Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
For Quarter Ended Commission File Number
June 30, 1999 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 August 1, 1999: 196,707,445
<PAGE>
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in millions) June 30, December 31,
1999 1998
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 13.4 $ 83.5
Accounts and notes receivable 585.5 516.6
Allowance for doubtful accounts (16.3) (13.5)
Inventories 514.4 486.2
Other current assets 66.8 64.3
- -------------------------------------------------------------------------
Total current assets 1,163.8 1,137.1
PROPERTY, PLANT & EQUIPMENT, NET 844.8 820.4
OTHER ASSETS
Excess cost of purchased companies over
net assets acquired, less accumulated
amortization of $58.1 in 1999
and $50.8 in 1998 601.5 498.9
Other intangibles, less accumulated
amortization of $28.6 in 1999
and $25.3 in 1998 30.2 29.7
Sundry 46.7 49.2
- ------------------------------------------------------------------------
Total other assets 678.4 577.8
- ------------------------------------------------------------------------
TOTAL ASSETS $ 2,687.0 $ 2,535.3
========================================================================
CURRENT LIABILITIES
Accounts and notes payable $ 158.9 $ 134.8
Accrued expenses 189.5 168.8
Other current liabilities 77.5 97.8
- ------------------------------------------------------------------------
Total current liabilities 425.9 401.4
LONG-TERM DEBT 611.6 574.1
OTHER LIABILITIES 52.0 48.1
DEFERRED INCOME TAXES 75.5 74.9
SHAREHOLDERS' EQUITY
Common stock 2.0 2.0
Additional contributed capital 419.1 396.1
Retained earnings 1,161.7 1,058.7
Accumulated other comprehensive income (17.2) (18.2)
Treasury stock (43.6) (1.8)
- -------------------------------------------------------------------------
Total shareholders' equity 1,522.0 1,436.8
- -------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,687.0 $ 2,535.3
=========================================================================
</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)
<TABLE>
<CAPTION>
(Amounts in millions, except per share data)
Six Months Ended Three Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 1,822.8 $ 1,648.6 $ 935.2 $ 855.4
Cost of goods sold 1,337.0 1,227.8 681.8 636.1
- -----------------------------------------------------------------------------
Gross profit 485.8 421.6 253.4 219.3
Selling, distribution and
administrative expenses 233.5 203.6 120.8 105.0
Other deductions (income), net 14.1 8.3 8.0 4.2
- -----------------------------------------------------------------------------
Earnings before interest and
income taxes 238.2 209.7 124.6 110.1
Interest expense 19.4 18.8 10.0 10.0
Interest income 1.4 2.6 0.5 0.7
- -----------------------------------------------------------------------------
Earnings before income taxes 220.2 193.5 115.1 100.8
Income taxes 81.7 72.2 42.7 37.4
- -----------------------------------------------------------------------------
NET EARNINGS $ 138.5 $ 121.3 $ 72.4 $ 63.4
=============================================================================
Earnings Per Share
Basic $ 0.70 $ 0.62 $ 0.37 $ 0.32
Diluted $ 0.69 $ 0.61 $ 0.36 $ 0.32
Cash Dividends Declared
Per Share $ 0.18 $ 0.155 $ 0.09 $ 0.08
Average Shares Outstanding
Basic 198.6 196.9 198.1 197.6
Diluted 201.2 200.3 200.9 200.9
</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) Six Months Ended
June 30,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings $ 138.5 $ 121.3
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 61.3 50.7
Amortization 12.9 10.3
Other 5.3 2.8
Other changes, net of effects
from purchases of companies
Increase in accounts receivable, net (33.5) (21.0)
Increase in inventories (6.7) (13.0)
Increase in other current assets (0.2) (2.9)
Increase (decrease) in current liabilities 37.3 (9.1)
- ---------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 214.9 139.1
INVESTING ACTIVITIES
Additions to property, plant and equipment (77.0) (67.9)
Purchases of companies, net of cash acquired (105.1) (73.5)
Other 6.7 (6.6)
- ---------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (175.4) (148.0)
FINANCING ACTIVITIES
Additions to debt 45.8 257.9
Payments on debt (43.4) (186.5)
Dividends paid (51.0) (43.9)
Issuances of common stock 1.8 0.0
Purchases of common stock (63.1) 0.0
Other 0.3 (4.6)
- ---------------------------------------------------------------------------
NET CASH (USED FOR) PROVIDED BY
FINANCING ACTIVITIES (109.6) 22.9
- ---------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (70.1) 14.0
CASH AND CASH EQUIVALENTS - January 1, 83.5 7.7
- ---------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - June 30, $ 13.4 $ 21.7
===========================================================================
</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>
June 30, December 31,
1999 1998
<S> <C> <C>
At First-In, First-Out (FIFO) cost
Finished goods $ 278.2 $ 251.7
Work in process 62.3 56.2
Raw materials 180.9 185.5
- -------------------------------------------------------------------
521.4 493.4
Excess of FIFO cost over LIFO cost 7.0 7.2
- -------------------------------------------------------------------
$ 514.4 $ 486.2
===================================================================
</TABLE>
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
Property, plant and equipment, at cost $ 1,511.8 $ 1,435.0
Less accumulated depreciation 667.0 614.6
- ---------------------------------------------------------------------------
$ 844.8 $ 820.4
===========================================================================
</TABLE>
4. COMPREHENSIVE INCOME
In accordance with the provisions of Financial Accounting
Standard No. 130, the Company has elected to report comprehensive
income in its Statement of Changes in Shareholders' Equity. For
the six months ending June 30, 1999 and 1998, comprehensive
income was $139.5 and $116.2, respectively.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
5. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Basic
Weighted average shares
outstanding, including
shares issuable for
little or no cash 198.6 196.9 198.1 197.6
============================================================================
Net earnings $ 138.5 $ 121.3 $ 72.4 $ 63.4
============================================================================
Earnings per share - basic $ 0.70 $ 0.62 $ 0.37 $ 0.32
============================================================================
Diluted
Weighted average shares
outstanding, including
shares issuable for
little or no cash 198.6 196.9 198.1 197.6
Additional dilutive shares
principally from the
assumed exercise of
outstanding stock options 2.6 3.4 2.8 3.3
- ----------------------------------------------------------------------------
201.2 200.3 200.9 200.9
============================================================================
Net earnings $ 138.5 $ 121.3 $ 72.4 $ 63.4
============================================================================
Earnings per share - diluted $ 0.69 $ 0.61 $ 0.36 $ 0.32
============================================================================
</TABLE>
6. CONTINGENCIES
The Company is involved in various legal proceedings including
matters which involve claims against the Company under
employment, intellectual property, environmental and other laws.
One of the Company's subsidiaries is involved in an unfair labor
complaint filed by the National Labor Relations Board prior to
the Company's acquisition of the subsidiary. An administrative
decision has been rendered against the subsidiary, which has been
upheld by the courts. The Company is currently pursuing actions
to resolve this matter.
When it appears probable in management's judgement that the
Company will incur monetary damages or other costs in connection
with claims and proceedings, and the costs can be reasonably
estimated, appropriate liabilities are recorded in the financial
statements and charges are made against earnings. No claim or
proceeding has resulted in a material charge against earnings,
nor are the total liabilities recorded material to the Company's
financial position. While the results of any ultimate resolution
cannot be predicted, management believes the
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
6. CONTINGENCIES - CONTINUED
possibility of a material adverse effect on the Company's
consolidated financial position, results of operations and cash
flows from claims and proceedings is remote.
7. SEGMENT INFORMATION
Reportable segments are primarily based upon the Company's
management and organizational structure. This structure is
generally focused on broad end-user markets for the Company's
diversified products. Residential Furnishings derives its
revenues from components for bedding, furniture, and other
furnishings, as well as related consumer products. Commercial
Furnishings derives its revenues from retail store fixtures,
displays, storage, material handling systems, and components for
office and institutional furnishings. Aluminum Products revenues
are derived from die castings, custom tooling, secondary
machining and coating, and smelting of aluminum ingot.
Industrial Materials derives its revenues from drawn steel wire,
specialty wire products and welded steel tubing sold to trade
customers as well as other Leggett segments. Specialized
Products is a combination of non-reportable segments which derive
their revenues from machinery and manufacturing equipment,
automotive seating suspension and lumbar supports, and control
cable systems.
A summary of segment results for the six months ended June 30,
1999 and 1998 and the quarters ended June 30 and March 31, 1999
and 1998 are shown in the following tables. Prior periods'
segment results have been restated due to a change in
organizational structure and to conform to the current
presentation. The impact of restatment of prior periods is not
significant.
<TABLE>
<CAPTION>
Inter-
External Segment Total
Sales Sales Sales EBIT
<S> <C> <C> <C> <C>
Six Months ended June 30, 1999
Residential Furnishings $ 950.7 $ 5.0 $ 955.7 $104.7
Commercial Furnishings 340.4 1.6 342.0 57.2
Aluminum Products 282.5 8.5 291.0 27.8
Industrial Materials 135.8 105.6 241.4 35.2
Specialized Products 113.4 22.8 136.2 16.4
Intersegment eliminations - - - (3.3)
Change in LIFO reserve - - - 0.2
- --------------------------------------------------------------------------
Totals $1,822.8 $ 143.5 $1,966.3 $238.2
==========================================================================
Six Months ended June 30, 1998
Residential Furnishings $ 866.7 $ 3.2 $ 869.9 $ 95.4
Commercial Furnishings 291.4 0.8 292.2 49.6
Aluminum Products 277.3 8.1 285.4 26.9
Industrial Materials 123.0 100.1 223.1 22.4
Specialized Products 90.2 22.5 112.7 13.2
Intersegment eliminations - - - (0.9)
Change in LIFO reserve - - - 3.1
- ---------------------------------------------------------------------------
Totals $1,648.6 $ 134.7 $1,783.3 $209.7
===========================================================================
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
7. SEGMENT INFORMATION - CONTINUED
<TABLE>
<CAPTION>
Inter-
External Segment Total
Sales Sales Sales EBIT
<S> <C> <C> <C> <C>
Quarter ended June 30, 1999
Residential Furnishings $ 481.3 $ 2.7 $ 484.0 $ 53.0
Commercial Furnishings 180.4 0.8 181.2 31.6
Aluminum Products 144.9 4.3 149.2 15.7
Industrial Materials 69.8 50.5 120.3 18.1
Specialized Products 58.8 11.5 70.3 7.1
Intersegment eliminations - - - (0.9)
Change in LIFO reserve - - - -
- --------------------------------------------------------------------------
Totals $935.2 $69.8 $1,005.0 $124.6
==========================================================================
Quarter ended June 30, 1998
Residential Furnishings $442.4 $ 1.7 $ 444.1 $ 46.2
Commercial Furnishings 160.0 0.5 160.5 28.4
Aluminum Products 140.5 3.8 144.3 15.3
Industrial Materials 61.2 45.5 106.7 10.7
Specialized Products 51.3 8.7 60.0 7.4
Intersegment eliminations - - - (0.2)
Change in LIFO reserve - - - 2.3
- --------------------------------------------------------------------------
Totals $855.4 $60.2 $ 915.6 $110.1
==========================================================================
Quarter ended March 31, 1999
Residential Furnishings $469.4 $ 2.3 $ 471.7 $ 51.7
Commercial Furnishings 160.0 0.8 160.8 25.6
Aluminum Products 137.6 4.2 141.8 12.1
Industrial Materials 66.0 55.1 121.1 17.1
Specialized Products 54.6 11.3 65.9 9.3
Intersegment eliminations - - - (2.4)
Change in LIFO reserve - - - 0.2
- --------------------------------------------------------------------------
Totals $887.6 $73.7 $ 961.3 $113.6
==========================================================================
Quarter ended March 31, 1998
Residential Furnishings $424.3 $ 1.5 $ 425.8 $ 49.2
Commercial Furnishings 131.4 0.3 131.7 21.2
Aluminum Products 136.8 4.3 141.1 11.6
Industrial Materials 61.8 54.6 116.4 11.7
Specialized Products 38.9 13.8 52.7 5.8
Intersegment eliminations - - - (0.7)
Change in LIFO reserve - - - 0.8
- --------------------------------------------------------------------------
Totals $793.2 $74.5 $ 867.7 $ 99.6
==========================================================================
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS-CONTINUED
(Unaudited)
7. SEGMENT INFORMATION - CONTINUED
Asset information for the Company's segments at June 30, 1999 and
December 31, 1998 is shown in the following table:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<S> <C> <C>
Assets
Residential Furnishings $1,035.1 $ 971.0
Commercial Furnishings 616.5 469.8
Aluminum Products 429.6 404.4
Industrial Materials 191.4 204.5
Specialized Products 209.4 188.8
Unallocated assets 175.9 285.9
Adjustment to period-end
Vs. average assets 29.1 10.9
- --------------------------------------------------------------------
$2,687.0 $2,535.3
====================================================================
</TABLE>
<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 June 30, 1999 and
December 31, 1998 is shown in the table below. Also, the table
shows the amount of unused committed credit available through the
Company's revolving bank credit agreements and the amount of cash
and cash equivalents.
<TABLE>
<CAPTION>
(Dollar amounts in millions) June 30, December 31,
1999 1998
<S> <C> <C>
Long-term debt outstanding:
Scheduled maturities $ 611.6 $ 574.1
Average interest rates 6.6% 6.6%
Average maturities in years 5.6 6.2
Deferred income taxes and other liabilites 127.5 123.0
Shareholders' equity 1,522.0 1,436.8
- --------------------------------------------------------------------------
Total capitalization $2,261.1 $2,133.9
==========================================================================
Unused committed credit $ 300.0 $ 300.0
==========================================================================
Cash and cash equivalents $ 13.4 $ 83.5
==========================================================================
Internal investments to modernize and expand manufacturing
capacity were $77.0 million in the first six months of 1999. The
Company also invested $105.1 million (net of cash acquired) and
issued 846,136 shares of common stock to acquire ten businesses
in transactions accounted for as purchases. In addition, the
Company repurchased approximately 3.0 million shares of its
common stock for $63.1 million cash, primarily to replace shares
issued in purchase acquisitions and employee benefit plans. Cash
provided by operating activities and temporary cash equivalent
investments provided a majority of the funds required for these
investments.
Working capital at June 30, 1999 was $737.9 million, up
slightly from $735.7 million at year-end. Total current assets
reflected increases primarily in accounts and notes receivable
and inventories, which were largely offset by reduced cash and
cash equivalents. Total current liabilities reflected increases
in accounts payable and accrued expenses that were partially
offset by a decrease in other current liabilities.
<PAGE>
Long-term debt outstanding at mid-year was 27.0% of total
capitalization compared to 26.9% at the end of 1998. In addition
to unused committed credit, the Company has the availability of
short-term uncommitted credit from several banks. However, there
was no short-term bank debt outstanding on June 30, 1999, or at
the end of the prior year. Given this strong financial position
and the continuing strong coverage of interest expense, the
Company has substantial capital resources and flexibility for
projected internal cash needs and additional acquisitions
consistent with management's goals and objectives.
Results of Operations
- ----------------------
Discussion of Consolidated Results
Sales and earnings grew to record levels in the first half
of 1999. Sales increased to $1.82 billion (up 10.6%), net
earnings increased to $138.5 million (up 14.2%), and earnings per
diluted share increased to $.69 (up 13.1%) - all compared with
the first half of 1998.
Results for the second quarter also set new quarterly highs.
Sales were $935.2 million (up 9.3%), net earnings were $72.4
million (up 14.2%), and earnings per diluted share were $.36 (up
12.5%) - all compared with the second quarter of 1998.
This performance reflects ongoing benefits from internal
growth, efficiencies and acquisitions. Roughly two-thirds of the
year-to-year growth in both of the last two quarters was
attributable to acquisitions. Internal growth in unit volume was
approximately 6%. When coupled with selling prices approximately
2% lower than the first two quarters of 1998, same location sales
increased about 4%. This performance is exceeding management's
long-term objective for internal growth of approximately 5%.
Businesses acquired in the first half of 1999 will expand
the Company's annual volume by approximately $230 million, or
almost 7% when compared with sales of $3.37 billion for the prior
year. These acquisitions keep the Company on track with
management's long-term objective for acquisition growth of
approximately 10%.
<PAGE>
Six of the recently acquired businesses, with annual sales
of about $140 million, serve markets for Commercial Furnishings.
They will enhance the Company's position in these markets by
adding excellent design and manufacturing capabilities in each of
the following areas:
Store Fixtures
Met Displays of Chicago, Illinois
Toledo Store Fixtures of Perrysburg, Ohio
Point-of-Purchase Displays
Beeline Group of Newark, California
Storage and Material Handling Systems
Arc Specialties of Valencia, California
Jarke Corporation of Niles, Illinois
Sensible Storage of Gurnee, Illinois
Three additional businesses acquired in the first half of
this year manufacture components, or related consumer products,
and serve markets for Residential Furnishings. They have annual
sales of approximately $60 million and include:
Maxwell Products of Cerritos, California
Southwest Carpet Pad of Carson, California
Yarborough Industrial Fabrics of Claremont, North Carolina
The tenth acquired business, Nagle Industries of Detroit,
Michigan, has annual sales of approximately $30 million, and
strengthens the Company's position in niche markets for
Specialized Products. Nagle designs and manufactures control
cable systems, primarily for the automotive industry.
<PAGE>
Residential Furnishings accounted for 48.2% of the 1999
increase in consolidated sales in the first half of the year and
48.7% of the 1999 increase in the second quarter. Commercial
Furnishings accounted for 28.1% and 25.6%, respectively. The
lower year-to-year selling prices noted earlier were concentrated
in Residential Furnishings, Aluminum Products and Industrial
Materials.
The following table shows various measures of earnings as a
percentage of sales for the first half and the second quarter in
both 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.
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Gross profit margin 26.7% 25.6% 27.1% 25.6%
EBIT (earnings before
interest and taxes) margin 13.1 12.7 13.3 12.9
Net profit margin 7.6 7.4 7.7 7.4
Effective income tax rate 37.1 37.3 37.1 37.1
Interest coverage ratio 12.4x 11.3x 12.5x 11.1x
</TABLE>
The improvement in gross profit margin reflected continued
increases in production efficiencies on higher volume, lower
material and other costs, and generally better manufacturing
overhead absorption. The EBIT margin also increased due to these
factors, offset in part primarily by higher total selling,
distribution and administrative expenses, as well as other
deductions as a percentage of sales.
<PAGE>
Discussion of Segment Results
A description of the products included in each segment,
segment sales, segment EBIT and other segment data appear in Note
7 of the Notes to Consolidated Condensed Financial Statements.
Following is a comparison of EBIT margins (Segment EBIT divided
by Total Segment Sales):
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Residential 11.0% 11.0% 11.0% 10.4%
Furnishings
Commercial 16.7 17.0 17.4 17.7
Furnishings
Aluminum Products 9.6 9.4 10.5 10.6
Industrial Materials 14.6 10.0 15.0 10.0
Specialized Products 12.0 11.7 10.1 12.3
</TABLE>
Six Months Discussion
Residential Furnishings total sales for the first half of
1999 increased 9.9%, with acquisition growth of just over 5%.
EBIT grew 9.7%, reflecting acquisitions and increased
efficiencies on higher production in many operations, offset in
part by inefficiencies in a major plant producing furniture
components. As shown above, EBIT margin was unchanged from the
first half of 1998.
Commercial Furnishings sales increased 17.0%, with
acquisition growth of just over 10%. EBIT grew at a somewhat
slower rate of 15.3%, as expenses to consolidate two commercial
fixture facilities partially offset the benefits of higher volume
and acquisitions. These factors resulted in a slightly lower
EBIT margin.
Aluminum Products sales increased 2.0%, with acquisition
growth just short of 3%. The acquired volume offset the impact
of reduced production in aluminum smelting operations and a major
die casting customer's continued inventory reduction. EBIT
increased 3.3%, reflecting acquisitions and improved efficiencies
in die casting operations. Thus, EBIT margin increased slightly.
<PAGE>
Industrial Materials sales increased 8.2%, with acquisition
growth of just over 7%. EBIT increased 57.1%, reflecting more
normal raw material costs, efficiencies gained on higher
production and acquisitions. The improvement in EBIT margin also
reflected these factors.
Specialized Products sales increased 20.9%, with nearly
equal internal and acquisition growth. EBIT increased 24.2%,
reflecting higher sales of machinery and equipment in the first
quarter, improved operating efficiencies and acquisitions. EBIT
margin benefited from these improvements.
Second Quarter Discussion
Residential Furnishings sales for the second quarter
increased 9.0%, with nearly equal year-to-year internal and
acquisition growth. EBIT grew 14.7%, reflecting increased
efficiencies on higher production and acquisitions. EBIT margin
also improved due to these factors.
Commercial Furnishings sales increased 12.9%, with
acquisition growth of just over 6%. EBIT grew 11.3%, as expenses
to consolidate two commercial fixture facilities partially offset
the benefits of higher volume and acquisitions. Thus, EBIT
margin was slightly lower.
Aluminum Products sales increased 3.4%, with most of the
growth attributable to acquisitions. The acquired volume offset
the impact of reduced production in aluminum smelting operations
and a major die casting customer's continued inventory reduction.
EBIT increased 2.6% due to acquisitions plus improved
efficiencies in die casting operations and reflected EBIT margin
that was about unchanged.
Industrial Materials sales increased 12.7%, with acquisition
growth of just over 7%. EBIT increased 69.2%, reflecting more
normal raw material costs, efficiencies gained on higher
production and acquisitions. The improvement in EBIT margin also
reflected these factors.
Specialized Products sales increased 17.2%, with acquisition
growth of slightly more than 12%. EBIT decreased 4.1%,
reflecting lower machinery and equipment volume which carries
higher margins and increased expense from a plant consolidation.
These factors impacted EBIT margin.
<PAGE>
Year 2000 Readiness Disclosure
The "Year 2000" issue refers to older computer programs that
used only two digits to represent the year, rather than four
digits. As a result, these older computer programs may not
process information or otherwise function properly when using the
year "2000", since that year will be indistinguishable from the
year "1900". These computer programs are found in information
processing applications and in timing devices for certain
machinery and equipment.
To monitor Year 2000 issues, the Company implemented a
Corporate level Year 2000 Steering Committee (the Steering
Committee). The Steering Committee meets regularly to review the
Company's progress, and to consider other actions that may be
necessary for Year 2000 issues.
In addition, the Company has engaged a large, reputable
consulting firm to perform certain procedures to review the
Company's planning, implementation and readiness for the Year
2000 issues at certain major locations. The results of the
consulting firm's preliminary and follow-up studies have been
reviewed with the Company's Audit Committee of the Board of
Directors. The Company has responded, or is in the process of
responding, to issues raised by the consulting firm's studies.
The Company recognized the Year 2000 issue several years
ago, and has been working since to correct this problem in its
computer systems. The majority of the Company's information
processing is centralized at its Corporate Offices. All of these
critical central systems have been converted to Year 2000
compliant software, and individual system testing is
substantially complete.
<PAGE>
Many of the Company's international and certain domestic
operations do not use some or any of the Corporate Offices'
centralized systems. All of these non-central system locations
have active projects underway to convert their systems to Year
2000 compliant software in 1999. Also, adequate testing of these
non-central system conversions is expected to be completed by
year-end.
In total, combining both central system and non-central
system locations, management estimates that the Year 2000 systems
conversion effort is 95% complete as of June 30, 1999.
All locations of the Company have been instructed to review
their facilities for Year 2000 issues. Potential internal and
third party risks were identified for the operating locations to
consider. Inventories of computer equipment, communications with
key suppliers, correspondence with customers, obtaining machinery
and equipment compliance certificates and other facility testing
related to Year 2000 issues are complete or nearing completion at
the Company's approximately 300 locations around the world.
These efforts are expected to be complete at all significant
locations prior to the year 2000.
Since the Company has been working on Year 2000 issues for
several years, the costs of mitigating these issues, which costs
have not been material in the past, were expensed in ongoing
operations. No material costs are expected from the remaining
Year 2000 compliance efforts. Costs of all the Company's system
conversion and implementation efforts, which include those
efforts related to the Year 2000 issue, were less than $6 million
in 1998. The overall magnitude of these ongoing system
conversion and implementation costs is not expected to be
significantly different for 1999. It is not practical to
segregate past or anticipated capital expenditures between Year
2000 compliance and expenditures which occur normally to keep
operations technologically competitive. However, management
believes that past or expected future capital requirements
related to Year 2000 compliance issues are not significant to its
operations.
The Company manufactures a broad line of products in over
150 major manufacturing sites around the world. Raw materials
and critical outside services are generally available from
numerous supply sources including, in some cases, the Company's
own vertically integrated operations. The Company's revenues are
<PAGE>
not dependent upon any single customer or any few customers.
Therefore, the impact to the Company of any individual operating
location or third-party risk involving Year 2000 is relatively
small. It is reasonable to assume that the Company will
experience a few, hopefully isolated, disturbances to its
operations early in the year 2000. While reasonable actions have
been taken, and will continue to be taken in the future, to
mitigate such disruption, the magnitude of all Year 2000
disturbances cannot be predicted. In addition, any widespread
Year 2000 failures, particularly in North America, in industries
such as financial services, communications, transportation and
electrical or other utilities could significantly and adversely
impact the Company's operations.
Efforts to date have been concentrated on mitigating Year
2000 disturbances. The Steering Committee is in the process of
evaluating the reasonable potential risks that cannot be
mitigated and determining the extent of contingency planning and
resources that are appropriate. These contingency actions and
resources are planned to be in place in sufficient time for the
year 2000.
Forward-Looking Statements
This report and other public reports or statements made from
time to time by the Company or its management may contain
"forward-looking" statements concerning possible future events,
objectives, strategies, trends or results. Such statements are
identified either by the context in which they appear or by use
of words such as "anticipate," "believe," "estimate," "expect,"
"plan" or the like.
Readers are cautioned that any forward-looking statement
reflects only the beliefs of the Company or its management at the
time the statement is made. In addition, readers should keep in
mind that, because all forward-looking statements deal with the
future, they are subject to risks, uncertainties and developments
that might cause actual events or results to differ materially
from those envisioned or reflected in any forward-looking
statement. Moreover, the Company does not have and does not
undertake any duty to update any forward-looking statement to
reflect events or circumstances after the date on which the
statement was made. For all of these reasons, forward-looking
statements should not be relied upon as a prediction of actual
future events, objectives, strategies, trends or results.
<PAGE>
It is not possible to anticipate and list all of the risks,
uncertainties and developments which may affect the future
operations or performance of the Company, or which otherwise may
cause actual events or results to differ from forward-looking
statements. However, some of these risks and uncertainties
include the following: general economic and market conditions and
risks, such as the rate of economic growth in the United States,
inflation, government regulation, interest rates, taxation, and
the like; risks and uncertainties which could affect industries
or markets in which the Company participates, such as growth
rates and opportunities in those industries, or changes in demand
for certain products, etc.; and factors which could impact costs,
including but not limited to the availability and pricing of raw
materials, the availability of labor and wage rates, and fuel and
energy costs. As indicated above, the consequences of the Year
2000 issues cannot be accurately predicted; therefore, actual
consequences will remain at least to some extent uncertain.
<PAGE>
ITEM 3. DISCLOSURES ABOUT MARKET RISK
(Unaudited)
(Amounts in millions)
INTEREST RATE
The Company has debt obligations sensitive to changes in interest
rates. The Company has no other significant financial
instruments sensitive to changes in interest rates. The Company
has not typically in the past used derivative financial
instruments to hedge its exposure to interest rate changes but,
in the second quarter of 1999, $14 of fixed rate debt was issued
and converted to variable rate debt by use of a swap instrument.
Substantially all of the Company's debt is denominated in United
States dollars. The fair value of variable rate debt is not
significantly different from its recorded amount. The fair value
of fixed rate debt is calculated using the U.S. Treasury Bond
rate as of June 30, 1999 for similar remaining maturities, plus
an estimated spread over such Treasury securities representing
the Company's interest costs under its medium-term note program.
The fair value of fixed rate debt approximated $519 at June 30,
1999, as compared to $539 at December 31, 1998.
EXCHANGE RATE
The Company has not typically hedged foreign currency exposures
related to transactions denominated in other than its functional
currencies, although such transactions have not been material in
the past. The Company does hedge firm commitments for certain
machinery purchases, and occasionally may hedge amounts due in
foreign currencies related to its acquisition program. The
decision by management to hedge any such transactions is made on
a case-by-case basis. The amount of forward contracts
outstanding at June 30, 1999 was not significant.
The Company views its investment in foreign subsidiaries as a
long-term commitment and does not hedge any translation
exposures. The investment in a foreign subsidiary may take the
form of either permanent capital or notes. The Company's net
investment (excluding goodwill) in foreign subsidiaries subject
to translation exposure was $259.8 at June 30, 1999, as compared
to $208.8 at December 31, 1998. The increase in translation
exposure was due to changing the functional currency of the
Company's Mexican operations from the US dollar to the Mexican
peso and to increases in Canadian dollar exposure from the
strengthening of this currency (versus the US dollar) and other
factors.
COMMODITY PRICE
The Company does not use derivative commodity instruments to
hedge its exposures to changes in commodity prices. The
principal commodity price exposure is aluminum, of which the
Company had an estimated $44 (at cost) in inventory at June 30,
1999. The Company has purchasing procedures and arrangements
with customers to mitigate its exposure to aluminum price
changes. No other commodity exposures are significant to the
Company.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on May 12, 1999.
Matters voted upon were (1) election of directors, (2) proposal
to increase the Company's authorized Common Stock from 300
million shares to 600 million shares, (3) proposal to amend the
Company's 1989 Discount Stock Plan, (4) proposal to approve the
Company's 1999 Key Officers Incentive Plan, and (5) proposal to
ratify the selection of PricewaterhouseCoopers LLP as the
Company's Independent Auditors for the Fiscal Year ending
December 31, 1999.
The number of votes cast for, against or withheld, as well as
abstentions, with respect to each matter are set out below.
1. Election of Directors
DIRECTOR FOR WITHHELD
Raymond F. Bentele 150,105,479 23,667,250
Harry M. Cornell, Jr. 149,845,597 22,927,132
Robert Ted Enloe, III 147,998,852 25,773,877
Richard T. Fisher 150,062,622 23,710,107
Bob L. Gaddy 149,801,850 23,970,879
David S. Haffner 149,894,301 23,878,428
Thomas A. Hays 150,102,537 23,670,192
Robert A. Jefferies, Jr. 149,894,197 23,878,532
Alexander M. Levine 150,102,695 23,670,034
Richard L. Pearsall 150,019,960 23,752,769
Duane W. Potter 149,895,612 23,877,117
Maurice E. Purnell, Jr. 148,889,827 24,882,902
Alice L. Walton 150,083,733 23,688,996
Felix E. Wright 148,008,407 25,764,322
2. To increase the Company's authorized Common Stock from 300
million shares to 600 million shares
FOR AGAINST ABSTAIN
145,869,529 27,449,683 453,517
3. To amend the Company's 1989 Discount Stock Plan
FOR AGAINST ABSTAIN
167,196,652 3,241,598 714,230
4. To approve the Company's 1999 Key Officers Incentive Plan
FOR AGAINST ABSTAIN
169,816,901 3,241,598 714,230
5. Ratification of Independent Auditors
FOR AGAINST ABSTAIN
173,447,345 141,031 184,353
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit 3 - Amendment of Restated Articles of Incorporation
dated May 24, 1999
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: August 13, 1999 By: /s/ FELIX E. WRIGHT
-------------------
Felix E. Wright
President and
Chief Executive Officer
DATE: August 13, 1999 By: /s/ MICHAEL A. GLAUBER
----------------------
Michael A. Glauber
Senior Vice President,
Finance and Administration
<PAGE>
EXHIBIT INDEX
Exhibit
Page
3 Amendment of Restated Articles of Incorporation 21
27 Financial Data Schedule 23
AMENDMENT OF RESTATED ARTICLES OF INCORPORATION
OF
LEGGETT & PLATT, INCORPORATED
TO: Honorable Rebecca McDowell Cook
Secretary of State
State of Missouri
Corporation Division
PO Box 778
Jefferson City, MO 65102
Pursuant to the provisions of The General and Business
Corporation Law of Missouri, the undersigned Corporation
certifies the following:
I.
The present name of the Corporation is Leggett & Platt,
Incorporated. The name under which it was originally organized
was Leggett & Platt Spring Bed and Manufacturing Company.
II.
An amendment to the Corporation's Restated Articles of
Incorporation was adopted by the shareholders on May 12, 1999.
III.
The amendment is as follows:
The introductory paragraph of Article III is amended to read
in its entirety as follows:
"The aggregate number of shares which the
corporation shall have the authority to issue
is Six Hundred Million (600,000,000) shares
of Common Stock of One Cent ($.01) par value
and One Hundred Million (100,000,000) shares
of Preferred Stock without par value."
IV.
The only class of the Corporation's securities entitled to
vote on this amendment was the Corporation's Common Stock, $.01
par value. Of the 197,803,977 shares of Common Stock, $.01 par
value, issued and outstanding, 173,772,729 shares were entitled
to vote on the amendment. No outstanding shares an any class of
securities were entitled to vote as a class on the amendment.
The number of shares of Common Stock, $.01 par value, voted
for and against the amendment was as follows:
No. of Shares Voted For No. of Shares Voted Against No.of Shares Abstained
----------------------- --------------------------- ----------------------
145,869,529 27,449,683 453,517
<PAGE>
IN WITNESS WHEREOF, the undersigned, Ernest C. Jett, Vice
President of Leggett & Platt, Incorporated, has executed this
instruments and Shonna L. Koch, Assistant Secretary of Leggett &
Platt, Incorporated, has affixed its corporate seal hereto and
attested said seal on the 20th day of May, 1999.
(CORPORATE SEAL) LEGGETT & PLATT,
INCORPORATED
ATTEST:
/s/ Shonna L. Koch /s/ Ernest C. Jett
- ----------------------- ------------------------
Shonna L. Koch, Assistant Secretary Ernest C. Jett, Vice President
State of MISSOURI )
) ss.
County of JASPER )
I, Valerie L. Day, a Notary Public, do hereby certify that
on this 20th day of May, 1999, personally appeared before me
Ernest C. Jett who, being by me first duly sworn, declared that
he is the Vice President of Leggett & Platt, Incorporated, that
he signed the foregoing documents as Vice President of the
Corporation, and that the statements therein contained are true.
(Notarial Seal)
/s/ Valerie L. Day
----------------------
Notary Public
My Commission Expires: 6/27/2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,400
<SECURITIES> 0
<RECEIVABLES> 585,500
<ALLOWANCES> 16,300
<INVENTORY> 514,400
<CURRENT-ASSETS> 1,163,800
<PP&E> 1,511,800
<DEPRECIATION> 667,000
<TOTAL-ASSETS> 2,687,000
<CURRENT-LIABILITIES> 425,900
<BONDS> 611,600
0
0
<COMMON> 2,000
<OTHER-SE> 1,520,000
<TOTAL-LIABILITY-AND-EQUITY> 2,687,000
<SALES> 1,822,800
<TOTAL-REVENUES> 1,822,800
<CGS> 1,337,000
<TOTAL-COSTS> 1,337,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,400
<INCOME-PRETAX> 220,200
<INCOME-TAX> 81,700
<INCOME-CONTINUING> 138,500
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<NET-INCOME> 138,500
<EPS-BASIC> .70
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