<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 15, 1996
------------------------------
Leggett & Platt, Incorporated
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 1-7845 44-0324630
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
No. 1 Leggett Road, Carthage, MO 64836
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (417) 358-8131
----------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. OTHER EVENTS
The Company has restated its financial statements for the three years ended
December 31, 1995 to reflect the May 1996 pooling of interests acquisition of
Pace Holdings, Inc. These financial statements are set out below together with a
revised Management's Discussion and Analysis of Financial Condition and Results
of Operations and other supplemental financial information for such periods.
TABLE OF CONTENTS
Page
----
Financial Statements
Consolidated Statements of Earnings................................. 2
Consolidated Balance Sheets......................................... 3
Consolidated Statements of Cash Flows............................... 4
Consolidated Statements of Changes in Shareholders' Equity.......... 5
Notes to Consolidated Financial Statements.......................... 6
Report of Independent Accountants................................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations................................... 21
Supplemental Financial Information
Selected Financial Data............................................. 25
Quarterly Summary of Earnings....................................... 26
Summary of Sales.................................................... 27
Schedule II--Valuation and Qualifying Accounts and Reserves......... 28
Exhibit Index.......................................................... 30
1
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Leggett & Platt, Incorporated and Subsidiaries
(Dollar amounts in millions, except per share data)
<TABLE>
<CAPTION>
Year ended December 31 1995 1994 1993
<S> <C> <C> <C>
Net sales $2,256.9 $2,009.1 $1,526.7
Cost of goods sold 1,722.0 1,537.4 1,178.3
-------- -------- --------
Gross profit 534.9 471.7 348.4
Selling, distribution and administrative expenses 272.3 239.7 192.4
Amortization of excess cost of purchased
companies and other intangibles 15.4 14.1 6.2
Interest expense 30.4 26.0 10.2
Other income, net of other deductions (3.8) (4.4) (.8)
-------- -------- --------
Earnings before income taxes 220.6 196.3 140.4
Income taxes 86.3 76.8 54.8
-------- -------- --------
Net earnings $ 134.3 $ 119.5 $ 85.6
======== ======== ========
Earnings per share $ 1.49 $ 1.36 $ 1.04
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONSOLIDATED BALANCE SHEETS
Leggett & Platt, Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(Dollar amounts in millions)
December 31 1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8.2 $ 3.0
Trade receivables, less allowance of $7.5 in 1995 and $8.1 in 1994 290.5 275.7
Other receivables 8.8 9.7
Inventories
Finished goods 186.3 152.5
Work in process 39.1 36.4
Raw materials and supplies 136.1 122.8
LIFO reserve (17.4) (11.5)
-------- --------
Total inventories 344.1 300.2
Other current assets 35.0 31.6
-------- --------
Total current assets 686.6 620.2
PROPERTY, PLANT AND EQUIPMENT - AT COST
Machinery and equipment 561.5 461.2
Buildings and other 285.4 259.9
Land 28.6 26.9
-------- --------
875.5 748.0
Less accumulated depreciation 364.9 307.3
-------- --------
Net property, plant and equipment 510.6 440.7
OTHER ASSETS
Excess cost of purchased companies over net assets acquired,
less accumulated amortization of $21.6 in 1995 and $16.2 in 1994 210.3 187.9
Other intangibles, less accumulated amortization of $24.2 in 1995
and $16.6 in 1994 31.7 40.5
Sundry 38.9 37.7
-------- --------
Total other assets 280.9 266.1
-------- --------
TOTAL ASSETS $1,478.1 $1,327.0
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 7.5 $ 4.4
Accounts payable 127.5 115.8
Income taxes 7.3 9.5
Accrued expenses 109.8 100.6
Other current liabilities 23.0 36.3
-------- --------
Total current liabilities 275.1 266.6
LONG-TERM DEBT 380.6 364.1
OTHER LIABILITIES 21.3 18.0
DEFERRED INCOME TAXES 54.3 50.0
SHAREHOLDERS' EQUITY
Capital stock
Preferred stock - authorized, 100,000,000 shares; none issued
Common stock - authorized, 300,000,000 shares
of $.01 par value; issued 89,407,103 and 46,321,900
shares in 1995 and 1994, respectively .9 .4
Additional contributed capital 164.0 133.6
Retained earnings 601.6 500.7
Cumulative translation adjustment (5.0) (6.1)
Less treasury stock - at cost (644,539 and 11,065
shares in 1995 and 1994, respectively) (14.7) ( .3)
-------- --------
Total shareholders' equity 746.8 628.3
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,478.1 $1,327.0
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Leggett & Platt, Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(Dollar amounts in millions)
Year ended December 31 1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 134.3 $ 119.5 $ 85.6
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation 62.6 52.5 39.1
Amortization 15.4 14.1 6.2
Deferred income tax (benefit) expense (1.9) (4.8) 8.3
Other ( .6) 2.3 ( .9)
Other changes, net of effects from
purchases of companies
Decrease (increase) in accounts receivable, net 1.0 (42.9) (9.2)
Increase in inventories (35.8) (35.2) (3.8)
Increase in other current assets (4.1) (6.4) (2.9)
Increase in current liabilities 16.9 72.8 23.3
------- ------- -------
Net Cash Provided by Operating Activities 187.8 171.9 145.7
INVESTING ACTIVITIES
Additions to property, plant and equipment (106.8) (97.1) (54.2)
Purchases of companies, net of cash acquired (28.6) (88.9) (94.9)
Other .5 ( .1) 2.9
------- ------- -------
Net Cash Used for Investing Activities (134.9) (186.1) (146.2)
FINANCING ACTIVITIES
Additions to debt 108.7 68.4 58.1
Payments on debt (100.4) (30.0) (57.8)
Dividends paid (31.9) (25.4) (21.1)
Sales of common stock 3.0 2.2 18.7
Purchases of common stock (24.5) (1.1) ( .1)
Other (2.6) 2.4 (1.8)
------- ------- -------
Net Cash (Used for) Provided by Financing Activities (47.7) 16.5 (4.0)
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5.2 2.3 (4.5)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 3.0 .7 5.2
------- ------- -------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 8.2 $ 3.0 $ .7
======= ======= =======
SUPPLEMENTAL INFORMATION
Interest paid $ 30.8 $ 24.9 $ 16.7
Income taxes paid 90.3 69.8 45.3
Liabilities assumed of acquired companies 21.7 40.4 21.8
Common stock issued for acquired companies 18.3 13.8 2.0
Stock issued for employee stock plans 17.4 8.2 6.6
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Leggett & Platt, Incorporated and Subsidiaries
(Dollar amounts in millions, except per share data) Additional Cumulative Treasury Stock
Common Contributed Retained Translation -----------------
Stock Capital Earnings Adjustment Cost Shares
<S> <C> <C> <C> <C> <C> <C>
BALANCES - JANUARY 1, 1993 $ 39.9 $ 70.6 $ 336.6 $ ( .8) $ (4.3) 136,196
Common stock issued, primarily for
employee stock plans (376,314 shares) .2 6.2
Treasury stock issued for acquired companies
and employee stock plans ( .3) 5.6 (168,717)
Treasury stock purchased, primarily
for employee stock plans (1.6) 40,099
Tax benefit related to stock options 1.1
Change in par value of common stock (39.7) 39.7
Equity on leveraged buyout transaction date
for pooled company (4,713,726 shares) (1.1)
Translation adjustment (2.0)
Net earnings for the year 85.6
Cash dividends declared ($.27 per share) (21.1)
------- -------- -------- -------- ------- --------
BALANCES - DECEMBER 31, 1993 .4 116.2 401.1 (2.8) ( .3) 7,578
Common stock issued for acquired companies
and employee stock plans (1,282,213 shares) 17.0
Treasury stock issued for employee stock plans ( .1) 2.1 (47,773)
Treasury stock purchased, primarily
for employee stock plans (2.1) 51,260
Tax benefit related to stock options .5
Translation adjustment (3.3)
Retained earnings of pooled
companies at date of acquisition 5.5
Net earnings for the year 119.5
Cash dividends declared ($.31 per share) (25.4)
------- -------- -------- -------- ------- --------
BALANCES - DECEMBER 31, 1994 .4 133.6 500.7 (6.1) ( .3) 11,065
Common stock issued for acquired companies
and employee stock plans (890,257 shares) .1 32.6
Treasury stock issued for employee stock plans (2.3) 11.4 (372,906)
Treasury stock purchased, primarily for employee
stock plans and to replace shares issued
for purchased companies (25.8) 887,712
Tax benefit related to stock options .5
Additional shares issued in two-for-one stock
split effected in the form of a stock dividend
September 15, 1995 (42,194,946 shares) .4 ( .4) 118,668
Translation adjustment 1.1
Retained earnings of pooled
company at date of acquisition (1.5)
Net earnings for the year 134.3
Cash dividends declared ($.38 per share) (31.9)
------- -------- -------- -------- ------- --------
BALANCES - DECEMBER 31, 1995 $ .9 $ 164.0 $ 601.6 $ (5.0) $(14.7) 644,539
======= ======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Leggett & Platt, Incorporated and Subsidiaries
(Dollar amounts in millions, except per share data)
December 31, 1995, 1994 and 1993
A-ACQUISITION OF PACE HOLDINGS, INC.
On May 13, 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. The accompanying financial statements have been
restated to reflect the pooling. The Consolidated Statement of Earnings for 1993
has not been restated because Pace entered into a leveraged buyout transaction
effective December, 1993 (see Note D). Separate results of operations for the
years ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net sales
Leggett & Platt $2,059.3 $1,858.1
Pace 197.6 151.0
-------- --------
Combined $2,256.9 $2,009.1
======== ========
Net earnings
Leggett & Platt $ 134.9 $ 115.4
Pace 0.4 1.7
Restatement Adjustments (1.0) 2.4
-------- --------
Combined $ 134.3 $ 119.5
======== ========
</TABLE>
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 connection with the 1993 leveraged buyout transaction discussed in Note
D, Pace adopted an employee stock option/bonus plan that provided for the
granting of options, under certain conditions, at an exercise price of $.01 per
Pace share. In May 1996, prior to the acquisition, options were granted and
exercised under the plan resulting in compensation expense of $12 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 discussed in Note F. 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.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
B-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Leggett & Platt, Incorporated (Leggett & Platt) and its
majority-owned subsidiaries (the Company). All significant intercompany
transactions and accounts have been eliminated in consolidation.
CASH EQUIVALENTS: Cash equivalents include cash in excess of daily
requirements which is invested in various financial instruments with original
maturities of three months or less.
INVENTORIES: All inventories are stated at the lower of cost or market.
Cost includes materials, labor and production overhead. Cost is determined by
the last-in, first-out (LIFO) method for approximately 60% of the inventories at
December 31, 1995 and 1994. The first-in, first-out (FIFO) method is
principally used for the remainder. The FIFO cost of inventories at December 31,
1995 and 1994 approximated replacement cost.
DEPRECIATION, AMORTIZATION AND ASSET REALIZATION: Property, plant and
equipment are depreciated by the straight-line method. The rates of
depreciation range from 6.7% to 25% for machinery and equipment, 2.5% to 6.7%
for buildings and 12.5% to 33% for other items. Accelerated methods are used
for tax purposes. The excess cost of purchased companies over net assets
acquired is amortized by the straight-line method over forty years. Other
intangibles are amortized by the straight-line method over their estimated
lives. Assets subject to periodic depreciation or amortization are evaluated
for probable realization, and appropriate adjustment of their carrying value is
made when realization is not assured. The excess cost of purchased companies
over net assets acquired is evaluated using estimated undiscounted cash flows
over the remaining amortization period.
COMPUTATIONS OF EARNINGS PER SHARE: Earnings per share is based on the
weighted average number of common and common equivalent shares outstanding.
Common stock equivalents result from the assumed issuance of shares under stock
option plans.
CONCENTRATION OF CREDIT RISKS, EXPOSURES AND FINANCIAL INSTRUMENTS: The
Company specializes in manufacturing, marketing, and distributing components and
other related products for furnishings and diversified markets. The Company's
operations are principally in the United States, although the Company also has
subsidiaries in Canada, Europe and Mexico.
The Company performs ongoing credit evaluations of its customers' financial
conditions and, generally, requires no collateral from its customers, some of
which are highly leveraged. The Company maintains allowances for potential
credit losses and such losses have generally been within management's
expectations.
From time to time, the Company will enter into forward exchange contracts
to hedge equipment purchase commitments in foreign currencies. The amounts
outstanding under the forward contracts at any point in time are not significant
to the Company. The Company has minimal continuing exposures to other foreign
currency transactions and interest rate fluctuations, none of which have been
hedged by the use of derivative instruments.
The carrying value of cash and short-term financial instruments
approximates fair value due to the short maturity of those instruments. The
fair value of the 10.625% senior notes, based on a subsequent tender offer for
the debt, was approximately 113% of par (see Note A). The carrying value of all
other long-term debt approximates fair value due to the use of variable interest
rates and fixed rate debt which approximates current interest rates.
OTHER RISKS: The Company obtains insurance for worker's compensation,
automobile, product and general liability, property loss and medical claims.
However, the Company has elected to retain a significant portion of expected
losses through the use of deductibles. Provisions for losses expected under
these programs are recorded based upon the Company's estimates of the aggregate
liability for claims incurred. These estimates utilize the Company's prior
experience and actuarial assumptions that are provided by the Company's
insurance carrier.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
B-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
INCOME TAXES: The Company provides for taxes on undistributed earnings of
subsidiaries where appropriate. The tax effect of most such distributions would
be significantly offset by available foreign tax credits.
C-STOCK SPLIT
On September 15, 1995, the Company distributed a two-for-one stock split in
the form of a stock dividend. All references to the number of shares and per
share amounts have been restated to reflect the split, except on the
Consolidated Statements of Changes in Shareholders' Equity. In these statements,
shares issued and purchased prior to September 15, 1995 are reflected on a pre-
split basis, except for the shares issued in the Pace acquisition (see Note A).
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
D-ACQUISITIONS
During 1995, the Company acquired the assets of nine companies that
primarily manufacture and distribute components to the furnishings industry.
These transactions, accounted for as purchases, resulted in the use of $28.6 in
cash, net of cash acquired, and 642,441 shares of common stock. The Company also
issued 325,000 shares of common stock to acquire a business in a transaction
accounted for as a pooling of interests. This company manufactures and
distributes formed wire products to the furnishings industry. The Company
elected not to restate its financial statements as the effect of the pooling was
not material. Pro forma results of operations for the twelve months ended
December 31, 1995 and 1994 are not materially different from the amounts
reflected in the accompanying financial statements.
During 1994, the Company acquired certain assets of eight companies in
exchange for $78.8 in cash, net of cash acquired, and 44,756 shares of common
stock in transactions accounted for as purchases. These companies primarily
specialize in manufacturing and distributing components and certain other
products to the furnishings industry. The Company also issued 1,156,872 shares
of common stock to acquire two companies during the year in transactions
accounted for as poolings of interests. The Company elected not to restate its
financial statements as the effect of the poolings was not material. The pooled
companies specialize in manufacturing and distributing point-of-purchase store
displays and other formed wire products to the furnishings and diversified
industries.
In November 1993, Pace entered into an agreement and plan of merger
pursuant to which an investor group acquired 57% of the outstanding common stock
of Pace and the then current management group and former stockholders acquired
43% of the outstanding common stock. In addition, the acquisition included the
issuance by Pace of $115 aggregate principal amount of senior notes and the
concurrent refinancing of existing long-term debt. The acquisition was
accounted for as a purchase in accordance with the consensus reached by the
Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board
in Issue No. 88-16 "Basis in Leveraged Buyout Transactions." The acquisition
was recorded as of December 31, 1993.
In September 1993, the Company issued 3,158,708 shares of common stock to
acquire Hanes Holding Company (Hanes) in a transaction accounted for as a
pooling of interests. Hanes' business consists of converting and distributing
woven and nonwoven construction fabrics, primarily in the furnishings industry.
In addition, Hanes is a commission dye/finisher of non-fashion fabrics for the
furnishings and apparel industries. In another pooling of interests
transaction, the Company issued 137,576 shares of common stock to acquire a
company whose business is manufacturing furniture components for the furnishings
industry. Prior year financial statements were restated for these poolings of
interests.
In September 1993, the Company acquired VWR Textiles & Supplies (through
Hanes) which converts and distributes construction fabrics and manufactures and
distributes other soft goods components to the furnishings industry. The
purchase price of this acquisition was approximately $26. Also in 1993, the
Company acquired full ownership of several wire drawing mills which previously
had been jointly owned. This transaction involved $33 in cash and the
assumption of approximately $3.6 of long-term debt. In addition, the Company
acquired several smaller companies during 1993 which primarily manufacture and
distribute products to the furnishings industry.
The results of operations of the above acquired companies, except the 1993
poolings, have been included in the consolidated financial statements since the
dates of acquisition.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
E-ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at December 31 consist of
the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Accrued expenses
Wages and commissions payable $ 29.4 $ 28.9
Worker's compensation, medical, auto
and product liability insurance 36.9 33.6
Sales promotions 12.2 10.4
Other 31.3 27.7
------ ------
$109.8 $100.6
====== ======
Other current liabilities
Outstanding checks in excess of book balances $ 16.3 $ 29.2
Other 6.7 7.1
------ ------
$ 23.0 $ 36.3
====== ======
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
F-LONG-TERM DEBT
Long-term debt, weighted average interest rates and due dates at December
31 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Medium-term notes, fixed interest rates of 6.5% and 6.4%
for 1995 and 1994, respectively, due dates through 2008 $127.5 $103.5
Pace senior notes, fixed interest rates of 10.625% for 1995
and 1994, due 2002 115.0 115.0
Pace revolving credit agreements, variable interest rates of
8.2% and 8.9% for 1995 and 1994, respectively, secured 47.2 22.7
Revolving credit agreements, variable interest rates of
6.5% for 1994, unsecured - 43.3
Commercial paper, variable interest rates of
6.0% and 6.1% for 1995 and 1994, respectively,
due dates in 1996 and 1995 17.5 15.0
Industrial development bonds, principally variable interest
rates of 5.5% and 6.1% for 1995 and 1994, respectively,
due dates through 2030 39.6 37.8
Other, partially secured 41.3 31.2
------ ------
388.1 368.5
Less current maturities 7.5 4.4
------ ------
$380.6 $364.1
====== ======
</TABLE>
Pace senior notes and revolving credit agreements were refinanced
subsequent to the acquisition discussed in Note A.
The current revolving credit agreements provide for a maximum line of
credit of $215. For any revolving credit agreement, the Company may elect to pay
interest based on 1) the bank's base lending rate, 2) LIBOR, 3) an adjusted
certificate of deposit rate, or 4) the money market rate, as specified in the
revolving agreements. The agreements will terminate at the end of five years, at
which time all outstanding balances will become due. Annual facility fees are
1/10 of 1% of the total credit line, payable on a quarterly basis.
Commercial paper is classified as long-term debt since the Company intends
to refinance it on a long-term basis either through continued issuance or unused
credit available under the revolving credit agreements.
The revolving credit agreements and certain other long-term debt contain
restrictive covenants which, among other restrictions, limit the amount of
additional debt, require working capital to be maintained at specified amounts
and restrict payments of dividends. Unrestricted retained earnings available for
dividends at December 31, 1995 were approximately $131.9.
Maturities of long-term debt, subsequent to the refinancing discussed
above, for each of the five years following 1995 are:
<TABLE>
<CAPTION>
Year ended December 31
<S> <C>
1996 $ 7.5
1997 29.0
1998 14.1
1999 11.8
2000 86.4
</TABLE>
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
G-LEASE OBLIGATIONS
The Company conducts certain of its operations in leased premises and also
leases most of its automotive and trucking equipment and some other assets.
Terms of the leases, including purchase options, renewals and maintenance costs,
vary by lease.
Total rental expense entering into the determination of results of
operations was $22.7, $21.1 and $17.4 for the years ended December 31, 1995,
1994 and 1993, respectively.
Future minimum rental commitments for all long-term noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
Year ended December 31
<S> <C>
1996 $14.3
1997 10.5
1998 7.0
1999 4.7
2000 3.1
Later years 3.6
-----
$43.2
=====
</TABLE>
The above lease obligations expire at various dates through 2010. Certain
leases contain renewal and/or purchase options. Aggregate rental commitments
above include renewal amounts where it is the intention of the Company to renew
the lease.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
H-CAPITAL STOCK
At December 31, 1995, the Company had 6,464,552 common shares authorized
for issuance under stock option plans. Generally, options are granted at not
less than quoted market value on the date of grant and become exercisable in
varying installments, beginning 6 to 18 months after the date of grant. However,
options have been granted at less than market value to replace existing options
of an acquired company or in lieu of compensation. Options outstanding at
December 31, 1995 that were granted at less than market value were 491,114.
Options exercisable were 1,656,270, 1,077,572 and 621,998 at December 31, 1995,
1994 and 1993, respectively.
Other data regarding the Company's stock options is summarized below:
<TABLE>
<CAPTION>
Per
share
Shares price Total
<S> <C> <C> <C>
Outstanding at
January 1, 1993 3,064,840 $ 3-12 $28.6
Granted 340,382 16-22 6.8
Exercised (508,264) 3-12 (3.1)
Forfeited (59,786) 5-21 (.6)
--------- ------ -----
Outstanding at
December 31, 1993 2,837,172 3-22 31.7
Granted 368,862 1-22 3.3
Exercised (320,064) 1-12 (2.5)
Forfeited (104,714) 7-21 (1.4)
--------- ------ -----
Outstanding at
December 31, 1994 2,781,256 1-22 31.1
Granted 344,800 1-25 3.2
Exercised (418,533) 1-22 (4.4)
Forfeited (75,134) 11-22 (1.2)
--------- ------ -----
Outstanding at
December 31, 1995 2,632,389 $ 1-25 $28.7
========= ====== =====
</TABLE>
In addition to the above Company options, Pace had an employee stock option
plan under which no option grants had been made as of December 31, 1995 (see
Note A).
The Company has also authorized shares for issuance in connection with
certain employee stock benefit plans discussed in Note I.
In 1993, the Company's shareholders approved an amendment to the Company's
Restated Articles of Incorporation reducing the par value of Common Stock to
$.01 from $1. The amendment provided that the stated capital of the Company
would not be affected as of the date of the amendment. Accordingly, stated
capital of the Company exceeds the amount reported as common stock in the
financial statements by approximately $39.
In 1989, the Company declared a dividend distribution of one preferred
stock purchase right (a Right) for each share of common stock. The Rights are
attached to and traded with the Company's common stock. The Rights may only
become exercisable under certain circumstances involving actual or potential
acquisitions of the Company's common stock. Depending upon the circumstances, if
the Rights become exercisable, the holder may be entitled to purchase shares of
Series A junior preferred stock of the Company, shares of the Company's common
stock or shares of common stock of the acquiring entity. The Rights remain in
existence until February 15, 1999, unless they are exercised, exchanged or
redeemed at an earlier date.
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
I-EMPLOYEE BENEFIT PLANS
The Company sponsors contributory and non-contributory pension and
retirement plans. Substantially all employees, other than union employees
covered by multiemployer plans under collective bargaining agreements, are
eligible to participate in the plans. Retirement benefits under the
contributory plans are based on career average earnings. Retirement benefits
under the non-contributory plans are based on years of service, employees'
average compensation and social security benefits. It is the Company's policy
to fund actuarially determined costs as accrued.
Information at December 31, 1995, 1994 and 1993 as to the funded status of
Company sponsored defined benefit plans, net pension income from the plans for
the years then ended and weighted average assumptions used in the calculations
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Funded Status
Actuarial present value
of benefit obligations
Vested benefits $(58.8) $(50.5) $(46.3)
Nonvested benefits (.6) (.6) (.6)
------ ------ ------
Accumulated benefit obligations (59.4) (51.1) (46.9)
Provision for future
compensation increases (3.1) (3.6) (3.3)
------ ------ ------
Projected benefit obligations (62.5) (54.7) (50.2)
Plan assets at fair value 87.1 75.2 78.1
------ ------ ------
Plan assets in excess of projected
benefit obligations 24.6 20.5 27.9
Unrecognized net experience gain (3.4) (.4) (9.6)
Unrecognized net transition asset (3.4) (4.1) (4.6)
------ ------ ------
Prepaid pension costs included
in other assets $ 17.8 $ 16.0 $ 13.7
====== ====== ======
Components of Pension Income (Expense)
Service cost $ (.8) $ (1.3) $ (.9)
Interest cost (4.1) (3.5) (3.3)
Actual return on plan assets 12.5 (1.9) 12.8
Net amortization and deferral (5.8) 9.0 (6.6)
------ ------ ------
Net pension income from
defined benefit plans $ 1.8 $ 2.3 $ 2.0
====== ====== ======
Weighted Average Assumptions
Discount rate 7.25% 7.50% 7.25%
Rate of increase in
compensation levels 5.18% 5.17% 5.14%
Expected long-term rate of
return on plan assets 8.00% 8.00% 8.00%
====== ====== ======
</TABLE>
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
I-EMPLOYEE BENEFIT PLANS--Continued
Plan assets are invested in a diversified portfolio of equity, debt and
government securities, including 588,000 shares of the Company's common stock at
December 31, 1995.
Contributions to union sponsored, multiemployer pension plans were $.2 in
1995, 1994 and 1993. These plans are not administered by the Company and
contributions are determined in accordance with provisions of negotiated labor
contracts. As of 1995, the actuarially computed values of vested benefits for
these plans were equal to or less than the net assets of the plans. Therefore,
the Company would have no withdrawal liability. However, the Company has no
present intention of withdrawing from any of these plans, nor has the Company
been informed that there is any intention to terminate such plans.
Net pension income, including Company sponsored defined benefit plans,
multiemployer plans and other plans, was $.2, $.9 and $.7 in 1995, 1994 and
1993, respectively.
The Company also has a contributory stock purchase/stock bonus plan (SPSB
Plan), a non-qualified executive stock purchase program (ESPP) and an employees'
discount stock plan (DSP). The SPSB Plan provides Company pre-tax contributions
of 50% of the amount of employee contributions. The ESPP provides cash payments
of 50% of the employees' contributions, along with an additional payment to
assist employees in paying taxes on the cash payments. To the extent possible,
contributions to the ESPP are invested in the Company's common stock through the
DSP. In addition, the Company matches its contributions when certain
profitability levels, as defined in the SPSB Plan and the ESPP, have been
attained. The Company's total contributions to the SPSB Plan and the ESPP were
$4.3, $3.3 and $2.5 for 1995, 1994 and 1993, respectively.
Under the DSP, eligible employees may purchase a maximum of 8,000,000
shares of Company common stock. The purchase price per share is 85% of the
closing market price on the last business day of each month. Shares purchased
under the DSP were 506,613, 415,408 and 362,612 during 1995, 1994 and 1993,
respectively. Purchase prices ranged from $15 to $21 per share. Since
inception of the DSP in 1982, a total of 5,162,847 shares have been purchased by
employees.
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
J-INCOME TAXES
The components of earnings before income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31 1995 1994 1993
<S> <C> <C> <C>
Domestic $198.7 $179.9 $128.1
Foreign 21.9 16.4 12.3
------ ------ ------
$220.6 $196.3 $140.4
====== ====== ======
</TABLE>
Income tax expense is comprised of the following components:
<TABLE>
<CAPTION>
Year ended December 31 1995 1994 1993
<S> <C> <C> <C>
Current
Federal $ 71.1 $ 64.0 $ 34.5
State and local 9.7 11.0 7.4
Foreign 7.4 6.6 4.6
------ ------ ------
88.2 81.6 46.5
Deferred
Federal (3.7) (4.6) 6.9
State and local 1.2 .3 1.4
Foreign .6 (.5) -
------ ------ ------
(1.9) (4.8) 8.3
------ ------ ------
$ 86.3 $ 76.8 $ 54.8
====== ====== ======
</TABLE>
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities. The major temporary differences that give rise to deferred tax
assets or liabilities at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
December 31 1995 1994
<S> <C> <C>
Property, plant and equipment $ (41.5) $ (39.8)
Accrued expenses 29.9 22.7
Prepaid pension cost (6.9) (6.1)
Intangible assets (2.1) (4.1)
Other, net (11.2) (5.1)
-------- --------
$ (31.8) $ (32.4)
======== ========
</TABLE>
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
J-INCOME TAXES--Continued
Deferred tax assets and liabilities included in the consolidated balance
sheet are as follows:
<TABLE>
<CAPTION>
December 31 1995 1994
<S> <C> <C>
Other current assets $ 22.5 $ 17.6
Deferred income taxes (54.3) (50.0)
-------- --------
$ (31.8) $ (32.4)
======== ========
</TABLE>
Income tax expense, as a percentage of earnings before income taxes,
differs from the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
Year ended December 31 1995 1994 1993
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Increases in rate resulting from
State taxes, net of federal benefit 3.4 3.8 4.0
Other .7 .3 -
---- ---- ----
Effective tax rate 39.1% 39.1% 39.0%
==== ==== ====
</TABLE>
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
K-INDUSTRY SEGMENT INFORMATION
The Company's operations principally consist of manufacturing
and marketing components and related finished products for the furnishings
industry. In addition, the Company supplies a diversified group of industries
with products which are similar in manufacturing technology to its furnishings
operations.
Operating profit is determined by deducting from net sales the cost of
goods sold and the selling, distribution, administrative and other expenses
attributable to the segment operations. Due to the Pace leveraged buyout
effective at the end of 1993 (see notes A and D), the identifiable assets from
the Pace acquisition are reflected as of December 31, 1993 but no Pace
operations are included in segment data for that year. Corporate expenses not
allocated to the segments include corporate general and administrative expenses,
interest expense and certain other income and deduction items which are
incidental to the Company's operations. Capital expenditures, as defined herein,
include amounts relating to acquisitions as well as internal expenditures. The
identifiable assets of industry segments are those used in the Company's
operations of each segment. Corporate identifiable assets include cash, land,
buildings and equipment used in conjunction with corporate activities and sundry
assets. Financial information by segment is as follows:
<TABLE>
<CAPTION>
Year ended December 31
Furnishings Diversified Corporate Consolidated
<S> <C> <C> <C> <C>
1995
Net sales $1,727.8 $529.1 $ - $2,256.9
Operating profit 214.1 51.5 (45.0) 220.6
Capital expenditures 94.7 26.9 4.2 125.8
Depreciation and
amortization expense 58.7 15.9 3.4 78.0
Identifiable assets 1,134.2 290.0 53.9 1,478.1
1994
Net sales $1,522.4 $486.7 $ - $2,009.1
Operating profit 171.9 60.0 (35.6) 196.3
Capital expenditures 98.4 31.8 3.9 134.1
Depreciation and
amortization expense 48.9 15.1 2.6 66.6
Identifiable assets 983.9 295.8 47.3 1,327.0
1993
Net sales $1,195.8 $330.9 $ - $1,526.7
Operating profit 128.7 33.6 (21.9) 140.4
Capital expenditures 68.4 16.9 3.0 88.3
Depreciation and
amortization expense 35.9 8.0 1.4 45.3
Identifiable assets 832.7 202.0 45.4 1,080.1
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
Leggett & Platt, Incorporated and Subsidiaries
L-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 December 31, 1995.
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.
Pace had previously provided in its financial statements amounts estimated
to resolve general litigation matters, including the above. These estimated
amounts are not material to the Company. Subsequent to the acquisition (see
Note A), 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 the unaudited, 1996 financial
statements 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.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Leggett & Platt, Incorporated and Subsidiaries
To the Board of Directors and Shareholders of Leggett & Platt, Incorporated:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Leggett & Platt, Incorporated and Subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
St. Louis, Missouri
February 8, 1996, except for Note A which is as of May 13, 1996.
20
<PAGE>
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), which is discussed in Note A of the Notes to the Consolidated Financial
Statements. 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 financial position reflects several important principles and
guidelines of management's capital policy. These include management's belief
that corporate liquidity must always be adequate to support the Company's
projected internal growth rate. At the same time, liquidity must assure
management that the Company will be able to withstand any amount of financial
adversity that can reasonably be anticipated. Management also intends to direct
capital to strategic acquisitions and other investments that provide additional
opportunities for expansion and enhanced profitability.
Financial planning to meet these needs reflects management's belief that
the Company should never be forced to expand its capital resources, whether debt
or equity, at a time not of its choosing. Management also believes that
financial flexibility is more important than maximization of earnings per share
through excessive leverage. Therefore, management continuously provides for
available credit in excess of 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%.
The following table shows, in millions, the Company's long-term debt
outstanding and shareholders' equity at the end of the three most recent years.
It also shows the amount of unused committed credit available through the
Company's revolving bank credit agreements. In addition, the amounts of cash
and cash equivalents are shown.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Long-term debt outstanding:
Scheduled maturities............... $315.9 $283.1 $258.2
Revolving credit/commercial paper.. 64.7 81.0 47.9
------ ------ ------
Total long-term debt........ 380.6 364.1 306.1
Shareholders' equity................. 746.8 628.3 514.6
Unused committed credit.............. 207.8 169.0 138.3
Cash and cash equivalents............ 8.2 3.0 .7
</TABLE>
Internally generated cash provided $505.4 million in capital during the
last three years. In 1995, long-term debt outstanding was 32% of total
capitalization at year-end. This compares with 34% at the end of the previous
two years. As shown in the table above, obligations having scheduled maturities
are the base "layer" of the Company's debt capital. In the last three years,
these obligations consisted primarily of the Company's privately placed medium-
term notes and tax-exempt industrial development bonds, and Pace's publicly
owned senior notes. As discussed in Note D of the Notes to Consolidated
Financial Statements, Pace issued $115 million in senior notes as a part of a
leveraged buyout transaction that Pace entered into and recorded as of December
31, 1993. Medium-term notes issued by the Company during the last three years
totaled $100 million. In 1995, $25 million in ten-year notes were issued with
21
<PAGE>
a fixed interest rate of 7.0%. In 1994, $25 million in notes were issued with
average lives of eight years and fixed interest rates averaging 7.6%. During
both of these years, proceeds from the medium-term notes were used to repay a
portion of the Company's revolving credit. In 1993, $50 million in medium-term
notes were issued with average lives of approximately nine years and fixed
interest rates averaging 5.8%. Debt of a company acquired in a September 1993
pooling of interests acquisition was repaid with the majority of the proceeds
from these notes. Since November 1994, the Company's senior debt ratings have
been maintained at single A by Standard & Poor's and single A2 by Moody's, the
two leading debt rating agencies.
The second "layer" of the Company's debt capital consists of revolving bank
credit agreements. Over the years, management has renegotiated these 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 credit under these arrangements has been a long-term
obligation. If needed, however, the credit is also available for short-term
borrowings and repayments. Pace also had $47.2 million in revolving credit
outstanding at the end of 1995, $22.7 million in 1994, and $4.4 million in 1993.
These amounts are included in the Company's total revolving credit/commercial
paper outstanding for each respective year shown in the preceding table.
Additional details of long-term debt, including scheduled maturities, revolving
credit and commercial paper are discussed in Note F of the Notes to the
Consolidated Financial Statements.
In the second quarter of 1996, following the Pace acquisition, the Company
refinanced Pace's debt. In June, the Company issued $100 million in privately
placed medium-term notes with average maturities of 8 years and fixed interest
rates averaging 7.4%. Proceeds from these notes provided a majority of the
funds to redeem, at approximately 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 redeem the balance of the senior notes and refinance
Pace's revolving credit were provided through the Company's revolving
credit/commercial paper arrangements.
The Company's capital investments to modernize and expand manufacturing
capacity internally totaled $258.1 million in the last three years. In 1996,
management anticipates internal investments will be at levels approximating
those of 1995. During the last three years, the Company also employed $212.4
million in cash (net of cash acquired) and issued 5.5 million shares of common
stock in acquisitions. During 1995, ten businesses were acquired for $28.6
million in cash (net of cash acquired) and 1.0 million shares of common stock,
including two companies acquired through Pace. Additional details of
acquisitions are discussed in Note D of the Notes to Consolidated Financial
Statements. Purchases of common stock for the Company's treasury
totaled $24.5 million in 1995 and $1.2 million in the preceding two years.
These purchases were made primarily for employee stock plans and, in 1995, to
replace shares issued in purchase acquisitions. Cash dividends on the Company's
common stock in the last three years totaled $78.4 million.
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 debt
outstanding at the end of any of the last three years.
Working capital increased $173.6 million in the last three years. To gain
additional flexibility in capital management and to improve the rate of return
on shareholders' equity, the Company continuously seeks efficient use of working
capital. The following table shows the annual turnover on average year-end
working capital, trade receivables and inventories. The ratios may be affected
by the timing of the Company's acquisitions.
22
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Working capital turnover (excluding cash
and cash equivalents)................... 6.0x 6.2x 5.8x
Trade receivables turnover................ 7.8 8.0 7.9
Inventory turnover........................ 5.3 5.7 5.5
</TABLE>
Future commitments under lease obligations are described in Note G and
contingent obligations are discussed in Note L of the Notes to Consolidated
Financial Statements.
Results of Operations
The results of operations during the last three years reflect various
elements of the Company's long-term growth strategy, along with general trends
in the economy and the markets the Company serves. The Company's growth
strategy continues to include both internal programs and acquisitions which
broaden product lines and provide for increased market penetration and operating
efficiencies. With a continuing emphasis on the development of new and improved
products and advancements in production technologies, the Company is able to
consistently offer high quality products, competitively priced.
During 1995, demand was mixed in the various furnishings markets the
Company serves. Industry sales and shipments of office, institutional and
commercial furnishings generally strengthened. By contrast, industry sales and
shipments of residential furniture softened during the year in response to
weakening retail sales. The demand for bedding products, however, was generally
stronger than the demand for most other kinds of residential furniture.
Additionally, in contrast to 1994, industry sales and shipments of furniture and
bedding experienced a more normal seasonal slowdown near the end of 1995. These
two markets previously had experienced above average growth in each of the three
preceding years. The Company's strongest percentage growth in 1995 sales
continued to come from niche markets for specialized furnishings and other
diversified products.
Trends in the general economy were favorable during the last three years.
In 1995, economic growth moderated as the year progressed. By contrast,
economic growth increased during 1994. In 1993, growth was modest during most
of the year, but increased in the fourth quarter.
As discussed in Note A of the Notes to the Consolidated Financial
Statements, the Company's statement of earnings for 1993 has not been restated
to include Pace's results of operations, because Pace entered into a leveraged
buyout transaction effective December 31, 1993. Therefore, the following
discussion reflects the Company's results of operations as restated to include
Pace's results of operations for 1995 and 1994 only.
In 1995, the Company's consolidated net sales increased 12% over the
previous year. Roughly three-fourths of this increase resulted from
acquisitions, with the remainder coming from internal growth. Sales increased
32% in 1994 and 16% in 1993, with about two-thirds of these increases resulting
from acquisitions. Internal sales growth in each of the last three years
primarily reflected higher unit volumes.
In response to increasing prices for raw materials, the Company implemented
some increases in selling prices, primarily in 1994 and 1993. While the
percentages and timing varied considerably, the largest 1994 increases were
concentrated in aluminum products. In 1993, the increases were concentrated in
steel and wire products. However, some of the 1993 and additional 1994 cost
increases for steel and wire products were not passed along in the Company's
selling prices until the end of 1994, or the first half of 1995.
The following table shows various measures of earnings as a percentage of
sales for the last three years. It also shows the effective income tax rate and
the coverage of interest expense by pre-tax earnings plus interest.
23
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Gross profit margin............ 23.7% 23.5% 22.8%
Pre-tax profit margin.......... 9.8 9.8 9.2
Net profit margin.............. 6.0 5.9 5.6
Effective income tax rate...... 39.1 39.1 39.0
Interest coverage ratio........ 8.3x 8.6x 14.8x
</TABLE>
The Company's gross profit margins improved in the last two years. The
slight increase in 1995 primarily reflected the Company's continuing growth in
niche markets with above average margins, increased production efficiencies and
cost containment. The increase in the gross profit margin was offset by slight
increases in total selling, distribution and administrative expenses and
interest expense, as a percentage of sales. Therefore, the pre-tax profit margin
was unchanged from the previous year.
The 1994 increase in the gross profit margin primarily reflected improved
market conditions in the aluminum and foam industries and gains in overall
manufacturing efficiencies on higher volume. These favorable factors more than
offset cost/price pressures the Company continued to experience in operations
producing steel products. A reduction in total selling, distribution and
administrative expenses, as a percentage of sales, was slightly more than offset
by higher interest expense and other deductions, net of other income.
In 1993, the gross profit margin decreased slightly. However, total
selling, distribution and administrative expenses were reduced as a percentage
of sales, resulting in an increase in the pre-tax profit margin. Increased
efficiencies and reduced bad debt expense contributed to the improvement in
operating expense ratios. These factors and a slight increase in other income
more than offset one time charges related to acquisitions and the Company's
implementation of new accounting statements issued by the Financial Accounting
Standards Board. Interest expense, as a percentage of sales, was also reduced
and further improved the pre-tax profit margin.
Outlook and Merger-Related Costs
Management continues to expect modest economic growth in 1996, with only
modest inflation. In such an environment, business conditions should be
favorable in the markets the Company serves. Management also continues to
believe the Company's prospects for long-term profitable growth are attractive.
As anticipated, the previously noted refinancing of Pace's debt resulted in an
extraordinary charge of $12.5 million, net of related tax benefits, that the
Company recognized in the second quarter of 1996. Net earnings for the quarter
were also reduced by $16.4 million due to other anticipated non-recurring costs
related to the acquisition.
Statements of Financial Accounting Standards Not Yet Adopted
Statement of Financial Accounting Standards (SFAS) No. 121, which the
Company adopted in 1996, established accounting standards for the impairment of
long-lived assets and certain other intangible assets. SFAS No. 121 did not
have any material impact on the Company's consolidated financial statements.
SFAS No. 123, "Accounting For Stock-Based Compensation," establishes
financial accounting and reporting standards for stock-based employee
compensation plans. SFAS No. 123 permits, as one alternative, the use of
existing accounting rules for such plans. The Company will adopt this
alternative in 1996 and, therefore, SFAS No. 123 will have no effect on the
Company's consolidated financial statements, except for the additional required
disclosure.
24
<PAGE>
SELECTED FINANCIAL DATA
Leggett & Platt, Incorporated and Subsidiaries
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(Unaudited)
(Dollar amounts in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net sales $2,256.9 $2,009.1 $1,526.7 $1,315.0 $1,221.4
Earnings from continuing operations 134.3 119.5 85.6 65.8 39.5
Earnings per share 1.49 1.36 1.04 .83 .53
Cash dividends declared per share .38 .31 .27 .23 .22
======== ======== ======== ======== ========
Summary of Financial Position
Total assets $1,478.1 $1,327.0 $1,080.1 $ 772.5 $ 746.7
Long-term debt 380.6 364.1 306.1 147.9 232.7
======== ======== ======== ======== ========
</TABLE>
Previously reported amounts have been restated to reflect the May 1996 pooling
of interests and the September 1995 two-for-one stock split.
25
<PAGE>
QUARTERLY SUMMARY OF EARNINGS
Leggett & Platt, Incorporated and Subsidiaries
(Unaudited)
(Dollar amounts in millions, except per share data)
<TABLE>
<CAPTION>
Year ended December 31, 1995 First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
Net sales $579.5 $584.5 $551.3 $541.6 $2,256.9
Gross profit 137.2 137.8 128.4 131.5 534.9
Earnings before income taxes 59.3 57.5 51.1 52.7 220.6
Net earnings 35.7 34.3 31.6 32.7 134.3
====== ====== ====== ====== ========
Earnings per share $ .40 $ .38 $ .35 $ .36 $ 1.49
====== ====== ====== ====== ========
Year ended December 31, 1994
Net sales $471.8 $502.2 $506.3 $528.8 $2,009.1
Gross profit 108.8 119.9 115.7 127.3 471.7
Earnings before income taxes 44.4 52.6 46.6 52.7 196.3
Net earnings 26.8 31.6 28.6 32.5 119.5
====== ====== ====== ====== ========
Earnings per share $ .30 $ .36 $ .33 $ .37 $ 1.36
====== ====== ====== ====== ========
</TABLE>
Previously reported amounts have been restated to reflect the May 1996 pooling
of interests and the September 1995 two-for-one stock split.
26
<PAGE>
SUMMARY OF SALES
Leggett & Platt, Incorporated and Subsidiaries
<TABLE>
<CAPTION>
(Unaudited)
(Dollar amounts in millions)
Year ended December 31 1995 1994 1993
<S> <C> <C> <C>
Furnishings Products
Bedding Components $ 558.4 $ 534.5 $ 471.1
Furniture and Other Components 736.4 630.3 412.0
Finished Products 433.0 357.6 312.7
-------- -------- --------
Total Furnishings Products 1,727.8 1,522.4 1,195.8
Diversified Products 529.1 486.7 330.9
-------- -------- --------
Net Sales $2,256.9 $2,009.1 $1,526.7
======== ======== ========
</TABLE>
Previously reported amounts have been restated to reflect the May 1996 pooling
of interests.
27
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Leggett & Platt, Incorporated and Subsidiaries
(Amounts in millions)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ------------ ----------- ----------- ----------
Additions
Charged
Balance at to Costs Balance at
Beginning of and End of
Description Period Expenses Deductions Period
- -------------------------------------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for doubtful receivables $8.1 $5.8 $6.4(A) $7.5
==== ==== ==== ====
Year ended December 31, 1994
Allowance for doubtful receivables $7.8 $5.7 $5.4(A) $8.1
==== ==== ==== ====
Year ended December 31, 1993
Allowance for doubtful receivables $7.1 $3.4 $2.7(A) $7.8
==== ==== ==== ====
</TABLE>
(A) Uncollectible accounts charged off, net of recoveries.
28
<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 hereunto duly authorized.
Leggett & Platt, Incorporated
----------------------------------
(Registrant)
Date August 15, 1996 /s/ Michael A. Glauber
-------------------- -----------------------------------
Senior Vice President, Finance &
Administration
(Signature)
29
<PAGE>
EXHIBIT INDEX
Exhibit Page
- ------- ----
11 Computations of Earnings Per Share 31
27 Financial Data Schedule 32
30
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
COMPUTATIONS OF EARNINGS PER SHARE
Exhibit 11
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
EARNINGS PER SHARE
Weighted average number of common
shares outstanding 88.6 86.7 80.2
Dilution from outstanding stock
options - computed using the
"treasury stock" method 1.3 1.1 1.4
Dilution from shares issuable
under contingent earnout
agreement - - .7
------ ------ -----
Weighted average number of common
shares outstanding as adjusted 89.9 87.8 82.3
====== ====== =====
Net Earnings $134.3 $119.5 $85.6
====== ====== =====
Earnings Per Share $ 1.49 $ 1.36 $1.04
====== ====== =====
</TABLE>
Previously reported amounts have been restated to reflect the May 1996 pooling
of interests and the September 1995 two-for-one stock split.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LEGGETT & PLATT, INCORPORATED FOR THE YEAR ENDED
DECEMBER 31, 1995 (COMMISSION FILE NUMBER 1-7845) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 8200
<SECURITIES> 0
<RECEIVABLES> 298000
<ALLOWANCES> 7500
<INVENTORY> 344100
<CURRENT-ASSETS> 686600
<PP&E> 875500
<DEPRECIATION> 364900
<TOTAL-ASSETS> 1478100
<CURRENT-LIABILITIES> 275100
<BONDS> 380600
<COMMON> 900
0
0
<OTHER-SE> 745900
<TOTAL-LIABILITY-AND-EQUITY> 1478100
<SALES> 2256900
<TOTAL-REVENUES> 2256900
<CGS> 1722000
<TOTAL-COSTS> 1722000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30400
<INCOME-PRETAX> 220600
<INCOME-TAX> 86300
<INCOME-CONTINUING> 134300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134300
<EPS-PRIMARY> 1.49
<EPS-DILUTED> 0
</TABLE>
