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, 2000
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, 2000 1-7845
LEGGETT & PLATT, INCORPORATED
(Exact name of registrant as specified in its charter)
Missouri 44-0324630
(State or other (I.R.S. Employer Identification
jurisdiction of No.)
incorporation or
organization)
No. 1 Leggett Road
Carthage, Missouri 64836
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (417) 358-8131
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Common stock outstanding as of November 1, 2000: 196,149,592
<PAGE>
PART I. FINANCIAL INFORMATION
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in millions) September 30, December 31,
2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 23.8 $ 20.6
Accounts and notes receivable 727.6 572.7
Allowance for doubtful accounts (16.0) (13.3)
Inventories 655.4 605.8
Other current assets 68.8 70.4
--------------------------------------------------------------------
Total current assets 1,459.6 1,256.2
PROPERTY, PLANT & EQUIPMENT, NET 990.3 915.0
OTHER ASSETS
Excess cost of purchased companies over
net assets acquired, less accumulated
amortization of $83.3 in 2000 and $67.3
in 1999 857.6 714.3
Other intangibles, less accumulated
amortization of $37.0 in 2000 and $32.6
in 1999 53.3 45.2
Sundry 53.5 46.8
--------------------------------------------------------------------
Total other assets 964.4 806.3
--------------------------------------------------------------------
TOTAL ASSETS $3,414.3 $2,977.5
====================================================================
CURRENT LIABILITIES
Accounts and notes payable $ 192.7 $ 146.1
Accrued expenses 229.8 194.2
Other current liabilities 79.4 91.2
--------------------------------------------------------------------
Total current liabilities 501.9 431.5
LONG-TERM DEBT 1,010.4 787.4
OTHER LIABILITIES 43.5 43.9
DEFERRED INCOME TAXES 67.5 68.5
SHAREHOLDERS' EQUITY
Common stock 2.0 2.0
Additional contributed capital 422.3 424.8
Retained earnings 1,435.7 1,278.1
Accumulated other comprehensive income (34.8) (18.9)
Treasury stock (34.2) (39.8)
Total shareholders' equity 1,791.0 1,646.2
--------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,414.3 $2,977.5
====================================================================
</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)
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $3,268.8 $2,813.9 $1,129.6 $ 991.1
Cost of goods sold 2,424.7 2,058.2 845.5 721.2
---------------------------------------------------------------------------
Gross profit 844.1 755.7 284.1 269.9
Selling, distribution and
administrative expenses 422.2 362.4 145.1 128.9
Other deductions (income), net 28.4 20.4 12.9 6.3
---------------------------------------------------------------------------
Earnings before interest
and income taxes 393.5 372.9 126.1 134.7
Interest expense 49.4 30.5 17.2 11.1
Interest income 3.0 1.8 0.3 0.4
---------------------------------------------------------------------------
Earnings before income taxes 347.1 344.2 109.2 124.0
Income taxes 128.1 128.0 40.3 46.3
---------------------------------------------------------------------------
NET EARNINGS $ 219.0 $ 216.2 $ 68.9 $ 77.7
===========================================================================
Earnings Per Share
Basic $ 1.10 $ 1.09 $ 0.35 $ 0.39
Diluted $ 1.09 $ 1.08 $ 0.34 $ 0.39
Cash Dividends Declared
Per Share $ 0.31 $ 0.27 $ 0.11 $ 0.09
Average Shares Outstanding
Basic 199.0 198.5 199.3 198.2
Diluted 200.5 201.1 200.7 200.9
</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) Nine Months Ended
September 30,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings $ 219.0 $ 216.2
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation 101.5 89.3
Amortization 25.3 20.6
Other 13.4 (2.7)
Other changes, net of effects from
purchase of companies
(Increase) in accounts receivable, net (83.9) (53.4)
(Increase) in inventories (6.3) (19.1)
(Increase) in other current assets (5.4) (2.4)
Increase in current liabilities 48.0 47.2
-----------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 311.6 295.7
INVESTING ACTIVITIES
Additions to property, plant and equipment (124.7) (113.4)
Purchases of companies, net of cash acquired (223.9) (233.0)
Other (15.7) 4.9
-----------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (364.3) (341.5)
FINANCING ACTIVITIES
Additions to debt 396.1 209.3
Payments on debt (228.7) (83.9)
Dividends paid (78.6) (68.9)
Issuances of common stock 3.0 3.1
Purchases of common stock (32.9) (78.6)
Other (3.0) 3.1
-----------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 55.9 (15.9)
-----------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3.2 (61.7)
CASH AND CASH EQUIVALENTS - January 1, 20.6 83.5
-----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - September 30, $ 23.8 $ 21.8
=======================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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
positions of Leggett & Platt, Incorporated and Consolidated
Subsidiaries (the `Company').
2. INVENTORIES
Inventories, about 50% of which are valued using the Last-in,
First-out (LIFO) cost method and the remainder using the First-In,
First-Out (FIFO) cost method, comprised the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
<S> <C> <C>
At First-In, First-Out (FIFO) cost
Finished goods $ 312.2 $ 309.9
Work in process 87.4 63.2
Raw materials and supplies 266.1 238.2
------------------------------------------------------------------
665.7 611.3
Excess of FIFO cost over LIFO cost (10.3) (5.5)
------------------------------------------------------------------
$ 655.4 $ 605.8
==================================================================
</TABLE>
3. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment comprised the following:
<TABLE>
<CATION>
September 30, December 31,
2000 1999
<S> <C> <C>
Property, plant and equipment, at cost $1,785.8 $1,628.7
Less accumulated depreciation 795.5 713.7
---------------------------------------------------------------------
$ 990.3 $ 915.0
=====================================================================
</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 nine
months ending September 30, 2000 and 1999, comprehensive income
was $203.1 and $222.5, respectively.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Basic
Weighted average shares
outstanding, including
shares issuable for
little or no cash 199.0 198.5 199.3 198.2
=========================================================================
Net earnings $ 219.0 $ 216.2 $ 68.9 $ 77.7
=========================================================================
Earnings per share - basic $ 1.10 $ 1.09 $ .35 $ .39
=========================================================================
Diluted
Weighted average shares
outstanding, including
shares issuable for
little or no cash 199.0 198.5 199.3 198.2
Additional dilutive shares
principally from the
assumed exercise of
outstanding stock options 1.5 2.6 1.4 2.7
-------------------------------------------------------------------------
200.5 201.1 200.7 200.9
=========================================================================
Net earnings $ 219.0 $ 216.2 $ 68.9 $ 77.7
=========================================================================
Earnings per share - diluted $ 1.09 $ 1.08 $ .34 $ .39
=========================================================================
</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.
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 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.
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
7. SEGMENT INFORMATION
Reportable segments are primarily based upon the Company's
management 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, components for office and institutional
furnishings, and plastic components. 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 that derive their revenues from
machinery, manufacturing equipment, automotive seating
suspensions, control cable systems, and lumbar supports for
automotive, office and residential applications.
A summary of segment results for the nine months ended September
30, 2000 and 1999 and the quarters ended September 30, 2000 and
1999 are shown in the following tables:
<TABLE>
<CAPTION>
Inter-
External Segment Total
Sales Sales Sales EBIT (1)
<S> <C> <C> <C> <C>
Nine Months ended Sept. 30, 2000
Residential Furnishings $1,628.8 $ 7.5 $1,636.3 $184.8
Commercial Furnishings 757.3 5.1 762.4 93.7
Aluminum Products 413.5 12.2 425.7 29.8
Industrial Materials 241.9 161.9 403.8 60.1
Specialized Products 227.3 36.6 263.9 35.1
Intersegment eliminations - - - (5.2)
Change in LIFO reserve - - - (4.8)
----------------------------------------------------------------------------
$3,268.8 $223.3 $3,492.1 $393.5
============================================================================
(1) Excluding plant closure charges, EBIT is $185.7 for
Residential Furnishings and $31.7 for Aluminum Products.
Nine Months ended Sept. 30, 1999
Residential Furnishings $1,460.9 $7.5 $1,468.4 $166.2
Commercial Furnishings 570.8 2.3 573.1 95.8
Aluminum Products 401.6 12.3 413.9 38.5
Industrial Materials 208.6 155.6 364.2 53.6
Specialized Products 172.0 32.4 204.4 22.6
Intersegment eliminations - - - (3.4)
Change in LIFO reserve - - - (.4)
----------------------------------------------------------------------------
$2,813.9 $210.1 $3,024.0 $372.9
============================================================================
</TABLE>
<PAGE>
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
7. SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
Inter-
External Segment Total
Sales Sales Sales EBIT (1)
<S> <C> <C> <C> <C>
Quarter ended September 30, 2000
Residential Furnishings $552.5 $ 2.6 $ 555.1 $ 57.5
Commercial Furnishings 294.5 1.4 295.9 40.5
Aluminum Products 111.9 3.9 115.8 0.0
Industrial Materials 82.3 53.2 135.5 17.9
Specialized Products 88.4 11.2 99.6 10.4
Intersegment eliminations - - - 1.3
Change in LIFO reserve - - - (1.5)
--------------------------------------------------------------------------
$1,129.6 $ 72.3 $1,201.9 $ 126.1
==========================================================================
(1) Excluding plant closure charges, EBIT is $58.4 for Residential
Furnishings and $1.9 for Aluminum Products.
Quarter ended September 30, 1999
Residential Furnishings $510.2 $ 2.5 $ 512.7 $ 61.5
Commercial Furnishings 230.4 .7 231.1 38.6
Aluminum Products 119.1 3.8 122.9 10.7
Industrial Materials 72.8 50.0 122.8 18.4
Specialized Products 58.6 9.6 68.2 6.2
Intersegment eliminations - - - (.1)
Change in LIFO reserve - - - (.6)
--------------------------------------------------------------------------
$991.1 $66.6 $1,057.7 $ 134.7
==========================================================================
</TABLE>
Asset information for the Company's segments at September 30, 2000
and December 31, 1999 is shown in the following table:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
<S> <C> <C>
Assets
Residential Furnishings $1,198.6 $1,173.4
Commercial Furnishings 905.5 721.4
Aluminum Products 485.5 441.1
Industrial Materials 236.7 204.8
Specialized Products 339.7 216.8
Unallocated assets 227.6 204.0
Adjustment to period-end
vs. average assets 20.7 16.0
--------------------------------------------------------------------
$3,414.3 $2,977.5
====================================================================
</TABLE>
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
The Company's financial position reflects management's capital
policy guidelines. These guidelines are intended to ensure that
corporate liquidity is adequate to support the Company's projected
growth rate. Also, liquidity is necessary to finance the Company's
ongoing operations in periods of economic downturn. In a normal
operating environment, management intends to direct capital to
ongoing operations, strategic acquisitions and other investments that
provide opportunities for expansion and enhanced profitability.
The expansion of capital resources - debt and equity - is
planned to allow the Company to take advantage of favorable capital
market conditions, rather than respond to short-term needs. Such
financial flexibility is considered more important than short-term
maximization of earnings per share through excessive leverage.
Therefore, management continuously provides for available credit in
excess of near-term 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%.
Total Capitalization
The following table shows the Company's total capitalization at
September 30, 2000 and December 31, 1999. 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) September 30, December 31,
2000 1999
<S> <C> <C>
Long-term debt outstanding:
Scheduled maturities $ 991.9 $ 642.7
Average interest rates 6.8% 6.7%
Average maturities in years 4.9 5.5
Revolving credit/commercial paper 18.5 144.7
----------------------------------------------------------------
Total long-term debt 1,010.4 787.4
Deferred income taxes and other
liabilities 111.0 112.4
Shareholders' equity 1,791.0 1,646.2
----------------------------------------------------------------
Total capitalization $2,912.4 $2,546.0
================================================================
Unused committed credit:
Long-term $ 196.5 $ 52.8
Short-term 112.5 97.5
----------------------------------------------------------------
Total unused committed credit $ 309.0 $ 150.3
================================================================
Cash and cash equivalents $ 23.8 $ 20.6
================================================================
</TABLE>
Cash provided by operating activities was $311.6 million in the
first nine months of 2000, compared to $295.7 million in the first
nine months of 1999. The increase in cash provided by operating
activities principally reflects an increase in depreciation,
amortization and other non-cash expenses, partially offset by
increased working capital levels.
Long-term debt outstanding increased to $1,010.4 million, and
was 34.7% of total capitalization at September 30, 2000, up from
30.9% at the end of 1999. As shown in the table above, obligations
having scheduled maturities are the base "layer" of the Company's
debt capital. At September 30, 2000, these obligations consisted
primarily of the Company's medium-term notes and tax-exempt
industrial development bonds. In November 1999, the Company
completed a $500 million shelf registration of debt. In February
<PAGE>
2000, $350 million of 7.65% five-year notes were issued under the
shelf registration. These notes were converted to variable rate
notes under an interest rate swap agreement. The proceeds of the
offering were used to pay down commercial paper, and to fund the
Company's capital expenditures and acquisition activity.
The second "layer" of the Company's debt capital consists of
revolving bank credit agreements and commercial paper issuances.
Management has negotiated 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 majority of the credit under these arrangements is a
long-term obligation. If needed, however, the credit is available
for short-term borrowings and repayments.
Uses of Capital Resources
The Company's internal investments to modernize and expand
manufacturing capacity were $124.7 million in the first nine months
of 2000. The Company invested $223.9 million (net of cash acquired)
to acquire seventeen businesses and issued 266,438 shares or share
equivalents at a value of $5.3 million for acquisitions. In
addition, the Company assumed $120.6 million of acquisition
companies' debt and other liabilities.
The Company repurchased approximately 1.8 million shares of its
common stock for $32.9 million in cash during the first nine months
of 2000. These purchases were made primarily for employee stock
plans and to replace shares issued in purchase acquisitions. The
Board of Directors, in February 2000, authorized management, at its
discretion, to buy up to 2,000,000 shares of Leggett stock for use in
employee benefit plans. This authorization is continuously
replenished as shares acquired are reissued for these benefit plans.
In addition, management is authorized, again at its discretion, to
repurchase any shares issued in acquisitions accounted for as
purchases. At the end of the third quarter 2000, the Company's Board
of Directors authorized management, at its discretion, to buy up to
an additional 10,000,000 shares of Leggett stock as part of the
Company's performance improvement plan. Under that authorization, the
Company has, since October 1, 2000 repurchased an additional 860,000
shares.
Cash dividends paid on the Company's common stock were $78.6
million during the first nine months of 2000. As a percent of
earnings per share (diluted), cash dividends declared per share were
28.4% during the period.
Short-term Liquidity
To gain additional flexibility in capital management and to
improve the return on shareholders' equity, the Company continuously
seeks efficient use of working capital. Working capital, including
working capital from acquired companies, at September 30, 2000 was
$957.7 million, up from $824.7 million at year-end. The higher level
of working capital resulted principally from the working capital of
businesses acquired during the first nine months of 2000. There was
no short-term bank debt outstanding at the end of either period.
Results of Operations
Discussion of Consolidated Results
The Company's third quarter earnings per diluted share were
$.34, down 12.8% from last year's third quarter earnings of $.39 per
diluted share. Sales for the quarter were a record $1.13 billion, an
increase of 14% compared with the third quarter of 1999. Through the
first nine months of 2000, sales grew to $3.27 billion (up 16.2%) and
earnings per diluted share were $1.09, up from $1.08 in the first
nine months of 1999.
<PAGE>
The 14% sales growth for the third quarter of 2000 resulted from
acquisitions completed over the past year. Commercial Furnishings
accounted for approximately 46% of the increase in consolidated sales
in the third quarter of 2000, while Residential Furnishings accounted
for 30%. Same location sales were approximately flat with last
year's third quarter, reflecting a decline in Aluminum segment sales.
Same location sales growth was 2.4% for the first nine months of
2000.
During the third quarter, the Company acquired four businesses
with annualized sales of approximately $40 million. The newly
acquired companies have expanded annualized volume in the Company's
segments as follows: Residential Furnishings - $26 million;
Commercial Furnishings - $11 million; Specialized Products - $3
million.
Earnings in the third quarter of 2000 were down, reflecting
softening demand as well as lower than expected performance in the
Company's Aluminum Products segment and some parts of the Residential
and Commercial Furnishings segments. Net earnings were 6.1% of third
quarter 2000 sales compared with 7.8% in the third quarter of 1999.
Most of the net margin decline is attributable to lower than expected
performance in the Aluminum and Commercial Furnishings segments. In
addition, higher interest expense accounts for approximately 15% of
the net margin decline.
At the end of the quarter, the Company announced a four-point
tactical plan aimed at improving performance, margins and shareholder
return. The primary objective is to fix problems in under-performing
businesses. Operations that cannot be fixed will be consolidated,
closed or sold. In addition, the Company will reduce acquisitions
and capital spending in operational areas that are under- performing.
The Company also intends to use cash flow made available through
these reductions to repurchase Leggett stock. The Company expects to
be on this tactical course for at least three or four quarters, and
possibly longer. Once performance improves, the Company expects to
return to its traditional level of acquisition activity. The
Company's strategic, long-term growth plans remain unchanged.
The following table shows various measures of earnings as a
percentage of sales for the third quarter in both of the last two
years. It also shows the effective income tax rate and the ratio of
earnings to fixed charges.
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Gross profit margin 25.8% 26.9% 25.2% 27.2%
EBIT (earnings before
Interest and
taxes) margin 12.0 13.3 11.2 13.6
Net profit margin 6.7 7.7 6.1 7.8
Effective income tax rate 36.9 37.2 36.9 37.3
Ratio of earnings
to fixed charges 7.0x 10.2x 6.5x 10.3x
</TABLE>
Seasonality
The Company does not experience significant seasonality,
however, quarter-to-quarter sales can vary to the total year by 1-2%.
Management estimates that this 1-2% sales impact can have, at
current average net margins and considering overhead absorption, an
impact on quarter-to-quarter net earnings of approximately 5-10%,
plus or minus. The timing of acquisitions and economic factors in
any year can distort the underlying seasonality in certain of the
Company's businesses. For the Company's businesses in total, the
second and third quarters have proportionately greater sales, while
the first and fourth quarters are lower. Over the last three years,
this small seasonality has become somewhat more pronounced, with the
first and fourth quarters showing proportionately lower sales due to
the growth of the store fixtures business of Commercial Furnishings.
<PAGE>
Residential Furnishings and Commercial Furnishings typically
have their strongest sales in the second and third quarters.
Commercial Furnishings particularly has heavy third quarter sales of
its store fixture products, with the first and fourth quarters
significantly lower. Aluminum Products sales are proportionately
greater in the first two calendar quarters due to gas barbecue grill
castings. Industrial Materials sales peak in the third and fourth
quarters from wire products used for baling cotton. Specialized
Products has relatively little quarter-to-quarter variation in sales,
although the automotive business is somewhat heavier in the first two
quarters of the year, and somewhat lower in the third quarter, due to
model changeovers and plant shutdowns in the automobile industry
during the summer.
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.
Third Quarter Discussion
Residential Furnishings sales increased 8.3%, with same location
growth of 2.4%. EBIT decreased 6.5%. EBIT margin decreased from
12.0% to 10.4%, due in part to efforts to reduce finished goods
inventory resulting in lower production, which consequently reduced
overhead absorption and efficiencies. In addition, sales were lower
than anticipated, attributable to weakening of growth trends
primarily in the furniture side of the business. Excluding plant
closure charges of $0.9, EBIT declined 5.0%, while EBIT margin was
10.5%.
Commercial Furnishings sales increased 28.0%, due entirely to
numerous acquisitions. Same location volume was down 2.3%, as some
customers for store fixture, display, and storage products delayed
purchases; this more than offset continued strengths in markets for
office and contract furnishings components. EBIT increased 4.9%, and
EBIT margins declined from 16.7% to 13.7%. Reduced margins reflected
the changing mix of business, lower than anticipated demand due to
some customers postponing purchases, and integration inefficiencies
at some fixture and display operations acquired over the last two
years.
Aluminum Products sales declined 5.8% and same location sales
were down 8.1%. EBIT margin decreased from 8.7% to breakeven. Delays
in orders of gas barbecue grill castings as the Company's customers
retool for new models, and reduced die cast component sales reflect
weak market demand for a variety of consumer and industrial products.
In addition, the absence of some automotive business the Company
purged over the last year has not completely been replaced with
alternative products. EBIT decreased significantly due to reduced
volumes, decreased efficiencies, depressed market prices for
secondary aluminum, and higher natural gas costs. Excluding plant
closure charges of $1.9, EBIT margin declined by 1.6% for the third
quarter of 2000.
Industrial Materials sales increased 10.3%, with same location
growth of 4.3%. EBIT declined 2.7%, and EBIT margins were down from
15.0% to 13.2%, reflecting higher raw materials costs, primarily for
steel rod and flat rolled steel used to make wire and welded tubing.
Specialized Products sales increased 46.0%, due primarily to a
single acquisition completed in the second quarter of 2000. Same
location sales declined 2.2%. EBIT increased 67.7%, and EBIT margin
improved from 9.1% to 10.4%, as both production efficiency and volume
increased.
<PAGE>
Nine Month Discussion
Residential Furnishings sales increased 11.4%, with same location
growth of 3.7%. Numerous acquisitions accounted for the balance of
the growth. EBIT increased 11.2%, in line with the sales increase.
Commercial Furnishings sales increased 33.0% due to numerous
acquisitions. Same location sales were down 1.2%. EBIT declined
2.2%, and EBIT margins moved from 16.7% last year to 12.3% this year,
in large part because a store fixture and design firm acquired at the
end of last year's second quarter experienced, in the first half of
this year, persistent supplier disruptions and higher costs, which
more than offset improved performance in operations producing
components for office and contract furniture and plastic components
Aluminum Products sales increased 2.9%, with same location
growth of 2.2%. EBIT decreased 22.6%, and EBIT margin declined from
9.3% to 7.0%, as significantly reduced volume and margins in the
third quarter more than offset improved first quarter performance.
Industrial Materials sales increased 10.9%, with same location
growth of 4.6%. Acquisitions accounted for the balance of the sales
growth. EBIT increased 12.1%, and EBIT margin improved from 14.7% to
14.9%, reflecting increased efficiencies on higher production and
acquisitions
Specialized Products sales increased 29.1%, with same location
growth of 3.4%. Acquisitions accounted for the balance of the sales
growth. EBIT increased 55.3%, and EBIT margin improved from 11.1% to
13.3%, reflecting acquisitions, increased sales of specialized
machinery with higher margins, and improved efficiencies.
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," 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
or revise 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.
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:
the Company's ability to improve operations and realize cost savings,
future growth of acquired companies, competitive and 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.
<PAGE>
ITEM 3. DISCLOSURES ABOUT MARKET RISK
(Unaudited)
(Amounts in millions)
INTEREST RATE
The Company has debt obligations sensitive to changes in interest rates.
In the first quarter of 2000, $350 of 7.65% fixed rate debt maturing in
February 2005 and, in the second quarter of 1999, $14 of 6.90% fixed rate
debt maturing in June 2004 were issued and converted to variable rate debt
by use of interest rate swap agreements. These swap agreements, which
contain the same payment dates as the original issues, are used primarily
by the Company to manage the fixed/variable interest rate mix of its debt
portfolio. The effective swap rate for the third quarter of 2000 was 6.85%
for the $350 and 7.08% for the $14. The difference in interest paid or
received as a result of swap agreements is recorded as an adjustment to
interest expense during the related debt period. Substantially all of the
Company's debt is denominated in United States dollars (U.S.$). The fair
value of fixed rate debt was less than its carrying value by $27.2 and
$11.2 at September 30, 2000 and December 31, 1999, respectively. The fair
value of fixed rate debt was calculated using the U.S. Treasury Bond rate
as of September 30, 2000 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
variable rate debt is not significantly different from its recorded amount.
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 may
occasionally hedge firm commitments for certain machinery purchases, other
fixed expenses or 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 September 30, 2000 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 in foreign subsidiaries subject to
translation exposure was $373.7 at September 30, 2000, as compared to
$301.8 at December 31, 1999. The increase in translation exposure was due
primarily to the Company's acquisition activity in Canada, Western Europe
and Mexico.
COMMODITY PRICE
The Company does not generally 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 $67 (at cost)
in inventory at September 30, 2000. 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
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, 2000 By: /s/ FELIX E. WRIGHT
--------------------
Felix E. Wright
President and
Chief Executive Officer
DATE: November 10, 2000 By: /s/ MICHAEL A. GLAUBER
-----------------------
Michael A. Glauber
Senior Vice President,
Finance and Administration
<PAGE>
EXHIBIT INDEX
Exhibit Page
12 Computation of Ratio of Earnings to Fixed Charges 18
27 Financial Data Schedule 19
