8.0
- --------------------------------------------------------------------------
Earnings before interest
and income taxes 267.4 238.2 137.0 124.6
Interest expense 32.2 19.4 17.6 10.0
Interest income 2.7 1.4 1.2 0.5
- --------------------------------------------------------------------------
Earnings before income taxes 237.9 220.2 120.6 115.1
Income taxes 87.8 81.7 44.3 42.7
- --------------------------------------------------------------------------
NET EARNINGS $ 150.1 $ 138.5 $ 76.3 $ 72.4
==========================================================================
Earnings Per Share
Basic $ 0.75 $ 0.70 $ 0.38 $ 0.37
Diluted $ 0.75 $ 0.69 $ 0.38 $ 0.36
Cash Dividends Declared
Per Share $ 0.20 $ 0.18 $ 0.10 $ 0.09
Average Shares Outstanding
Basic 198.9 198.6 199.0 198.1
Diluted 200.5 201.2 200.6 200.9
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,
2000 1999
OPERATING ACTIVITIES
Net Earnings $ 150.1 $ 138.5
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation 65.2 61.3
Amortization 16.3 12.9
Other 3.0 5.3
Other changes, net of effects from
purchase of companies
(Increase) in accounts receivable, net (56.6) (33.5)
(Increase) in inventories (27.9) (6.7)
(Increase) in other current assets (3.3) (0.2)
Increase in current liabilities 41.5 37.3
- ----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 188.3 214.9
INVESTING ACTIVITIES
Additions to property, plant and equipment (81.5) (77.0)
Purchases of companies, net of cash acquired (203.4) (105.1)
Other (16.2) 6.7
- -----------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (301.1) (175.4)
FINANCING ACTIVITIES
Additions to debt 392.0 45.8
Payments on debt (203.1) (43.4)
Dividends paid (57.0) (51.0)
Issuances of common stock 2.3 1.8
Purchases of common stock (25.4) (63.1)
Other 1.1 0.3
- -----------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 109.9 (109.6)
- -----------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2.9) (70.1)
CASH AND CASH EQUIVALENTS - January 1, 20.6 83.5
- -----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - June 30, $ 17.7 $ 13.4
=======================================================================
See accompanying notes to consolidated condensed financial statements.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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
positions of Leggett & Platt, Incorporated and Consolidated
Subsidiaries (the `Company').
2. INVENTORIES
Inventories, about 50% of which are valued using the Last-in,
First-out (LIFO) cost method and the remainder using the First-In,
First-Out (FIFO) cost method, comprised the following:
June 30, December 31,
2000 1999
At First-In, First-Out (FIFO) cost
Finished goods $ 345.3 $ 309.9
Work in process 71.2 63.2
Raw materials and supplies 269.1 238.2
- -------------------------------------------------------------------
685.6 611.3
Excess of FIFO cost over LIFO cost (8.7) (5.5)
- -------------------------------------------------------------------
$ 676.9 $ 605.8
===================================================================
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
June 30, December 31,
2000 1999
Property, plant and equipment, at cost $1,765.1 $1,628.7
Less accumulated depreciation 783.3 713.7
- --------------------------------------------------------------------
$ 981.8 $ 915.0
====================================================================
4. COMPREHENSIVE INCOME
In accordance with the provisions of Financial Accounting Standard
No. 130, the Company has elected to report comprehensive income in
its Statement of Changes in Shareholders' Equity. For the six
months ending June 30, 2000 and 1999, comprehensive income was
$140.3 and $139.5, respectively.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
Basic
Weighted average shares
outstanding, including
shares issuable for
little or no cash 198.9 198.6 199.0 198.1
========================================================================
Net earnings $ 150.1 $ 138.5 $ 76.3 $ 72.4
========================================================================
Earnings per share - basic $ .75 $ .70 $ .38 $ .37
========================================================================
Diluted
Weighted average shares
outstanding, including
shares issuable for
little or no cash 198.9 198.6 199.0 198.1
Additional dilutive shares
principally from the
assumed exercise of
outstanding stock options 1.6 2.6 1.6 2.8
- ------------------------------------------------------------------------
200.5 201.2 200.6 200.9
========================================================================
Net earnings $ 150.1 $ 138.5 $ 76.3 $ 72.4
========================================================================
Earnings per share-diluted $ .75 $ .69 $ .38 $ .36
========================================================================
6. CONTINGENCIES
The Company is involved in various legal proceedings including
matters which involve claims against the Company under employment,
intellectual property, environmental and other laws.
When it appears probable in management's judgement that the
Company will incur monetary damages or other costs in connection
with 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 claims and
proceedings is remote.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
7. SEGMENT INFORMATION
Reportable segments are primarily based upon the Company's
management organizational structure. This structure is generally
focused on broad end-user markets for the Company's diversified
products. Residential Furnishings derives its revenues from
components for bedding, furniture and other furnishings, as well
as related consumer products. Commercial Furnishings derives its
revenues from retail store fixtures, displays, storage, material
handling systems, components for office and institutional
furnishings, and plastic components. Aluminum Products revenues
are derived from die castings, custom tooling, secondary machining
and coating, and smelting of aluminum ingot. Industrial Materials
derives its revenues from drawn steel wire, specialty wire
products and welded steel tubing. Specialized Products is a
combination of non-reportable segments which derive their revenues
from machinery, manufacturing equipment, automotive seating
suspensions, control cable systems, and lumbar supports for
automotive, office and residential applications.
A summary of segment results for the six months ended June 30,
2000 and 1999 and the quarters ended June 30, 2000 and 1999 are
shown in the following tables:
Inter-
External Segment Total
Sales Sales Sales EBIT
Six Months ended June 30, 2000
Residential Furnishings $ 1,076.3 $ 4.9 $ 1,081.2 $ 127.3
Commercial Furnishings 462.8 3.7 466.5 53.2
Aluminum Products 301.6 8.3 309.9 29.8
Industrial Materials 159.6 108.7 268.3 42.2
Specialized Products 138.9 25.4 164.3 24.7
Intersegment eliminations - - - (6.5)
Change in LIFO reserve - - - (3.3)
- ----------------------------------------------------------------------------
$ 2,139.2 $151.0 $ 2,290.2 $ 267.4
============================================================================
Six Months ended June 30, 1999
Residential Furnishings $ 950.7 $ 5.0 $ 955.7 $ 104.7
Commercial Furnishings 340.4 1.6 342.0 57.2
Aluminum Products 282.5 8.5 291.0 27.8
Industrial Materials 135.8 105.6 241.4 35.2
Specialized Products 113.4 22.8 136.2 16.4
Intersegment eliminations - - - (3.3)
Change in LIFO reserve - - - .2
- ----------------------------------------------------------------------------
$ 1,822.8 $143.5 $1,966.3 $ 238.2
============================================================================
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
7. SEGMENT INFORMATION (continued)
Inter-
External Segment Total
Sales Sales Sales EBIT
Quarter ended June 30, 2000
Residential Furnishings $ 544.0 $ 2.7 $ 546.7 $ 65.3
Commercial Furnishings 253.0 2.0 255.0 29.6
Aluminum Products 142.6 4.4 147.0 13.2
Industrial Materials 82.8 53.5 136.3 22.0
Specialized Products 73.2 12.8 86.0 12.6
Intersegment eliminations - - - (3.8)
Change in LIFO reserve - - - (1.9)
- ---------------------------------------------------------------------------
$1,095.6 $ 75.4 $1,171.0 $ 137.0
===========================================================================
Quarter ended June 30, 1999
Residential Furnishings $ 481.3 $ 2.7 $ 484.0 $ 53.0
Commercial Furnishings 180.4 .8 181.2 31.6
Aluminum Products 144.9 4.3 149.2 15.7
Industrial Materials 69.8 50.5 120.3 18.1
Specialized Products 58.8 11.5 70.3 7.1
Intersegment eliminations - - - (.9)
Change in LIFO reserve - - - -
- ---------------------------------------------------------------------------
$ 935.2 $ 69.8 $1,005.0 $ 124.6
===========================================================================
Asset information for the Company's segments at June 30, 2000 and
December 31, 1999 is shown in the following table:
June 30, December 31,
2000 1999
Assets
Residential Furnishings $ 1,186.1 $ 1,173.4
Commercial Furnishings 871.9 721.4
Aluminum Products 494.1 441.1
Industrial Materials 236.8 204.8
Specialized Products 348.1 216.8
Unallocated assets 268.6 204.0
Adjustment to period-end
vs. agerage assets (18.6) 16.0
- --------------------------------------------------------------------
$ 3,387.0 $ 2,977.5
====================================================================
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
The Company's financial position reflects management's capital
policy guidelines. These guidelines are intended to ensure that
corporate liquidity is adequate to support the Company's projected
growth rate. Also, liquidity is necessary to finance the Company's
ongoing operations in periods of economic downturn. In a normal
operating environment, management intends to direct capital to
ongoing operations, strategic acquisitions and other investments that
provide opportunities for expansion and enhanced profitability.
The expansion of capital resources - debt and equity - is
planned to allow the Company to take advantage of favorable capital
market conditions, rather than respond to short-term needs. Such
financial flexibility is considered more important than short-term
maximization of earnings per share through excessive leverage.
Therefore, management continuously provides for available credit in
excess of near-term projected cash needs and has maintained a
guideline for long-term debt as a percentage of total capitalization
in a range of 30% to 40%.
Total Capitalization
The following table shows the Company's total capitalization at
June 30, 2000 and December 31, 1999. Also, the table shows the
amount of unused committed credit available through the Company's
revolving bank credit agreements and the amount of cash and cash
equivalents.
(Dollar amounts in millions) June 30, December 31,
2000 1999
Long-term debt outstanding:
Scheduled maturities $ 991.5 $ 642.7
Average interest rates 6.7% 6.7%
Average maturities in years 5.0 5.5
Revolving credit/commercial paper 40.0 144.7
- ----------------------------------------------------------------
Total long-term debt 1,031.5 787.4
Deferred income taxes and other
liabilities 109.6 112.4
Shareholders' equity 1,748.4 1,646.2
- ----------------------------------------------------------------
Total capitalization $2,889.5 $2,546.0
================================================================
Unused committed credit:
Long-term $ 187.5 $ 52.8
Short-term 112.5 97.5
- ----------------------------------------------------------------
Total unused committed credit $ 300.0 $ 150.3
================================================================
Cash and cash equivalents $ 17.7 $ 20.6
================================================================
Cash provided by operating activities was $188.3 million in the
first six months of 2000, compared to $214.9 million in the first six
months of 1999. The decrease in cash provided by operating
activities principally reflects an increase in working capital levels
due to increases in accounts receivable and inventories, partially
offset by increased earnings.
Long-term debt outstanding increased to $1,031.5 million at June
30, 2000, while the Company's net debt-to-total-capital ratio was
35.3%, up from 30.4% at the end of 1999. As shown in the table
above, obligations having scheduled maturities are the base "layer"
of the Company's debt capital. At June 30, 2000, these obligations
consisted primarily of the Company's medium-term notes and
tax-exempt industrial development bonds. In November 1999,
the Company completed a $500 million shelf registration of debt. In
February 2000, $350 million of 7.65% five-year notes were issued
under the shelf registration. These notes were converted to variable
rate notes under an interest rate swap agreement. The proceeds of
the offering were used to pay down commercial paper, and to fund the
Company's capital expenditures and acquisition activity.
The second "layer" of the Company's debt capital consists of
revolving bank credit agreements and commercial paper issuances.
Management has negotiated bank credit agreements and established a
commercial paper program to continuously support the Company's
projected growth and to maintain highly flexible sources of debt
capital. The majority of the credit under these arrangements is a
long-term obligation. If needed, however, the credit is available
for short-term borrowings and repayments.
Uses of Capital Resources
The Company's internal investments to modernize and expand
manufacturing capacity were $81.5 million in the first six months of
2000. The Company invested $203.4 million (net of cash acquired) to
acquire thirteen businesses and issued 266,438 shares or share
equivalents at a value of $5.3 million for acquisitions. In
addition, the Company assumed $115.9 million of acquisition
companies' debt and other liabilities.
The Company repurchased approximately 1.4 million shares of its
common stock for $25.4 million in cash during the first six months of
2000. These purchases were made primarily for employee stock plans
and to replace shares issued in purchase acquisitions. In February
2000, the Company's Board of Directors authorized management, at its
discretion, to buy up to 2,000,000 shares of Leggett stock for use in
employee benefit plans. The authorization is continuously
replenished as shares acquired are reissued for these benefit plans.
In addition, management is authorized, again at its discretion, to
repurchase any shares issued in acquisitions accounted for as
purchases.
Cash dividends paid on the Company's common stock were $57.0
million during the first six months of 2000. As a percent of
earnings per share (diluted), cash dividends declared per share were
26.7% during the period.
Short-term Liquidity
To gain additional flexibility in capital management and to
improve the return on shareholders' equity, the Company continuously
seeks efficient use of working capital. Working capital, including
working capital from acquired companies, at June 30, 2000 was $948.3
million, up from $824.7 million at year-end. The higher level of
working capital resulted principally from the working capital of
businesses acquired during the first six months of 2000. There was
no short-term bank debt outstanding at the end of either period.
Results of Operations
Discussion of Consolidated Results
The Company achieved record sales and earnings for the second
quarter of 2000. Sales increased to $1.1 billion (up 17.2%), and
earnings per diluted share increased to $.38 (up 5.6%) - both
compared with the second quarter of 1999.
Results for the first half of 2000 also increased to new highs.
Sales were $2.1 billion (up 17.4%) and earnings were $.75 per diluted
share (up 8.7%) - both compared with the first half of last year.
This performance reflects ongoing benefits from the Company's
active acquisition program. Approximately three-fourths of sales
growth for the second quarter and first six months of 2000 resulted
from acquisitions completed over the past year. Same location sales
volume increased approximately 3% in the second quarter and 4% in the
first six months of 2000, as many operations achieved excellent
improvements. Commercial Furnishings accounted for almost half of
the increase in consolidated sales in the second quarter of 2000,
while Residential Furnishings accounted for 40%.
During the second quarter of 2000, the Company acquired seven
businesses with annualized sales of approximately $255 million. The
newly acquired companies have expanded annualized volume in the
Company's segments as follows: Specialized Products - $125 million;
Commercial Furnishings - $105 million; Residential Furnishings - $15
million; Aluminum Products - $10 million.
Earnings growth in the second quarter of 2000 lagged sales
growth, reflecting disappointing performance in some of the Company's
store fixture and display businesses and in aluminum operations. Net
earnings were 7.0% of second quarter 2000 sales compared with 7.7% in
the second quarter of 1999. Approximately half of the net margin
decline is attributable to a single store fixtures operation that was
acquired by the Company approximately one year ago. Approximately 40%
of the margin decrease was due to an increase in interest expense.
As a percent of sales, interest expense (before tax) increased from
1.0% to 1.5% this year. Long-term debt grew from $612 million one
year ago, to $1.03 billion at the end of the second quarter of 2000.
The Company expects sales and earnings improvements in its store
fixture and display operations as they move toward their strongest
business in the third quarter. See below for a further discussion of
the effect of seasonality on the Company's operations. Interest
expense should continue to reflect the Company's higher debt levels.
The following table shows various measures of earnings as a
percentage of sales for the second quarter in both of the last two
years. It also shows the effective income tax rate and the ratio of
earnings to fixed charges.
Six Months Ended Quarter Ended
June 30, June 30,
2000 1999 2000 1999
Gross profit margin 26.2% 26.7% 26.3% 26.7%
EBIT (earnings before
interest and taxes) margin 12.5 13.1 12.5 13.3
Net profit margin 7.0 7.6 7.0 7.7
Effective income tax rate 36.9 37.1 36.7 37.1
Ratio of earnings
to fixed charges 7.3x 10.2x 6.9x 10.3x
Seasonality
The Company does not experience significant seasonality,
however, quarter-to-quarter sales can vary to the total year by 1-2%.
Management estimates that this 1-2% sales impact can have, at
current average net margins and considering overhead absorption, an
impact on quarter-to-quarter net earnings of approximately 5-10%,
plus or minus. The timing of acquisitions in any year can distort
the underlying seasonality in certain of the Company's businesses.
For the Company's businesses in total, the second and third quarters
have proportionately greater sales, while the first and fourth
quarters are lower. Over the last three years, this small
seasonality has become somewhat more pronounced, with the first and
fourth quarters showing proportionately lower sales due to the growth
of the store fixtures business of Commercial Furnishings.
Residential Furnishings and Commercial Furnishings typically
have their strongest sales in the second and third quarters.
Commercial Furnishings particularly has heavy third quarter sales of
its store fixture products, with the first and fourth quarters
significantly lower. Aluminum Products sales are proportionately
greater in the first two calendar quarters due to gas barbecue grill
castings. Industrial Materials sales peak in the third and fourth
quarters from wire products used for baling cotton. Specialized
Products has relatively little quarter-to-quarter variation in sales,
although the automotive business is somewhat heavier in the first two
quarters of the year, and somewhat lower in the third quarter, due to
model changeovers and plant shutdowns in the automobile industry
during the summer.
Discussion of Segment Results
A description of the products included in each segment, segment
sales, segment EBIT and other segment data appear in Note 7 of the
Notes to Consolidated Condensed Financial Statements.
Second Quarter Discussion
Residential Furnishings sales increased 13.0%, with same location
growth of 4.5%. Numerous acquisitions accounted for the balance of
sales growth. EBIT increased 23.2%. EBIT margin increased from
11.0% to 11.9%, reflecting acquisitions and improved efficiencies in
operations producing furniture components. These improvements were
partially offset by increasing costs in bedding operations, where
steel rod and wire are the predominant raw materials. Prices for rod
began increasing in the first quarter, driving up overall
manufacturing costs. The Company has completed the process of passing
these higher costs through to customers to compensate for the
increased cost of raw materials.
Commercial Furnishings sales increased 40.7%, due almost entirely
to numerous acquisitions. Same location volume was up fractionally
as increased sales of components for office and contract furniture
and plastic components more than offset lower volume in some
operations producing store fixtures, displays and storage products.
EBIT declined 6.3%, and EBIT margins moved from 17.4% last year to
11.6% this year as a result of additional operational problems at a
store fixture and design firm acquired at the end of last year's
second quarter. This operation experienced persistent supplier
disruptions and higher costs. The Company is taking steps to correct
these problems. Another factor negatively affecting margins during
the period is the seasonal nature of the fixtures business discussed
previously.
The Company expects annual margins in the Commercial Furnishings
segment to be lower than last year, due to the changing mix of
businesses within the segment. As the Company acquires fixtures
businesses, though they are profitable ventures, segment margins are
expected to be lower than in previous years, but still somewhat
higher than the corporate average, as the Company continues to
implement its strategy of becoming a "one stop" supplier.
Aluminum Products sales declined 1.5%, and EBIT declined 15.9%.
EBIT margin decreased from 10.5% last year to 9.0% this year,
reflecting inefficiencies at some of the Company's die casting
facilities during the quarter. Abnormally high rejects and
maintenance costs caused short-term margin depression at some plants.
The Company has also experienced lower than expected demand for
aluminum die castings, especially for gas barbecue grills, negatively
affecting overhead absorption.
Industrial Materials sales increased 13.3%, with same location
growth of 6.7%. Acquisitions accounted for the balance of the sales
growth. EBIT increased 21.5%, and EBIT margins were up from 15.0%
last year to 16.1% this year. The majority of these improvements
reflect the recovery of one of the Company's major wire producing
mills, which experienced extensive fire damage in 1998 and negatively
affected operations during 1999.
Specialized Products sales increased 22.3%, with same location
growth of 4.5%. Acquisitions accounted for the balance of the sales
growth. EBIT increased 77.5%, and EBIT margin improved from 10.1%
last year to 14.7% this year, as both production efficiency and
volume increased. Sales of specialized machinery have been strong,
resulting in margin improvement. In addition, one of the Company's
automotive seat suspension operations completed a move to new
facilities, and is returning to more-typical efficiencies.
Six Month Discussion
Residential Furnishings sales increased 13.1%, with same location
growth of 4.4%. Numerous acquisitions accounted for the balance of
the growth. EBIT increased 21.6%. EBIT margin increased from 11.0%
to 11.8%, reflecting acquisitions and improved efficiencies,
primarily in operations producing furniture components.
Commercial Furnishings sales increased 36.4%, due to numerous
acquisitions. Same location sales were down fractionally from
stronger than usual 1999 sales of store fixtures and displays. EBIT
declined 7.0%, and EBIT margins moved from 16.7% last year to 11.4%
this year, primarily because a store fixture and design firm acquired
at the end of last year's second quarter experienced persistent
supplier disruptions and higher costs, which more than offset
improved performance in operations producing components for office
and contract furniture and plastic components
Aluminum Products sales increased 6.5% due to first quarter same
location growth and improved aluminum market conditions. EBIT
increased 7.2% and EBIT margin remained at 9.6%, reflecting increased
first quarter efficiencies on higher production and increased sales
of dies and die castings for non-automotive applications.
Industrial Materials sales increased 11.1%, with same location
growth of 4.8%. Acquisitions accounted for the balance of the sales
growth. EBIT increased 19.9%, and EBIT margins were up from 14.6%
last year to 15.7% this year, reflecting increased efficiencies on
higher production and acquisitions
Specialized Products sales increased 20.6%, with same location
growth of 6.2%. Acquisitions accounted for the balance of the sales
growth. EBIT increased 50.6%, and EBIT margin improved from 12.0%
last year to 15.0% this year, reflecting acquisitions, increased
sales of specialized machinery with higher margins, and improved
efficiencies.
Forward-Looking Statements
This report and other public reports or statements made from
time to time by the Company or its management may contain "forward-
looking" statements concerning possible future events, objectives,
strategies, trends or results. Such statements are identified either
by the context in which they appear or by use of words such as
"anticipate," "believe," "estimate," "expect," or the like.
Readers are cautioned that any forward-looking statement
reflects only the beliefs of the Company or its management at the
time the statement is made. In addition, readers should keep in mind
that, because all forward-looking statements deal with the future,
they are subject to risks, uncertainties and developments that might
cause actual events or results to differ materially from those
envisioned or reflected in any forward-looking statement. Moreover,
the Company does not have and does not undertake any duty to update
or revise any forward-looking statement to reflect events or
circumstances after the date on which the statement was made. For
all of these reasons, forward-looking statements should not be relied
upon as a prediction of actual future events, objectives, strategies,
trends or results.
It is not possible to anticipate and list all of the risks,
uncertainties and developments which may affect the future operations
or performance of the Company, or which otherwise may cause actual
events or results to differ from forward-looking statements.
However, some of these risks and uncertainties include the following:
general economic and market conditions and risks, such as the rate of
economic growth in the United States, inflation, government
regulation, interest rates, taxation, and the like; risks and
uncertainties which could affect industries or markets in which the
Company participates, such as growth rates and opportunities in those
industries, or changes in demand for certain products, etc.; and
factors which could impact costs, including but not limited to the
availability and pricing of raw materials, the availability of labor
and wage rates, and fuel and energy costs.
ITEM 3. DISCLOSURES ABOUT MARKET RISK
(Unaudited)
(Amounts in millions)
INTEREST RATE
The Company has debt obligations sensitive to changes in interest rates.
In the first quarter of 2000, $350 of 7.65% fixed rate debt maturing in
February 2005 and, in the second quarter of 1999, $14 of 6.90% fixed rate
debt maturing in June 2004 was issued and converted to variable rate debt
by use of interest rate swap agreements. These swap agreements, which
contain the same payment dates as the original issues, are used primarily
by the Company to manage the fixed/variable interest rate mix of its debt
portfolio. The effective swap rate for the second quarter of 2000 was
6.89% for the $350 and 6.59% for the $14. The difference in interest paid
or received as a result of swap agreements is recorded as an adjustment to
interest expense during the related debt period. Substantially all of the
Company's debt is denominated in United States dollars (U.S.$). The fair
value of fixed rate debt was less than its carrying value by $21.2 and
$11.2 at June 30, 2000 and December 31, 1999, respectively. The fair value
of fixed rate debt was calculated using the U.S. Treasury Bond rate as of
June 30, 2000 for similar remaining maturities, plus an estimated "spread"
over such Treasury securities representing the Company's interest costs
under its medium-term note program. The fair value of variable rate debt is
not significantly different from its recorded amount.
EXCHANGE RATE
The Company has not typically hedged foreign currency exposures related to
transactions denominated in other than its functional currencies, although
such transactions have not been material in the past. The Company may
occasionally hedge firm commitments for certain machinery purchases, other
fixed expenses or amounts due in foreign currencies related to its
acquisition program. The decision by management to hedge any such
transactions is made on a case-by-case basis. The amount of forward
contracts outstanding at June 30, 2000 was not significant.
The Company views its investment in foreign subsidiaries as a long-term
commitment and does not hedge any translation exposures. The investment in
a foreign subsidiary may take the form of either permanent capital or
notes. The Company's net investment in foreign subsidiaries subject to
translation exposure was $362.9 at June 30, 2000, as compared to $301.8 at
December 31, 1999. The increase in translation exposure was due primarily
to the Company's acquisition activity in Canada, Western Europe and Mexico,
and other factors.
COMMODITY PRICE
The Company does not use derivative commodity instruments to hedge its
exposures to changes in commodity prices. The principal commodity price
exposure is aluminum, of which the Company had an estimated $67 (at cost)
in inventory at June 30, 2000. The Company has purchasing procedures and
arrangements with customers to mitigate its exposure to aluminum price
changes. No other commodity exposures are significant to the Company.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the second quarter of 2000 the Company issued 90,873 shares of its
common stock and equity securities convertible into 175,565 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. The common stock was issued on June 22, 2000 in
connection with the acquisition of Southern Bedding, Inc. from its
shareholders. The equity securities convertible into the Company's common
stock were issued on May 8, 2000 in connection with the acquisition of
Schukra Manufacturing, Inc., an Ontario corporation, from its shareholders.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on May 3, 2000.
Matters voted upon were (1) election of directors, and (2) proposal to
ratify the selection of PricewaterhouseCoopers LLP as the Company's
Independent Auditors for the Fiscal Year ending December 31, 2000.
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 161,434,317 2,638,888
Ralph W. Clark 160,363,718 3,709,487
Harry M. Cornell, Jr. 161,332,351 2,740,854
Robert Ted Enloe III 161,421,395 2,651,810
Richard T. Fisher 161,443,555 2,629,650
Bob L. Gaddy 161,329,012 2,744,193
David S. Haffner 161,254,875 2,818,330
Thomas A. Hays 161,413,035 2,660,170
Robert A. Jefferies, Jr. 161,444,158 2,629,047
Alexander M. Levine 161,323,361 2,749,844
Duane W. Potter 161,333,913 2,739,292
Maurice E. Purnell, Jr. 158,945,147 5,128,058
Alice L. Walton 147,250,553 16,822,652
Felix E. Wright 151,781,457 12,291,748
2. Ratification of Independent Auditors
FOR AGAINST ABSTAIN
163,456,380 147,557 469,268
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
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 11, 2000 By: /s/ FELIX E. WRIGHT
------------------------
Felix E. Wright
President and
Chief Executive Officer
DATE: August 11, 2000 By: /s/ MICHAEL A. GLAUBER
-------------------------
Michael A. Glauber
Senior Vice President,
Finance and Administration
EXHIBIT INDEX
Exhibit Page
12 Computation of Ratio of Earnings to Fixed Charges 19
27 Financial Data Schedule 20
EXHIBIT 12
LEGGETT AND PLATT, INCORPORATED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in millions of dollars)
Six Months Twelve Months Ended
Ended December 31,
6/30/00 6/30/99 1999 1998 1997 1996 1995
Earnings
Income from continuing
operations before
income tax $237.9 $220.2 $462.6 $395.6 $333.3 $249.7 $220.6
Interest expense
(excluding amount
capitalized) 32.2 19.4 43.0 38.5 31.8 30.0 30.4
Portion of rental
expense under
operating leases
representative
of an interest factor 4.7 4.1 8.2 6.7 6.1 5.5 5.1
- ------------------------------------------------------------------------------
Total earnings $274.8 $243.7 $513.8 $440.8 $371.2 $285.2 $256.1
==============================================================================
Fixed charges
Interest expense
(including amount
capitalized) $32.7 $19.9 $44.0 $39.2 $32.7 $31.0 $31.4
Portion of rental expense
under operating leases
representative
of an interest factor 4.7 4.1 8.2 6.7 6.1 5.5 5.1
- ------------------------------------------------------------------------------
Total fixed charges $37.4 $24.0 $52.2 $45.9 $38.8 $36.5 $36.5
==============================================================================
Ratio of earnings
to fixed charges 7.3 10.2 9.8 9.6 9.6 7.8 7.0
==============================================================================
Earnings consist principally of income from continuing operations before
income taxes, plus fixed charges. Fixed charges consist principally
of interest costs.
5
6-MOS
DEC-31-2000
JUN-30-2000
17,700
0
693,400
14,000
676,900
1,445,800
1,765,100
783,300
3,387,000
497,500
1,031,500
0
0
2,000
1,746,400
3,387,000
2,139,200
2,139,200
1,579,200
1,579,200
0
0
32,200
237,900
87,800
150,100
0
0
0
150,100
0.75
0.75
