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, 1996
-------------
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, 1996 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 29, 1996: 89,707,598
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
June 30, December 31,
1996 1995
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 4.8 $ 8.2
Accounts and notes receivable 385.8 306.8
Allowance for doubtful accounts (10.3) (7.5)
Inventories 352.3 344.1
Other current assets 39.9 35.0
--------- ---------
Total current assets 772.5 686.6
PROPERTY, PLANT & EQUIPMENT, NET 546.0 510.6
OTHER ASSETS
Excess cost of purchased companies over
net assets acquired, less accumulated
amortization of $24.6 in 1996
and $21.6 in 1995 268.7 210.3
Other intangibles, less accumulated
amortization of $25.8 in 1996
and $24.2 in 1995 34.6 31.7
Sundry 39.5 38.9
--------- ---------
Total other assets 342.8 280.9
--------- ---------
TOTAL ASSETS $ 1,661.3 $ 1,478.1
========= =========
CURRENT LIABILITIES
Accounts and notes payable $ 129.2 $ 127.5
Accrued expenses 128.2 117.1
Other current liabilities 28.8 30.5
--------- ---------
Total current liabilities 286.2 275.1
LONG-TERM DEBT 465.5 380.6
OTHER LIABILITIES 39.5 21.3
DEFERRED INCOME TAXES 60.5 54.3
SHAREHOLDERS' EQUITY
Common stock .9 .9
Additional contributed capital 179.4 164.0
Retained earnings 634.2 601.6
Cumulative translation adjustment (4.9) (5.0)
Treasury stock - (14.7)
--------- ---------
Total shareholders' equity 809.6 746.8
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,661.3 $ 1,478.1
========= =========
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,
--------------------- -------------------
1996 1995 1996 1995
--------- --------- ------- -------
Net sales $ 1,211.2 $ 1,164.0 $ 620.0 $ 584.5
Cost of goods sold 909.0 889.0 462.4 446.7
--------- --------- ------- -------
Gross profit 302.2 275.0 157.6 137.8
Selling, distribution and
administrative expenses 147.7 136.1 75.9 68.5
Interest expense 15.9 15.9 8.0 8.7
Merger expense 26.6 - 26.6 -
Other deductions (income), net 6.8 6.2 3.3 3.1
--------- --------- ------- -------
Earnings before income taxes
and extraordinary item 105.2 116.8 43.8 57.5
Income taxes 40.9 46.8 17.2 23.2
--------- --------- ------- -------
Net earnings before
extraordinary item 64.3 70.0 26.6 34.3
Extraordinary item 12.5 - 12.5 -
--------- --------- ------- -------
NET EARNINGS $ 51.8 $ 70.0 $ 14.1 $ 34.3
========= ========= ======= =======
Earnings Per Share (Exhibit 11)
Net earnings before
extraordinary item $ .71 $ .78 $ .29 $ .38
Net earnings $ .57 $ .78 $ .15 $ .38
Cash Dividends Declared
Per Share $ .22 $ .18 $ .11 $ .09
Average Common and Common
Equivalent Shares Outstanding 90.7 89.4 91.3 89.6
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,
-------------------
1996 1995
------- -------
OPERATING ACTIVITIES
Net Earnings $ 51.8 $ 70.0
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 36.2 30.4
Amortization 7.9 7.2
Merger expense (non-cash portion) 24.3 -
Extraordinary item (non-cash portion) 4.0 -
Other 2.5 .4
Other changes, net of effects from
purchases of companies
Increase in accounts receivable, net (67.7) (33.6)
Decrease in inventories 7.2 -
Increase in other current assets - (2.0)
Increase in current liabilities 7.6 8.4
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 73.8 80.8
INVESTING ACTIVITIES
Additions to property, plant and equipment (50.3) (57.0)
Purchases of companies, net of cash acquired (76.2) (1.6)
Other (.1) 1.7
------- -------
NET CASH USED FOR INVESTING ACTIVITIES (126.6) (56.9)
FINANCING ACTIVITIES
Additions to debt 257.3 32.1
Payments on debt (182.6) (31.4)
Dividends paid (19.2) (15.0)
Sales of common stock 3.8 1.6
Purchases of common stock (9.9) (7.7)
Other - (1.7)
------- -------
NET CASH PROVIDED BY
(USED FOR)FINANCING ACTIVITIES 49.4 (22.1)
------- -------
(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS (3.4) 1.8
CASH AND CASH EQUIVALENTS - January 1, 8.2 3.0
------- -------
CASH AND CASH EQUIVALENTS - June 30, $ 4.8 $ 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"). The consolidated condensed
financial statements include accounts of the Company and its majority-owned
subsidiaries.
2. INVENTORIES
Inventories, using principally the Last-In, First-Out (LIFO) cost method,
comprised the following:
June 30, December 31,
1996 1995
----------- ------------
At First-In, First-Out (FIFO) cost
Finished goods $ 196.1 $ 186.3
Work in process 37.7 39.1
Raw materials 133.5 136.1
------- -------
367.3 361.5
Excess of FIFO cost over LIFO cost 15.0 17.4
------- -------
$ 352.3 $ 344.1
======= =======
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
June 30, December 31,
1996 1995
----------- ------------
Property, plant and equipment, at cost $ 942.7 $ 875.5
Less accumulated depreciation 396.7 364.9
------- -------
$ 546.0 $ 510.6
======= =======
4. 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, 1996 were approximately $110.7.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
5. ACQUISITION AND RELATED EXPENSES
In May 1996, the Company issued 5,134,092 shares of common stock to acquire
Pace Holdings, Inc. (Pace) in a transaction accounted for as a pooling of
interests. Pace is a leading manufacturer and marketer of non-automotive
aluminum die cast components. Previously issued financial statements have
been restated to reflect the pooling. Results of operations for the separate
companies prior to the merger and for the combined companies as restated are
as follows:
Three Months Six Months Three Months
Ended Ended Ended
March 31, 1996 June 30, 1995 June 30, 1995
-------------- ------------- -------------
Net Sales
Leggett & Platt $ 524.2 $ 1,040.8 $ 517.7
Pace 67.0 123.2 66.8
------- --------- -------
Combined $ 591.2 $ 1,164.0 $ 584.5
======= ========= =======
Net Earnings
Leggett & Platt $ 36.4 $ 65.9 $ 33.0
Pace 1.3 3.7 2.1
Restatement Adjustments - .4 (.8)
------- --------- -------
Combined $ 37.7 $ 70.0 $ 34.3
======= ========= =======
Included in the restatement adjustments to reflect the Pace acquisition is a
change in accounting for the Company's existing aluminum inventory from the
LIFO method to FIFO. This change was made to conform the accounting principles
used by the Company's aluminum operations to those of Pace.
In May 1996, prior to the acquisition, options were granted and exercised under
the Pace employee stock option/bonus plan resulting in compensation expense of
$12.0 before taxes. Other merger expense, including costs for the accrual of
commitments under contracts no longer benefiting the Company and legal and
environmental issues, was $14.6 before taxes, in 1996.
Following the acquisition, the Company issued a tender offer to all holders of
the Pace 10.625% senior notes. In June 1996, the notes were redeemed at
approximately 113% of par value, plus accrued interest. The cash required for
the redemption was provided through the issuance of medium term notes and the
Company's revolving credit agreements. The Company recognized an extraordinary
charge, net of related tax benefits, of $12.5 in 1996 from the extinguishment
of debt.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
6. CONTINGENCIES
From time to time, the Company is involved in proceedings related to
environmental matters. In one instance, the United States Environmental
Protection Agency (EPA) ordered one of the Company's subsidiaries to
investigate potential releases into the environment and, if necessary, to
perform corrective action. The subsidiary successfully appealed the EPA's
order. On June 27, 1994, the EPA indicated it planned to issue a new, similar
order. The subsidiary, the EPA and the Florida Department of Environmental
Protection (FDEP) are negotiating an agreement to investigate and, if
necessary, take corrective action to resolve the dispute. Estimated costs to
perform an agreed upon investigation and any related corrective actions are not
material and have been provided for in the financial statements as of June 30,
1996.
If current negotiations with the EPA and the FDEP are unsuccessful, and the EPA
issues a new order, the subsidiary expects it would appeal the new order. If
this appeal is unsuccessful, the costs to perform any required investigation
and, if necessary, corrective action cannot be reasonably estimated. One-half
of any costs, including the costs of voluntary actions, would be reimbursed to
the Company under a contractual obligation of a former joint owner of the
subsidiary. No provision for the costs of performing investigation and
corrective action beyond any agreed upon investigation and remediation
mentioned above has been recorded in the Company's financial statements. If
any such additional investigation and corrective action is required, management
believes the possibility of a material adverse effect on the Company's
consolidated financial position is remote.
In connection with the acquisition of Universal Die Casting, Inc. ("Universal")
through a subsidiary of Pace during 1990, the National Labor Relations Board
("NLRB") filed a complaint based on an unfair labor charge filed by the union
representing the former employees of Universal. The complaint alleges that the
subsidiary refused to hire former employees of Universal because they were
union members and refused to bargain with the union. It seeks back pay and
benefits, together with interest thereon, from October 18, 1988, and
reinstatement on behalf of 81 individuals. In May 1993, the administrative law
judge in a recommended order, rendered a decision against the subsidiary. The
recommended order would require the subsidiary to recognize and bargain with
the union and to offer immediate and full reinstatement of 61 employees and
make such employees whole for any loss of earnings and other benefits suffered
as a result of the alleged discrimination against them. However, under
applicable law, such damages would generally be reduced by the amount of
mitigation, if any, by such individuals, including salary and benefits earned
by such individuals since October 18, 1988. The subsidiary filed an appeal to
the full NLRB in Washington and exceptions to the administrative law judge's
recommended order. On January 3, 1996, the NLRB rendered its decision on the
subsidiary's appeal by affirming the administrative law judge's decision and
recommended order against the subsidiary. The subsidiary intends to appeal the
NLRB's decision and to contest individual back pay specifications in NLRB
compliance proceedings, if necessary. During August 1994, the subsidiary began
implementation of a plan to offer employment to certain of these individuals,
which offers, in the event there was an unfavorable outcome to the subsidiary
regarding this matter, would toll the accrual of any further back pay and
benefits. The subsidiary believes its hiring practices were objective and
complied with all labor laws and that the individuals were denied employment
for legitimate reasons. 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 from this matter is remote.
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
6. CONTINGENCIES - continued
Pace had previously provided in its financial statements amounts estimated to
resolve general litigation matters, including the above. Subsequent to the
acquisition (see Note 5), Leggett & Platt and Pace management continued to
review the alternatives to resolve general litigation matters. The Company
increased (in 1996) the amounts provided in the financial statements as a
result of this review. The additional amounts provided in 1996 are not
material to the Company's consolidated 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 from these matters is remote.
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 the May 1996 pooling of interests acquisition of Pace Holdings, Inc.
(Pace). Previously reported share and per share amounts have also been
restated to reflect a September 15, 1995 two-for-one stock split. Therefore,
the following discussion reflects the Company's capital resources and liquidity
and results of operations as restated for these events.
Capital Resources and Liquidity
- --------------------------------
The Company's long-term debt outstanding and shareholders' equity at June 30,
1996 and December 31, 1995 are shown in millions of dollars in the table below.
The amount of additional capital available through the Company's revolving bank
credit agreements is also shown, along with the amount of cash and cash
equivalents.
June 30, December 31,
1996 1995
----------- ------------
Long-term debt outstanding:
Scheduled maturities $ 309.0 $ 315.9
Revolving credit/commercial paper 156.5 64.7
------- -------
Total long-term debt 465.5 380.6
Shareholders' equity 809.6 746.8
Unused committed credit 215.0 207.8
Cash and cash equivalents 4.8 8.2
Capital investments to modernize and expand capacity internally were $50.3
million in the first six months of 1996. The Company also invested $76.2
million, net of cash acquired, and issued 694,444 shares of common stock
equivalents to acquire several businesses in transactions accounted for as
purchases. Funds for these investments were provided by operating activities
and through the Company's revolving credit/commercial paper arrangements.
To acquire Pace, the Company issued 5.1 million shares of common stock and
assumed approximately $200 million in Pace debt. The Pace debt that was
refinanced in the second quarter consisted primarily of $115 million in senior
notes and revolving bank credit. In June 1996, the Company issued $100 million
in privately placed medium-term notes having average maturities of 8 years and
fixed interest rates averaging 7.4%. Proceeds from these notes provided a
majority of the funds required to redeem, at 113% of par value, all of the Pace
senior notes that were to mature in almost 7 years and had fixed interest rates
of 10.625%. Funds required to refinance the balance of the senior notes and
Pace's revolving credit were provided through the Company's revolving
credit/commercial paper arrangements.
Working capital at June 30, 1996 was $486.3 million, up from $411.5 million at
year end. Total current assets increased $85.9 million, due primarily to
increases in accounts and notes receivable that primarily reflected increased
sales. Total current liabilities increased $11.1 million, due primarily to
increases in accrued expenses.
The Company has substantial capital resources to support projected internal
cash needs and additional acquisitions consistent with management's goals and
objectives. The Company also has the availability of short-term uncommitted
credit from several banks. However, there was no short-term debt outstanding
at mid-year or at year-end.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
Results of Operations
- ---------------------
The Company had record sales of $1.21 billion in the first six months of 1996.
Sales for the second quarter increased to an all-time quarterly high of $620
million. Compared with the same periods in 1995, sales increased 4% in the
first six months and 6% in the second quarter. These increases primarily
reflected the benefits from acquisitions and modestly higher unit volumes.
Earnings increased to a record $.89 per share in the first six months of this
year, before $.32 per share in non-recurring costs related to the Pace
acquisition. Earnings for the second quarter increased to a record $.47 per
share, before the $.32 per share in non-recurring costs. Compared with the
same periods in 1995, earnings per share before the non-recurring costs
increased 14% in the first six months and 24% in the second quarter. Including
the non-recurring costs, earnings were $.57 per share in the first half and
$.15 per share in the second quarter of 1996. These compare with $.78 per
share and $.38 per share for the same respective periods in 1995.
The anticipated and previously announced non-recurring costs consisted of an
extraordinary item of $.14 per share to refinance Pace's debt and $.18 per
share in other anticipated merger related expense. Before these costs, Pace
slightly enhanced the Company's 1996 second quarter earnings per share.
The Pace aluminum operations are seasonal in nature, with a majority of sales
occurring in the first half of the year. However, the effect of this
seasonality on the Company as a whole is expected to be significantly offset
by certain other operations that have seasonally stronger sales in the second
half of the year.
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 Company's effective income tax rate in each respective period.
Six Months Ended Quarter Ended
June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
Gross profit margin 25.0% 23.6% 25.4% 23.6%
Pre-tax profit margin
Excluding non-recurring costs 10.9 10.0 11.4 9.8
Including non-recurring costs 8.7 -- 7.1 --
Net profit margin
Excluding non-recurring costs 6.7 6.0 6.9 5.9
Including non-recurring costs 4.3 -- 2.3 --
Effective income tax rate 38.9 40.1 39.3 40.3
Gross profit margins for the first six months and the second quarter of 1996
compare favorably with the same periods of 1995. They reflect continuing
improvements in production efficiencies in many operations throughout the
Company. Lower costs also resulted in a smaller LIFO effect on gross profit in
1996 compared to 1995.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Continued
Results of Operations - continued
- ---------------------------------
Some of the improvement in gross profit margins was offset by increases in
total selling, distribution and administrative expenses as a percentage of
sales. This is reflected in less of an improvement in the year-over-year
comparison of pre-tax profit margins, excluding non-recurring costs. Interest
expense for the first six months of 1996 was unchanged from 1995, but declined
slightly as a percentage of sales. In the second quarter of 1996, interest
expense was reduced from the second quarter of 1995 due to lower interest
rates. These considerations had a slightly positive effect on the year-over-
year comparisons of pre-tax profit margins.
Net profit margins for the first six months and second quarter of 1996,
excluding non-recurring costs, also compared favorably with the same periods of
1995. They reflected the improvements in pre-tax margins as well as somewhat
lower 1996 effective income tax rates.
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 15, 1996. Matters
voted upon were (1) election of directors, (2) ratification of Price Waterhouse
as the Company's independent auditors, and (3) a shareholder proposal requiring
the Company to provide additional information about the Company's practices
relating to environmental protection.
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 58,090,595 3,145,025
Harry M. Cornell, Jr. 60,253,717 981,903
Robert Ted Enloe, III 60,641,933 593,687
Richard T. Fisher 60,645,286 590,334
David S. Haffner 60,255,372 980,248
Robert A. Jefferies, Jr. 60,256,720 978,900
Alexander M. Levine 60,255,759 979,861
Richard L. Pearsall 60,647,610 588,010
Duane W. Potter 60,255,466 980,154
Maurice E. Purnell, Jr. 60,243,090 992,530
Felix E. Wright 60,260,464 975,156
2. Ratification of Independent Auditors
FOR AGAINST ABSTAIN
61,041,058 135,035 59,527
3. Shareholder Proposal
FOR AGAINST ABSTAIN
7,667,448 48,182,735 1,046,236
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibit 11 - Computations of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(B) 1. A Form 8-K was filed on May 6, 1996 concerning the
proposed acquisition of Pace Holdings, Inc. No financial
statements were filed therewith.
2. A Form 8-K was filed on May 24, 1996 concerning the
completed acquisition of Pace Holdings,Inc. Historical
financial statements of Pace Holdings, Inc. and combined
proforma financial statements were included therewith.
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, 1996 By: /s/ HARRY M. CORNELL, JR.
--------------------------
Harry M. Cornell, Jr.
Chairman of the Board
and Chief Executive Officer
DATE: August 12, 1996 By: /s/ MICHAEL A. GLAUBER
--------------------------
Michael A. Glauber
Senior Vice President,
Finance and Administration
EXHIBIT INDEX
Exhibit Page
- ------- ----
11 Computations of Earnings Per Share 15
27 Financial Data Schedule 16
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES Exhibit 11
COMPUTATIONS OF EARNINGS PER SHARE
(Amounts in millions, except
per share data)
Six Months Ended Three Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
------ ------ ------ ------
EARNINGS PER SHARE
Weighted average number of
common shares outstanding 89.1 88.2 89.4 88.4
Dilution from outstanding stock
options-computed using the
"treasury stock" method 1.6 1.2 1.9 1.2
------ ------ ------ ------
Weighted average number of
common shares outstanding
as adjusted 90.7 89.4 91.3 89.6
====== ====== ====== ======
Net Earnings Before
Extraordinary Item $ 64.3 $ 70.0 $ 26.6 $ 34.3
====== ====== ====== ======
Net Earnings $ 51.8 $ 70.0 $ 14.1 $ 34.3
====== ====== ====== ======
Earnings Per Share
Net Earnings Before
Extraordinary Item $ .71 $ .78 $ .29 $ .38
====== ====== ====== ======
Net Earnings $ .57 $ .78 $ .15 $ .38
====== ====== ====== ======
5
1000
6-MOS
DEC-31-1996
JUN-30-1996
4800
0
385800
10300
352300
772500
942700
396700
1661300
286200
465500
0
0
900
808700
1661300
1211200
1211200
909000
909000
0
0
15900
105200
40900
64300
0
12500
0
51800
.57
0
