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, 1997
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
------- -------
For Quarter Ended Commission File Number
September 30, 1997 1-7845
------------------ ----------------------
LEGGETT & PLATT, INCORPORATED
-----------------------------
(Exact name of registrant as specified in its charter)
Missouri 44-0324630
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
No. 1 Leggett Road
Carthage, Missouri 64836
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (417) 358-8131
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Common stock outstanding as of October 31, 1997: 96,044,122
<PAGE>
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 9.5 $ 3.7
Accounts and notes receivable 474.3 343.9
Allowance for doubtful accounts (12.4) (8.6)
Inventories 417.5 379.6
Other current assets 53.6 44.7
--------- ---------
Total current assets 942.5 763.3
PROPERTY, PLANT & EQUIPMENT, NET 674.8 582.9
OTHER ASSETS
Excess cost of purchased companies over
net assets acquired, less accumulated
amortization of $35.4 in 1997
and $28.4 in 1996 387.6 290.3
Other intangibles, less accumulated
amortization of $33.6 in 1997
and $30.3 in 1996 33.6 30.2
Sundry 46.3 46.2
--------- ---------
Total other assets 467.5 366.7
--------- ---------
TOTAL ASSETS $ 2,084.8 $ 1,712.9
========= =========
CURRENT LIABILITIES
Accounts and notes payable $ 142.0 $ 110.3
Accrued expenses 178.9 140.1
Other current liabilities 57.6 42.4
--------- ---------
Total current liabilities 378.5 292.8
LONG-TERM DEBT 487.0 388.5
OTHER LIABILITIES 37.2 36.0
DEFERRED INCOME TAXES 61.5 54.5
SHAREHOLDERS' EQUITY
Common stock 1.0 .9
Additional contributed capital 294.7 240.2
Retained earnings 829.0 704.4
Cumulative translation adjustment (4.0) (4.2)
Treasury stock (.1) (.2)
--------- ---------
Total shareholders' equity 1,120.6 941.1
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,084.8 $ 1,712.9
========= =========
</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,
----------------- ------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $2,141.4 $1,839.8 $ 747.0 $ 628.6
Cost of goods sold 1,599.3 1,380.3 558.5 471.3
------- ------- ------ ------
Gross profit 542.1 459.5 188.5 157.3
Selling, distribution and
administrative expenses 262.1 222.6 91.8 74.9
Interest expense 23.3 22.9 8.0 7.0
Merger expense - 26.6 - -
Other deductions (income), net 10.8 10.3 4.8 3.5
------- ------- ------ ------
Earnings before income taxes
and extraordinary item 245.9 177.1 83.9 71.9
Income taxes 92.7 68.8 31.1 27.9
------- ------- ------ ------
Net earnings before
extraordinary item 153.2 108.3 52.8 44.0
Extraordinary item - 12.5 - -
------- ------- ------ ------
NET EARNINGS $ 153.2 $ 95.8 $ 52.8 $ 44.0
======= ======= ====== ======
Earnings Per Share (Exhibit 11)
Net earnings before
extraordinary item $ 1.60 $ 1.19 $ .54 $ .48
Net earnings $ 1.60 $ 1.05 $ .54 $ .48
Cash Dividends Declared Per Share $ .40 $ .34 $ .14 $ .12
Average Common and Common
Equivalent Shares Outstanding 96.0 91.1 98.1 92.0
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1997 1996
------ ------
<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings $ 153.2 $ 95.8
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation 64.5 55.3
Amortization 12.0 12.3
Merger expense (non-cash portion) - 24.4
Extraordinary item (non-cash portion) - 4.0
Other 2.7 1.4
Other changes, net of effects from
purchases of companies
Increase in accounts receivable, net (88.8) (63.1)
Decrease in inventories 1.6 2.3
Increase in other current assets (5.5) (2.7)
Increase in current liabilities 70.3 32.4
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 210.0 162.1
INVESTING ACTIVITIES
Additions to property, plant and equipment (86.7) (72.8)
Purchases of companies, net of cash acquired (149.1) (88.9)
Other 4.6 (.8)
------ ------
NET CASH USED FOR INVESTING ACTIVITIES (231.2) (162.5)
FINANCING ACTIVITIES
Additions to debt 208.6 287.6
Payments on debt (134.7) (254.8)
Dividends paid (48.6) (30.0)
Sales of common stock 5.5 4.4
Purchases of common stock (5.4) (9.9)
Other 1.6 (.5)
------ ------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 27.0 (3.2)
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5.8 (3.6)
CASH AND CASH EQUIVALENTS - January 1, 3.7 8.2
------ ------
CASH AND CASH EQUIVALENTS - September 30, $ 9.5 $ 4.6
====== ======
</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)
1. STATEMENT
In the opinion of management, the accompanying consolidated condensed financial
statements contain all adjustments necessary for a fair statement of results of
operations and financial position of Leggett & Platt, Incorporated and
Consolidated Subsidiaries (the "Company").
2. INVENTORIES
Inventories, using principally the Last-In, First-Out (LIFO) cost method,
comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
At First-In, First-Out (FIFO) cost
Finished goods $ 209.3 $ 204.2
Work in process 53.3 39.4
Raw materials 170.2 147.7
------ ------
432.8 391.3
Excess of FIFO cost over LIFO cost 15.3 11.7
------ ------
$ 417.5 $ 379.6
====== ======
</TABLE>
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Property, plant and equipment, at cost $ 1,172.6 $ 1,015.1
Less accumulated depreciation 497.8 432.2
-------- --------
$ 674.8 $ 582.9
======== ========
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
4. CONTINGENCIES
The Company is involved in numerous environmental, employment, intellectual
property and other claims and legal proceedings. When it appears probable in
management's judgement that the Company will incur monetary damages or other
costs in connection with such claims and proceedings, and the costs can be
reasonably estimated, appropriate liabilities are recorded in the financial
statements and charges are made against earnings. No claim or proceeding has
resulted in a material charge against earnings, nor are the total liabilities
recorded material to the Company's financial position. While the results of any
ultimate resolution cannot be predicted, management believes the possibility of
a material adverse effect on the Company's consolidated financial position,
results of operations and cash flows from these claims and proceedings is
remote. The more significant claims and proceedings are briefly described in
the following paragraphs.
One of the Company's subsidiaries is performing an environmental investigation
at a Florida plant site pursuant to a negotiation with local and Federal
environmental authorities. The costs of the investigation and any remediation
actions will be shared equally by the Company and a former joint owner of the
plant site.
In connection with an acquisition, one of the Company's subsidiaries is involved
in an unfair labor complaint filed by the National Labor Relations Board. An
administrative decision has been rendered against the subsidiary, which decision
was recently upheld by the appellate court. The Company is currently
considering additional legal and other actions to resolve this matter.
A former supplier has brought several lawsuits against the Company and others
alleging breach of contract and patent infringement. The Company has
countersued in certain cases. None of these lawsuits have been tried at this
time.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
- -------------------------------
The Company's total capitalization at September 30, 1997 and December 31, 1996
is shown in the table below. The table also shows the amount of unused
committed credit available through the Company's revolving bank credit
agreements.
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
(Dollar amounts in millions)
Long-term debt outstanding:
Scheduled maturities $ 429.1 $ 332.4
Revolving credit/commercial paper 57.9 56.1
-------- --------
Total long-term debt 487.0 388.5
Deferred income taxes and other liabilities 98.7 90.5
Shareholders' equity 1,120.6 941.1
-------- --------
Total capitalization $ 1,706.3 $ 1,420.1
======== ========
Unused committed credit $ 240.0 $ 215.0
======== ========
</TABLE>
The Company's internal investments to modernize and expand manufacturing
capacity were $86.7 million in the first nine months of 1997. The Company
also invested $149.1 million in cash (net of cash acquired) and issued 2.9
million shares of common stock to make 24 acquisitions. Cash provided by
operating activities provided a majority of the funds required for these
investments. Increased borrowing under the Company's commercial paper program
initially provided the balance. In April 1997, the Company issued $100
million in medium-term notes. These notes have average lives of 6.25 years
and fixed interest rates averaging 7.24%. Proceeds from the notes were used to
repay commercial paper outstanding.
Working capital at September 30, 1997 was $564.0 million, up from $470.5
million at year-end. Total current assets increased $179.2 million, due
primarily to increases in accounts receivable and inventories attributable to
increased sales. Total current liabilities increased $85.7 million, due
primarily to increases in accounts payable and accrued expenses.
During this year's third quarter, the Company increased the amount of
committed credit available through revolving bank credit agreements to $240.0
million, up from the previous $215.0 million. The Company also has the
availability of short-term uncommitted credit from several banks. However,
there was no short-term bank debt outstanding at quarter-end, or at year-end.
Given this strong financial position and the continuing strong coverage of
interest expense, the Company has substantial capital resources and
flexibility to provide for projected internal cash needs and additional
acquisitions consistent with management's goals and objectives.
Results of Operations
- ---------------------
The Company's results of operations for the first nine months of 1997
increased to record levels. Sales were $2.14 billion (up 16%), net earnings
were $153.2 million (up 23%), and earnings per share were $1.60 (up 17%) all
compared with the first nine months of 1996. This year's earnings are
compared with 1996 results before non-recurring costs. The non-recurring
costs, as reported last year, totaled $28.9 million after-tax, or $.32 per
share. They consisted of $16.4 million, or $.18 per share, in merger related
costs for the Company's May 1996 acquisition of Pace Holdings, Inc., and $12.5
million, or $.14 per share in an extraordinary item for the mid-year
refinancing of Pace debt. Including the non-recurring costs, net earnings in
the first nine months of 1996 were $95.8 million, or $1.05 per share.
<PAGE>
The Company's results of operations in the third quarter of 1997 increased to
record levels for the quarter. Sales were $747.0 million (up 19%), net
earnings were $52.8 million (up 20%), and earnings per share were $.54 (up
13%) all compared to the third quarter of 1996. Additional year-to-year
comparisons show that pre-tax earnings for the quarter increased 17%.
However, the Company's previously announced acquisition of Cambridge Tool &
Mfg. Co. this past July resulted in pre-tax merger costs of $2.4 million being
charged to the quarter. Absent this charge, pre-tax earnings increased 20%,
net earnings increased 23% and earnings per share increased 15%.
The Company's 1997 sales growth reflected ongoing benefits from acquisitions
and improved performance in existing operations. Acquisitions accounted for
more of the sales growth than other factors. The balance of the sales growth
primarily reflected increased unit volumes.
Net earnings increased faster than sales, reflecting an improvement in 1997
net profit margins. The following table shows various measures of earnings as
a percentage of sales for the first nine months and the third quarter of the
last two years. It also shows the effective income tax rate and the coverage
of interest expense by pre-tax earnings plus interest in each respective
period.
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
September 30, September 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Gross profit margin 25.3% 25.0% 25.2% 25.0%
Pre-tax profit margin-reported 11.5 9.6 11.2 11.4
Impact of non-recurring costs -- 1.5 -- --
------ ------ ------ ------
Excluding non-recurring costs 11.5 11.1 11.2 11.4
Net profit margin-reported 7.2 5.2 7.1 7.0
Impact of non-recurring costs -- 1.6 -- --
------ ------ ------ ------
Excluding non-recurring costs 7.2 6.8 7.1 7.0
Effective income tax rate 37.7 38.8 37.1 38.8
Interest coverage ratio 11.6x 8.7x 11.5x 11.3x
</TABLE>
As shown above, the net profit margin for the first nine months of 1997 was
7.2%. In 1996, the net profit margin for the same period was 6.8%, excluding
the impact of non-recurring costs. Most of this improvement was due to an
increase in the gross profit margin, reflecting the benefits from acquisitions
and enhanced efficiencies in many existing operations. The 1997 net margin
also benefited from little year-to-year change in interest expense and other
deductions, net of other income, plus a slightly lower effective income tax
rate.
In this year's third quarter, the net profit margin was 7.1%, up slightly from
7.0% in the third quarter of 1996. This improvement resulted from the lower
effective income tax rate in 1997. The year-to-year improvement in the gross
profit margin for the quarter was more than offset by a somewhat higher
operating expense ratio. Thus, the pre-tax profit margin for the quarter was
11.2% in 1997, including the previously noted charge for the merger costs this
past July. Absent this charge, the pre-tax margin was 11.6%. In 1996, the
third quarter pre-tax margin was 11.4%.
Compared to the prior year, earnings per share grew at a lower rate than net
earnings for the quarter and nine months ended September 30, 1997 due to a
greater number of weighted average shares outstanding. The increase in shares
outstanding is primarily a result of shares issued in the Company's
acquisition program.
Consistent cash flow, a prudent capital policy and long-term profitable growth
have allowed the Company to sustain a 26-year record of increasing dividends.
In August 1997, the quarterly dividend was increased to $.14 per share. This
action marked the second dividend increase in 1997. In the first two
quarters, the rate was $.13 per share. The current quarterly dividend is 8%
higher than the previous rate and 17% above the dividends declared in the
third and fourth quarters of 1996.
<PAGE>
Statements of Financial Accounting Standards Not Yet Adopted
- ------------------------------------------------------------
Statement of Financial Accounting Standards No. 128, which will be effective
for the fourth quarter of 1997, establishes new standards for reporting
earnings per share. The new standard requires dual presentation of basic (no
dilution) and diluted (assuming full dilution) earnings per share. The
earnings per share under the new standard will not be significantly different
than what is currently being reported.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the third quarter of 1997 the Company issued 1,797,227 shares of its
common stock in transactions which qualified for exemption from registration
under the Securities Act by virtue of Regulation D and Section 4(2) of the
Securities Act. These securities were issued in connection with the
acquisition of two businesses. On July 9, 1997, 8,642 shares were issued
pursuant to Section 4(2) to acquire Family Frames, Inc. from its sole
shareholder. On July 15, 1997, 1,788,585 shares were issued pursuant to
Section 4(2) and Regulation D to acquire Cambridge Tool and Manufacturing Co.,
Inc. from its shareholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit 11 - Computations of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(B) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
<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, 1997 By: /s/ HARRY M. CORNELL, JR.
--------------------------
Harry M. Cornell, Jr.
Chairman of the Board
and Chief Executive Officer
DATE: November 10, 1997 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 13
27 Financial Data Schedule 14
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,
----------------- ------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE
Weighted average number of
common shares outstanding 93.7 89.3 95.7 89.8
Dilution from outstanding stock
options-computed using the
"treasury stock" method 2.3 1.8 2.4 2.2
------ ------ ------ ------
Weighted average number of
common shares outstanding
as adjusted 96.0 91.1 98.1 92.0
====== ====== ====== ======
Net Earnings Before
Extraordinary Item $153.2 $108.3 $ 52.8 $ 44.0
====== ====== ====== ======
Net Earnings $153.2 $ 95.8 $ 52.8 $ 44.0
====== ====== ====== ======
Earnings Per Share
Net Earnings Before
Extraordinary Item $ 1.60 $ 1.19 $ .54 $ .48
====== ====== ====== ======
Net Earnings $ 1.60 $ 1.05 $ .54 $ .48
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 9500
<SECURITIES> 0
<RECEIVABLES> 474300
<ALLOWANCES> 12400
<INVENTORY> 417500
<CURRENT-ASSETS> 942500
<PP&E> 1172600
<DEPRECIATION> 497800
<TOTAL-ASSETS> 2084800
<CURRENT-LIABILITIES> 378500
<BONDS> 487000
0
0
<COMMON> 1000
<OTHER-SE> 1119600
<TOTAL-LIABILITY-AND-EQUITY> 2084800
<SALES> 2141400
<TOTAL-REVENUES> 2141400
<CGS> 1599300
<TOTAL-COSTS> 1599300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23300
<INCOME-PRETAX> 245900
<INCOME-TAX> 92700
<INCOME-CONTINUING> 153200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 153200
<EPS-PRIMARY> 1.6
<EPS-DILUTED> 0
</TABLE>
