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 September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
For Quarter Ended Commission File Number
September 30, 1994 1-7845
------------------- ----------------------
LEGGETT & PLATT, INCORPORATED
(Exact name of registrant as specified in its charter)
Missouri 44-0324630
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
No. 1 Leggett Road
Carthage, Missouri 64836
--------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (417) 358-8131
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ----
Common stock outstanding as of November 1, 1994: 41,503,014
<PAGE>
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM I. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions, except share
and per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6.7 $ 0.4
Accounts and notes receivable 272.3 211.9
Allowance for doubtful accounts (11.3) (7.2)
Inventories 231.6 209.1
Other current assets 31.1 21.4
---------- ---------
530.4 435.6
PROPERTY, PLANT & EQUIPMENT, NET 377.0 313.1
OTHER ASSETS
Goodwill, net 114.7 93.0
Other intangibles, net 24.9 25.7
Sundry 37.3 34.5
---------- ---------
TOTAL ASSETS $ 1,084.3 $ 901.9
========== =========
CURRENT LIABILITIES
Accounts and notes payable $ 93.7 $ 74.1
Accrued expenses 102.2 66.9
Other current liabilities 32.0 25.2
----------- ---------
227.9 166.2
LONG-TERM DEBT 204.9 165.8
OTHER LIABILITIES 12.6 11.1
DEFERRED INCOME TAXES 43.3 43.2
SHAREHOLDERS' EQUITY
Common stock - authorized 300,000,000
shares of $.01 par value; issued
41,069,539 and 40,325,961 shares in
1994 and 1993, respectively .4 .4
Additional contributed capital 130.3 117.3
Retained earnings 468.1 401.0
Cumulative translation adjustment (3.2) (2.8)
Treasury stock (906 and 7,578 shares in
1994 and 1993, respectively) - (0.3)
----------- ---------
595.6 515.6
----------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,084.3 $ 901.9
=========== =========
</TABLE>
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.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------- ---------------------
1994 1993 1994 1993
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 1,366.0 $ 1,130.1 $ 482.6 $ 395.4
Cost of goods sold 1,052.5 871.1 372.0 304.3
-------- -------- -------- --------
Gross profit 313.5 259.0 110.6 91.1
Selling, distribution and
administrative expenses 165.3 143.4 58.0 49.6
Interest expense 6.6 8.4 2.8 2.6
Other deductions(income), net 2.3 3.6 (0.1) 1.8
-------- --------- -------- --------
Earnings before income taxes 139.3 103.6 49.9 37.1
-------- --------- -------- --------
Income taxes 54.9 40.7 19.7 14.8
-------- --------- -------- --------
NET EARNINGS $ 84.4 $ 62.9 $ 30.2 $ 22.3
======== ========= ======== ========
Earnings Per Share (Exhibit 11) $ 2.04 $ 1.53 $ 0.73 $ 0.54
======== ========= ======== ========
Cash Dividends Declared Per Share $ 0.46 $ 0.40 $ 0.16 $ 0.14
======== ========= ======== ======== =
Average Shares Outstanding 41.4 41.1 41.4 41.2
======== ========= ======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in millions) Nine Months Ended
September 30,
------------------
1994 1993
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings $ 84.4 $ 62.9
Adjustments to reconcile net earnings to net cash
provided by operations
Depreciation and amortization 41.0 32.2
LIFO expense 3.5 2.0
Deferred income taxes (6.9) (4.9)
Other 2.8 0.4
Other changes, net of effects from acquisitions of
companies
Increase in accounts receivable, net (41.3) (37.2)
(Increase) Decrease in inventories at FIFO cost (9.7) 9.2
Increase in other assets (3.1) (2.4)
Increase in accounts payable, accrued expenses
and other current liabilities 59.1 39.1
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 129.8 101.3
INVESTING ACTIVITIES
Additions to property, plant and equipment (63.1) (34.5)
Proceeds from sales of property, plant and equipment 1.6 0.9
Acquisitions of companies, net of cash acquired (75.1) (70.6)
(Increase) Decrease in other assets (0.5) 1.2
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (137.1) (103.0)
FINANCING ACTIVITIES
Additions to debt 47.2 66.8
Payments on debt (15.5) (54.2)
Dividends paid (18.8) (15.4)
Net sales of common stock 0.7 1.3
Other - (0.8)
NET CASH PROVIDED BY (USED FOR) FINANCING ------- --------
ACTIVITIES 13.6 (2.3)
------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6.3 (4.0)
CASH AND CASH EQUIVALENTS - January 1, 0.4 5.2
------- --------
CASH AND CASH EQUIVALENTS - September 30, $ 6.7 $ 1.2
======= ========
Interest paid (net of amounts capitalized) $ 5.2 $ 11.5
======= ========
Income taxes paid $ 50.7 $ 40.9
======= ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions, except share and per share data)
1. STATEMENT
In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments necessary for a fair
statement of results of operations and financial position of Leggett
& Platt, Incorporated and Consolidated Subsidiaries (the "Company").
The consolidated condensed financial statements include accounts of the
Company and its majority-owned subsidiaries.
2. INVENTORIES
Inventories (principally LIFO method) comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
----------- -----------
<S> <C> <C>
Finished goods $ 123.5 $ 113.3
Work in process 31.2 23.8
Raw materials 90.6 82.2
---------- ----------
245.3 219.3
---------- ----------
Less LIFO reserve 13.7 10.2
---------- ----------
$ 231.6 $ 209.1
========== ==========
</TABLE>
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- -----------
<S> <C> <C>
Property, plant and equipment, at cost $ 669.5 $ 571.2
Less accumulated depreciation 292.5 258.1
---------- ----------
$ 377.0 $ 313.1
========== ==========
</TABLE>
4. GOODWILL AND OTHER INTANGIBLES
Goodwill comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Goodwill, at cost $ 128.3 $ 104.4
Less accumulated amortization 13.6 11.4
---------- ----------
$ 114.7 $ 93.0
========== ==========
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
4. GOODWILL AND OTHER INTANGIBLES (continued)
Other Intangibles comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Other intangibles, at cost $ 36.1 $ 37.0
Less accumulated amortization 11.2 11.3
--------- ----------
$ 24.9 $ 25.7
========= ==========
</TABLE>
5. LOAN AGREEMENTS
In connection with various notes payable, the related loan agreements,
among other restrictions, limit the amount of additional debt, require
working capital to be maintained at specified amounts, and restrict
payment of dividends. Unrestricted retained earnings available for
dividends at September 30, 1994 were approximately $158.1.
6. ACQUISITIONS
During 1994, the Company acquired certain assets of five small companies
for $75.1, net of cash acquired, in transactions accounted for as purchases.
These companies primarily specialize in manufacturing and distributing
components and certain other products to the furnishings industry and some
other markets. The Company also issued 158,569 shares of common stock to
acquire a company in August, 1994 in a transaction accounted for as a
pooling of interests. The Company elected not to restate its financial
statements as the effect of the pooling was not material. Subsequent to
September 30, 1994, the Company issued 419,867 shares of common stock to
acquire a company in another transaction accounted for as a pooling of
interests. In this transaction, options to purchase an additional 10,584
shares of common stock at an average price of approximately $11 per share
were also extended in substitution for previously existing options. The
pooled companies specialize in manufacturing and distributing point-of-
purchase display racks and other formed wire products. The following pro
forma information shows the results of operations for the nine months ended
September 30, 1994 and 1993 as though the 1994 acquisitions discussed above
had occurred on January 1 of each year presented. The pro forma amounts
reflect, where appropriate, purchase accounting adjustments, interest on
incremental borrowings and the tax effects thereof. The pro forma
information is not necessarily indicative of either results of operations
that would have occurred had the acquisitions been made on January 1 of each
year or of future results of the combined companies.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 1993
--------- ----------
<S> <C> <C>
Net Sales $ 1,472.2 $ 1,253.0
Net Earnings $ 86.6 $ 64.6
Earnings Per Share $ 2.06 $ 1.55
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
(Unaudited)
7. CAPITAL STOCK
On May 12, 1994 the Company's shareholders approved an amendment to the
Company's 1989 Flexible Stock Plan which increased the number of shares
authorized for issuance under the plan by 1,500,000 shares.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Capital Resources and Liquidity
- - -------------------------------
The Company's capitalization at September 30, 1994 and December 31, 1993
is shown in millions of dollars in the table below. The amount of
additional capital available through the Company's revolving bank credit
agreements and commercial paper program is also shown, along with the
amount of cash and cash equivalents.
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Long-term debt outstanding:
Scheduled maturities $ 147.5 $ 122.3
Revolving credit 57.4 43.5
------- -------
Total long-term debt 204.9 165.8
Shareholders' equity 595.6 515.6
Unused committed credit 142.6 116.5
Cash and cash equivalents 6.7 0.4
</TABLE>
In the first nine months of 1994, capital investments to modernize
and expand capacity internally were $61.5 million, net of proceeds from
sales of property, plant and equipment. The Company also purchased certain
assets of five small businesses for $75.1 million, net of cash acquired.
The increase in total long-term debt at September 30, 1994 primarily
reflected borrowings for acquisitions accounted for as purchases. In
addition, the Company issued 158,569 shares of common stock to acquire
one small business in a pooling of interests in August 1994.
Working capital at September 30, 1994 was $302.5 million, up from $269.4
million at the end of 1993. Total current assets increased $94.8 million,
due primarily to increases in trade accounts and notes receivable and
inventories. Total current liabilities increased $61.7 million. These
increases primarily reflected higher sales and production volumes during
the first nine months of 1994 as well as normal recurring liabilities with
funding requirements later in the year. There was no short-term debt
outstanding at the end of the quarter or at year end.
In mid October 1994, soon after the end of the third quarter, the Company
acquired another small business for 419,867 shares of common stock and
options to purchase an additional 10,584 shares. This transaction was also
accounted for as a pooling of interests. All acquisitions completed to
date in 1994 fit very well with the Company's continuing emphasis on
manufacturing, marketing and distributing a broad line of components and
related products for the furnishings industry and diversified markets.
Moody's and Standard & Poor's, the two leading debt rating agencies, both
recently raised their ratings of the Company's senior debt and commercial
paper. In October, Moody's increased the senior debt rating to A2 from A3,
and the commercial paper rating to Prime-1 from Prime-2. In November,
Standard & Poor's increased the senior debt rating to A from A-, and the
commercial paper rating to A-1 from A-2. Management is pleased to have
these confirmations of the Company's improved credit quality. The Company
has substantial capital resources and flexibility to continue pursuing
management's goal of increasing efficiencies and profitable growth, both
internally and through additional acquisitions.
<PAGE>
Results of Operations
- - ----------------------
The Company had record earnings and sales in the first nine months of 1994.
Earnings were $2.04 per share (up 33%) and sales were $1.37 billion (up 21%)
- - --- both compared with the first nine months of 1993. Third quarter earnings
and sales were also at record levels. Earnings were $.73 per share (up 35%)
and sales were $482.6 million (up 22%) --- both compared with the third
quarter of 1993.
The Company's 1994 sales growth reflected continued growth in the economy
and increased consumer spending on durable goods, including furniture and
bedding. In addition, final demand continued to improve in the diversified
markets the Company serves. Sales growth also reflected a continuing
benefit from acquisitions. Excluding acquisitions, the Company's sales
increased 10% in the first nine months and 11% in the third quarter.
Acquisitions completed to date in 1994 have expanded the Company's current
annual sales base by approximately $175 million, an increase of about 10%.
Based on initial projections, these acquisitions should enhance annual
earnings by approximately $.08 per share and provide opportunities for
additional long-term growth.
As noted above, the Company's earnings growth continued to exceed sales
growth, as year-to-year comparisons of net profit margins remained favorable.
In the first nine months and the third quarter of 1994, net profit margins
were 6.2% and 6.3%, respectively. In 1993, net profit margins were 5.6% in
both of these periods.
The following table shows various measures of earnings, as a percentage of
sales, in the first nine months and the third quarter of 1994 and 1993. It
also shows the Company's effective income tax rate in each respective period.
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
September 30, September 30,
------------------ ----------------
1994 1993 1994 1993
------- -------- ------- -------
<S> <C> <C> <C> <C>
Gross profit margin 23.0% 22.9% 22.9% 23.0%
Pre-tax profit margin 10.2 9.2 10.3 9.4
Net profit margin 6.2 5.6 6.3 5.6
Effective income tax rate 39.4 39.3 39.5 39.9
</TABLE>
<PAGE>
The increase in 1994 net profit margins primarily reflected continuing
improvement in the Company's operating expense ratios. Administrative,
selling and distribution expense ratios declined by 0.6% as a percentage of
sales in the first nine months and 0.5% in the third quarter. Interest
expense also declined slightly as a percentage of sales, because of debt
refinancing in September 1993 following a pooling of interests acquisition.
In addition, the Company's 1994 net profit margins reflected a normal
effective income tax rate. In 1993, the effective income tax rate was
somewhat higher than normal in the third quarter as a result of the increase
in corporate federal income tax rates, which was retroactive to the beginning
of the year.
Gross profit margins, as shown on the preceding page, were essentially
unchanged. Overall gains in manufacturing efficiencies on higher volume
and increased sales of some products with above average margins favorably
affected gross profit margins in the first nine months and the third quarter
of 1994. In general, these factors improved gross margins in operations
producing products other than steel products for bedding, furniture and
automotive applications. Margins on the Company's steel products continued
to reflect some 1993 and additional 1994 cost increases for raw materials
that were not passed along in the Company's selling prices. Price increases
on some of these product lines have recently been announced by the Company
and will become effective near the end of 1994.
In this year's third quarter, the gross profit margin reflected some unusual
costs associated with further consolidation of the Company's Fashion Bed
Group, and an additional reserve for potential environmental costs at one of
the Company's wire mills. These costs reduced the gross margin for the
quarter by 0.3% of sales. However, this negative impact was more than offset
by an increase in "other income", resulting from a special dividend the
Company received on the recapitalization of a small equity investment. The
dividend also offset an additional increase in "other deductions" associated
with the further consolidation of the Fashion Bed Group facilities.
With continuing earnings growth and a strong financial position, the Board of
Directors in August increased the third quarter cash dividend on the Company's
common stock to $.16 per share. This was the second increase in the quarterly
rate during 1994. Dividends declared in the first nine months totaled $.46
per share, up 15% from the first nine months of 1993. On November 9, 1994,
the Board declared a fourth quarter dividend of $.16 per share. This dividend
will be paid on January 2, 1995 to shareholders of record on November 25,
1994.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibit 11 - Computations of Earnings Per Share
(B) Exhibit 27 - Financial Data Schedule
(C) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
<PAGE>
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: November 10, 1994 By: /s/ HARRY M. CORNELL
-----------------------
Harry M. Cornell, Jr.
Chairman of the Board
and Chief Executive Officer
DATE: November 10, 1994 By: /s/ MICHAEL A. GLAUBER
-----------------------
Michael A. Glauber
Senior Vice President,
Finance and Administration
<PAGE>
EXHIBIT INDEX
Exhibit Page
- - ------- ----
11 Computations of Earnings Per Share 14
27 Financial Data Schedule 15
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES Exhibit 11
COMPUTATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
(Amounts in millions, except
per share data)
Nine Months Ended Three Months Ended
September 30, September 30,
1994 1993 1994 1993
-------- ------- ------- --------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE
Weighted average number of common
shares outstanding 40.8 40.1 40.9 40.2
Dilution from outstanding stock
options-computed using the
"treasury stock" method 0.6 0.7 0.5 0.7
Dilution from shares issuable
under contingent earnout agreement - 0.3 - 0.3
------- ------- ------- -------
Weighted average number of common
shares outstanding as adjusted 41.4 41.1 41.4 41.2
======= ======= ======= =======
Net Earnings $ 84.4 $ 62.9 $ 30.2 $ 22.3
======= ======= ======= =======
Earnings Per Share $ 2.04 $ 1.53 $ 0.73 $ 0.54
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 6700
<SECURITIES> 0
<RECEIVABLES> 272300
<ALLOWANCES> 11300
<INVENTORY> 231600
<CURRENT-ASSETS> 530400
<PP&E> 669500
<DEPRECIATION> 292500
<TOTAL-ASSETS> 1084300
<CURRENT-LIABILITIES> 227900
<BONDS> 204900
<COMMON> 400
0
0
<OTHER-SE> 595200
<TOTAL-LIABILITY-AND-EQUITY> 1084300
<SALES> 1366000
<TOTAL-REVENUES> 1366000
<CGS> 1052500
<TOTAL-COSTS> 165300
<OTHER-EXPENSES> 2300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6600
<INCOME-PRETAX> 139300
<INCOME-TAX> 54900
<INCOME-CONTINUING> 84400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84400
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 2.04
</TABLE>
