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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
COMMISSION FILE NUMBER 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 64836
CARTHAGE, MISSOURI (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (417) 358-8131
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
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 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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant was approximately $3,038,337,123.
There were 92,301,320 shares of the Registrant's common stock outstanding as
of February 28, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held May 14, 1997, are incorporated by reference
into Part III of this report.
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PART I
ITEM 1. BUSINESS
The Company is a manufacturer. It was incorporated in 1901 as the successor
to a partnership formed in 1883 at Carthage, Missouri. That partnership was a
pioneer in the manufacture and sale of steel coil bedsprings. The Company
today serves markets for components and related products for bedding,
furniture and other furnishings including commercial fixtures, store displays,
shelving, and related products as well as materials, equipment and
technologies used by Company operations and other manufacturers in diverse
markets. The term "Company," unless the context requires otherwise, refers to
Leggett & Platt, Incorporated and its majority owned subsidiaries.
General Development of Business During 1996. In May 1996, the Company
acquired Pace Holdings, Inc. (Pace) based in Fayetteville, Arkansas. Pace
manufactures aluminum die cast components used primarily by manufacturers of
consumer and commercial products including manufacturers of furnishings. The
Pace acquisition involved the issuance of approximately 5.1 million shares of
Company common stock. Pace had approximately $200 million in outstanding debt
at the time of the acquisition. This assumed debt was refinanced in June.
In addition to Pace, the Company made thirteen other acquisitions during
1996. Included in these acquisitions were Excell Store Fixtures and Slot All
Limited, both based in Ontario, Canada. The Excell/Slot All operations
manufacture custom designed metal and wood display cases, shelving, counters
and other fixtures primarily for U.S. based specialty retailers.
Other acquisitions in 1996 involved companies manufacturing a variety of
products including aluminum die castings and tooling, non-woven textiles,
commercial furnishings, bedding components and furniture components. Reference
is also made to Note B of the Notes to Consolidated Financial Statements for
further information about the Company's acquisitions.
Customers, Market and Products. The Company has several thousand customers,
most of which are manufacturers. The Company is not dependent upon any single
customer or any few customers. A large number of the Company's customers
manufacture finished bedding (mattresses and boxsprings) or upholstered and
non-upholstered furniture for home, office, institutions and commercial
applications. Customers for commercial furnishings (such as store fixtures,
shelving and point-of-purchase displays) include manufacturers of packaged
consumer products and retailers that use the Company's products to display a
wide variety of merchandise throughout their facilities and at point-of-
purchase.
Other Company customers participate in a number of different specialized or
niche markets for consumer and industrial products. These customers have
requirements for various aluminum die castings, components for automotive
seating and sound insulation, various kinds and sizes of steel wire and steel
tubing, non-fashion fabrics, cushioning materials, specialized production
equipment and proprietary motion controls for manufacturing machinery.
The Company's products are sold and distributed primarily through its own
sales personnel.
The Company's products include a broad line of components used by
manufacturers to make finished furnishings products. Examples of furnishings
components manufactured by the Company include (i) innerspring and boxspring
units for mattresses and boxsprings; (ii) foam, textile, fiber and other
cushioning materials for bedding and furniture; (iii) springs and seating
suspensions for chairs, sofas and other furniture; (iv) steel mechanisms and
hardware for reclining chairs, sleeper sofas and other types of motion
furniture; (v) chair controls, bases and columns for office furniture; (vi)
molded plastic parts and seating constructions; (vii) non-fashion construction
fabrics; (viii) aluminum die cast components for gas barbeque grills, outdoor
lighting fixtures, clean room flooring and furniture, and (ix) other furniture
supplies.
The Company's diverse range of components gives its furnishings
manufacturer-customers access to a single source for many of their component
needs. For example, a manufacturer of bedding can come to the
1
Company for almost every component part of a mattress and boxspring, except
the upholstering material. This same principle holds true for manufacturers of
other furnishings such as upholstered recliner chairs, sofas and loveseats and
office chairs. Because the Company has the advantage of long production runs
and numerous production and assembly locations, it can generally produce
component products more efficiently than its customers. Therefore, components
customers can focus on the design, style and marketing of their various
furnishings products, rather than the production of many standardized
components.
The Company also manufactures and sells finished furnishings. These finished
products include carpet underlay and non-skid area rug pads; metal and wood
shelving, point-of-purchase displays, custom and semi-custom shelving,
counters and racks and other commercial fixtures; bed frames; daybeds; bunk
beds; headboards; adjustable electric beds; and fashion beds. Some of the
finished furniture produced by the Company is sold to bedding and furniture
manufacturers that resell the furniture under their own labels to wholesalers
or retailers. Certain finished furniture, such as bed frames, fashion beds,
daybeds and other select items, are also sold by the Company directly to
retailers. Point-of-purchase displays are sold to manufacturers of packaged
goods for use in retail stores. Custom and semi-custom shelving, counters,
racks, displays and other commercial fixtures are sold to retailers to furnish
their stores. Material handling, shelving and storage fixtures are sold to end
users for food service, office and industrial applications.
The Company also produces and sells a number of different products for
various consumer and industrial markets. These products require manufacturing
technologies similar to those used in making furnishings products. Materials
which the Company produces for its own use are sold to customers outside the
Company as well. Examples of these diverse products include: (i) aluminum die
castings sold to manufacturers of small to mid size gasoline engines, large
and mid range diesel engines, motorcycles, recreational boats, electric motors
and telecommunications equipment; (ii) non-fashion fabrics sold to apparel
manufacturers; (iii) bale-tie machinery and parts and galvanized wire sold to
customers who compact and recycle solid waste or bale cotton; (iv) seating
components and systems, and other sound insulation materials sold to
automotive suppliers; (v) steel wire and welded steel tubing sold to
manufacturers of a wide range of industrial and consumer products; (vi)
aluminum ingot sold to manufacturers of aluminum products; (vii) motion
controls for manufacturing equipment; (viii) quilting machinery and materials
handling equipment sold to manufacturers of consumer products; and (ix)
injection molded plastic products.
The table below sets out further information concerning sales of each class
of the Company's products:
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
SUMMARY OF SALES
YEAR ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
(UNAUDITED)
(DOLLAR AMOUNTS IN MILLIONS)
Furnishings products
Bedding components........... $ 632.5 25.7% $ 558.4 24.8% $ 534.5 26.6%
Furniture and other
components.................. 766.7 31.1 736.4 32.6 630.3 31.4
Finished products............ 501.3 20.3 433.0 19.2 357.6 17.8
-------- ----- -------- ----- -------- -----
Total furnishings products. 1,900.5 77.1 1,727.8 76.6 1,522.4 75.8
Diversified products........... 565.7 22.9 529.1 23.4 486.7 24.2
-------- ----- -------- ----- -------- -----
Net sales.................. $2,466.2 100.0% $2,256.9 100.0% $2,009.1 100.0%
======== ===== ======== ===== ======== =====
Reference is also made to Note I of the Notes to Consolidated Financial
Statements for further segment information.
2
The Company's international operations outside Canada are involved primarily
in the sale of machinery and equipment designed to manufacture the Company's
innersprings and certain other spring products and the licensing of patents
owned and presently maintained by the Company in foreign countries. Machinery
used by bedding manufacturers in the production of their products is also
manufactured and sold by international operations. The Company has several
operations in Canada producing primarily components used by manufacturers of
bedding and furniture products as well as commercial fixtures. The Company
also has some operations in Mexico, the United Kingdom and Europe.
Foreign sales are a minor portion of the Company's business. Reference is
made to Note I of the Notes to Consolidated Financial Statements for further
information concerning the Company's operations outside of the United States.
Raw Materials. The Company uses a variety of raw materials in manufacturing
its products. Some of the Company's most important raw materials include steel
rod from which steel wire is drawn, coil steel, woven and nonwoven fabrics,
aluminum ingot, aluminum scrap, angle iron, sheet steel, dimension lumber,
textile scrap, foam chemicals, foam scrap and plastic. Substantially all of
the Company's requirements for steel wire, an important material in many of
the Company's products, are supplied by Company-owned wire drawing mills. The
Company also produces, at various locations, for its own consumption and for
sale to customers not affiliated with the Company, slit coil steel, welded
steel tubing, textile fibers, dimension lumber and aluminum ingot. Numerous
supply sources for the raw materials used by the Company are available. The
Company did not experience any significant shortages of raw materials during
the past year.
Patents and Trademarks. The Company holds numerous patents concerning its
various product lines. No single patent or group of patents is material to the
Company's business as a whole. Examples of the Company's more significant
trademarks include LOK-Fast(TM) and DYNA-Lock(TM) (boxspring components),
Mira-Coil(R) and Lura-Flex(TM) (mattress innersprings), Nova-Bond(R) and
Flexnet(TM) (insulators for mattresses), ADJUSTA-MAGIC (adjustable electric
beds); Wallhugger(R) (recliner chairs), Flex-O-Lators(R) (seating components),
NO-SAG(R) (sinuos wire springs and accessories) and VERSARE(R); and Gribetz,
WBSCO and Cyclo-Index (machinery).
Research and Development. The Company maintains research, engineering and
testing centers at Carthage, Missouri, and also does research and development
work at several of its other facilities. The Company is unable to precisely
calculate the cost of research and development since the personnel involved in
product and machinery development also spend portions of their time in other
areas. However, the Company believes the cost of research and development was
approximately $9 million in 1996, $7 million in 1995 and $6 million in 1994.
Employees. The Company has approximately 21,000 employees of whom
approximately 16,500 are engaged in production. Approximately 30% of the
Company's production employees are represented by labor unions.
The Company did not experience any material work stoppage related to the
negotiation of contracts with labor unions during 1996. Management is not
aware of any circumstances which are likely to result in a material work
stoppage related to the negotiations of any contracts expiring during 1997.
Competition. There are many companies offering products which compete with
those manufactured and sold by the Company. The markets for the Company's
products are highly competitive in all aspects. Given the diverse range of
components and other products produced by the Company, the number of other
companies competing with respect to any class or type of components or other
products varies over the Company's product range. There are also a number of
maker-users (vertically integrated manufacturers) of many of the products the
Company manufactures. The primary competitive factors in the Company's
business are price, product quality and customer service. To the best of the
Company's knowledge, it is the largest supplier in the United States of a
diverse range of components to the furnishings industry.
Backlog. The Company's relationship with its customers and its manufacturing
and inventory practices do not provide for the traditional backlog associated
with some manufacturing entities and no backlog data is regularly prepared or
used by management.
3
Government Regulation. The Company's various operations are subject to
federal, state and local laws and regulations related to the protection of the
environment, worker safety and other matters. Environmental regulations
include those relating to air and water emissions, underground storage tanks,
waste handling, and the like. While the Company cannot forecast policies that
may be adopted by various regulatory agencies, management believes that
compliance with these various laws and regulations will not have a material
adverse effect on the consolidated financial condition or results of
operations of the Company.
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 expected
remediation actions will be shared equally by the Company and a former joint
owner of the plant site.
ITEM 2. PROPERTIES
The Company has approximately 230 locations in North America, including 32
states in the United States. The Company's most important physical properties
are its manufacturing plants. These manufacturing plants include five wire
drawing mills, three welded steel tubing mills and approximately 90 major
manufacturing facilities. The balance of the Company's locations are engaged
in assembly, warehousing, sales, administration or research and development.
The Company's numerous assembly and warehousing locations are in place to
provide quick and efficient deliveries and necessary service to the Company's
diverse and geographically dispersed customer base. In addition, the Company
has several locations in foreign countries. Its corporate headquarters are
located in Carthage, Missouri. Properties of the Company include facilities
which, in the opinion of management, are suitable and adequate for the
manufacture, assembly and distribution of its products.
Most of the Company's major manufacturing plants are owned by the Company.
The Company also conducts certain of its operations in leased premises. Terms
of the leases, including purchase options, renewals and maintenance costs,
vary by lease. For additional information regarding lease obligations,
reference is made to Note E of the Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in numerous workers' compensation, product
liability, vehicle accident, employment termination, intellectual property and
other claims and legal proceedings, the resolution of which management
believes will not have a material adverse effect on the consolidated financial
condition or results of operations of the Company in the ordinary course of
business.
The Company is presently party to a small number of proceedings in which a
governmental authority is a party and which involve provisions enacted
regulating the discharge of materials into the environment. These proceedings
deal primarily with waste disposal site remediation. Management believes that
potential monetary sanctions, if imposed in any or all of these proceedings,
or any capital expenditures or operating expenses attributable to these
proceedings, will not have a material adverse effect on the consolidated
financial condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
4
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's common stock is listed on The New York and Pacific Stock
Exchanges with the trading symbol LEG. The table below highlights quarterly
and annual stock market information for the last two years.
PRICE RANGE
--------------- VOLUME OF DIVIDEND
HIGH LOW SHARES TRADED DECLARED
------- ------- ------------- --------
1996
Fourth Quarter................... $34.750 $29.375 5,277,400 $.12
Third Quarter.................... 29.500 24.125 7,070,400 .12
Second Quarter................... 29.875 22.375 6,730,300 .11
First Quarter.................... 25.750 20.625 6,039,000 .11
For the Year..................... 34.750 20.625 25,117,100 .46
1995
Fourth Quarter................... $26.875 $19.875 10,968,900 $.10
Third Quarter.................... 26.438 21.750 11,293,000 .10
Second Quarter................... 22.438 18.813 10,907,000 .09
First Quarter.................... 21.438 17.000 9,863,400 .09
For the Year..................... 26.875 17.000 43,032,300 .38
Price and volume data reflect composite transactions and prices as reported
daily by The Wall Street Journal.
At March 13, 1997 the Company had 10,818 shareholders of record.
During the fourth quarter of 1996 the Company issued 1,961,718 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 Steadley Company (1,399,289 shares) on October 16, 1996 and
Latrobe Plastics Company (562,429 shares) on November 21, 1996. The shares
were issued to the shareholders of the two companies.
ITEM 6. SELECTED FINANCIAL DATA
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(UNAUDITED)
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER
SHARE DATA)
Summary of Operations
Net sales....................... $2,466.2 $2,256.9 $2,009.1 $1,526.7 $1,315.0
Earnings from continuing
operations..................... 153.0 134.3 119.5 85.6 65.8
Earnings per share from
continuing operations.......... 1.67 1.49 1.36 1.04 .83
Cash dividends declared per
share.......................... .46 .38 .31 .27 .23
Summary of Financial Position
Total assets.................... $1,712.9 $1,478.1 $1,327.0 $1,080.1 $ 772.5
Long-term debt.................. 388.5 380.6 364.1 306.1 147.9
Merger related costs of $16.4 after-tax, or $.18 per share are included in
1996 earnings from continuing operations.
5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Company's financial position reflects several important principles and
guidelines of management's capital policy. These include management's belief
that corporate liquidity must always be adequate to support the Company's
projected growth rate. At the same time, liquidity must assure management that
the Company will be able to withstand any amount of financial adversity that
can reasonably be anticipated. Management also intends to direct capital to
strategic acquisitions and other investments that provide additional
opportunities for expansion and enhanced profitability.
Financial planning to meet these needs reflects management's belief that the
Company should never be forced to expand its capital resources, whether debt
or equity, at a time not of its choosing. Management also believes that
financial flexibility is more important than maximization of earnings per
share through excessive leverage. Therefore, management continuously provides
for available credit in excess of projected cash needs and has maintained a
guideline for long-term debt as a percentage of total capitalization in a
range of 30% to 40%.
The following table shows the Company's total capitalization at the end of
the three most recent years. The table also shows the amount of unused
committed credit available through the Company's revolving bank credit
agreements.
1996 1995 1994
-------- -------- --------
(DOLLAR AMOUNTS IN
MILLIONS)
Long-term debt outstanding:
Scheduled maturities........................ $ 332.4 $ 315.9 $ 283.1
Revolving credit/commercial paper........... 56.1 64.7 81.0
-------- -------- --------
Total long-term debt...................... 388.5 380.6 364.1
Deferred income taxes and other liabilities... 90.5 75.6 68.0
Shareholders' equity.......................... 941.1 746.8 628.3
-------- -------- --------
Total capitalization...................... $1,420.1 $1,203.0 $1,060.4
======== ======== ========
Unused committed credit....................... $ 215.0 $ 207.8 $ 169.0
Internally generated cash provided $597.8 million in capital during the last
three years. In 1996, long-term debt outstanding was 27% of total
capitalization at year-end. This compares with 32% at the end of 1995 and 34%
in 1994. As shown in the table above, obligations having scheduled maturities
are the base "layer" of the Company's debt capital. In the last three years,
these obligations consisted primarily of the Company's privately placed
medium-term notes and tax-exempt industrial development bonds, and the Pace
Holdings, Inc. (Pace) publicly owned senior notes. In June 1996, the Company
issued $100 million in medium-term notes having average maturities of 8 years
and fixed interest rates averaging 7.4%. Proceeds from these notes provided a
majority of the funds required to redeem, at 113% of par value, all of the
Pace senior notes that were to mature in almost 7 years and had fixed interest
rates of 10.625%. Funds required to refinance the balance of the senior notes
and Pace's revolving credit initially were provided through the Company's
revolving credit/commercial paper arrangements. In August 1996, the Company
issued an additional $25 million in medium-term notes with maturities of 3
years and fixed interest rates of 6.6%. Proceeds from these notes were used to
repay a portion of revolving credit/commercial paper outstanding.
In 1995, $25 million in 10-year notes were issued with fixed interest rates
of 7.0%. In 1994, $25 million in notes were issued with average lives of 8
years and fixed interest rates averaging 7.6%. During both of these years,
proceeds from the medium-term notes were used to repay a portion of the
Company's revolving credit. Since November 1994, the Company's senior debt
ratings have been maintained at single A by Standard & Poor's and single A2 by
Moody's, the two leading debt rating agencies.
The second "layer" of the Company's debt capital consists of revolving bank
credit agreements. Over the years, management has renegotiated these bank
credit agreements and established a commercial paper program
6
to continuously support the Company's projected growth and to maintain highly
flexible sources of debt capital. The credit under these arrangements has been
a long-term obligation. If needed, however, the credit is available for short-
term borrowings and repayments. Pace also had $47.2 million in revolving
credit outstanding at the end of 1995 and $22.7 million in 1994. These amounts
are included in the Company's total revolving credit/commercial paper
outstanding for each respective year shown in the preceding table. Additional
details of long-term debt, including scheduled maturities, revolving credit
and commercial paper are discussed in Note D of the Notes to Consolidated
Financial Statements.
The Company's internal investments to modernize and expand manufacturing
capacity totaled $300.1 million in the last three years. In 1997, management
anticipates internal investments will be higher than the average of these
prior years. During the last three years, the Company employed $207.2 million
in cash (net of cash acquired) and issued 10.0 million shares of common stock
in acquisitions, including 5.1 million shares to acquire Pace. During 1996, 13
businesses in addition to Pace were acquired for $89.7 million in cash (net of
cash acquired) and 2.7 million shares of common stock. Additional details of
acquisitions are discussed in Note B of the Notes to Consolidated Financial
Statements. Purchases of the Company's common stock totaled $10.1 million in
1996, $24.5 million in 1995, and $1.1 million in 1994. These purchases were
made primarily for employee stock plans, to replace shares issued in purchase
acquisitions and satisfy contractual obligations. Cash dividends on the
Company's common stock in the last three years totaled $87.6 million.
The Company has substantial capital resources to support projected internal
cash needs and additional acquisitions consistent with management's goals and
objectives. In addition, the Company has the availability of short-term
uncommitted credit from several banks.
Working capital increased $172.7 million in the last three years. To gain
additional flexibility in capital management and to improve the return on
shareholders' equity, the Company continuously seeks efficient use of working
capital. The following table shows the annual turnover on average year-end
working capital, trade receivables and inventories. The ratios may be affected
by the timing of the Company's acquisitions.
1996 1995 1994
---- ---- ----
Working capital turnover (excluding cash and cash
equivalents)........................................... 5.7x 6.0x 6.2x
Trade receivables turnover............................. 7.8 7.8 8.0
Inventory turnover..................................... 5.1 5.3 5.7
Future commitments under lease obligations are described in Note E and
contingencies are discussed in Note J of the Notes to Consolidated Financial
Statements.
RESULTS OF OPERATIONS
The results of operations during the last three years reflect various
elements of the Company's long-term growth strategy, along with general trends
in the economy and the markets the Company serves. The Company's growth
strategy continues to include internal programs and acquisitions which broaden
product lines and provide for increased market penetration and operating
efficiencies. With a continuing emphasis on the development of new and
improved products and advancements in production technologies, the Company is
able to consistently offer high quality products, competitively priced.
Trends in the general economy were favorable during the last three years. In
1996, economic growth increased, particularly near the end of the year.
Economic growth moderated during 1995. In 1994, growth increased during the
year.
In each of the last three years, acquisitions accounted for more of the
Company's sales growth than other factors. The balance of the sales growth
during this period primarily reflected increases in unit volumes, as selling
price increases were only a minor factor.
7
Inflation in prices for raw materials generally decreased in 1996, except in
foam scrap. Therefore, the Company was generally able to refrain from raising
selling prices during most of the last two years. In 1994, due to increasing
prices for raw materials, the Company increased selling prices with the
largest increases concentrated in aluminum products. Some earlier cost
increases for steel and wire products were not passed along in the Company's
selling prices until the end of 1994, or the first half of 1995.
The following table shows various measures of earnings as a percentage of
sales for the last three years. It also shows the effective income tax rate
and the coverage of interest expense by pre-tax earnings plus interest.
1996 1995 1994
---- ---- ----
Gross profit margin..................................... 25.3% 23.7% 23.5%
Pre-tax profit margin--reported......................... 10.1 9.8 9.8
Impact of non-recurring costs........................... 1.1 -- --
---- ---- ----
Excluding non-recurring costs........................... 11.2 9.8 9.8
Net profit margin--reported............................. 5.7 6.0 5.9
Impact of non-recurring costs........................... 1.2 -- --
---- ---- ----
Excluding non-recurring costs........................... 6.9 6.0 5.9
Effective income tax rate............................... 38.7 39.1 39.1
Interest coverage ratio................................. 9.3x 8.3x 8.6x
The Company's gross profit margins improved in the last two years. The
increase in 1996 reflected several favorable factors. These included continued
increases in production efficiencies, increased sales in niche markets of
products with above average margins, better manufacturing overhead absorption,
and reduced costs. The pre-tax profit margin, before non-recurring costs,
increased due to the factors noted, but reflected a slight increase in total
selling, distribution and administrative expenses. The non-recurring costs in
1996 were associated with the Pace acquisition and are discussed in Note B of
the Notes to Consolidated Financial Statements.
The slight increase in the 1995 gross profit margin primarily reflected the
Company's continuing growth in niche markets with above average margins,
increased production efficiencies and cost containment. The increase in the
gross profit margin was offset by slight increases in total selling,
distribution and administrative expenses and interest expense, as a percentage
of sales. Therefore, the pre-tax profit margin was unchanged from the previous
year.
In 1994, the gross profit margin increased from 22.8% in 1993, primarily
reflecting improved market conditions in the aluminum and foam industries and
gains in overall manufacturing efficiencies on higher volume. These favorable
factors more than offset cost/price pressures the Company continued to
experience in operations producing steel products. A reduction in total
selling, distribution and administrative expenses, as a percentage of sales,
was slightly more than offset by higher interest expense and other deductions,
net of other income.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and supplementary data included in
this Report begin on page 12.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the section entitled "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Company's definitive Proxy Statement for the Company's Annual Meeting of
Shareholders to be held on May 14, 1997, said sections being incorporated by
reference, for a description of the directors of the Company.
8
The following table sets forth the names, ages and positions of all
executive officers of the Company. Executive officers are elected annually by
the Board of Directors at the first meeting of directors following the Annual
Meeting of Shareholders.
The description of the executive officers of the Company is as follows:
NAME AGE POSITION
---- --- --------
Harry M. Cornell, Jr. 68 Chairman of the Board and Chief Executive
Officer
Felix E. Wright 61 President, Chief Operating Officer and Di-
rector
Bob L. Gaddy 56 Senior Vice President and Chairman and Chief
Executive Officer--Aluminum Group and Direc-
tor
Roger D. Gladden 51 Senior Vice President and President--
Commercial Fixtures and Displays Group
Michael A. Glauber 53 Senior Vice President, Finance and
Administration (Principal Financial Officer)
David S. Haffner 44 Executive Vice President and Director
Jerry H. Hudkins 61 Vice President and President--Wire Group
Robert A. Jefferies, Jr. 55 Senior Vice President, Mergers, Acquisitions
and Strategic Planning and Director
Ernest C. Jett 51 Vice President, Secretary and Managing Di-
rector, Legal Department
Allan J. Ross 50 Vice President, Accounting (Chief Accounting
Officer)
Duane W. Potter 65 Senior Vice President and President--Foam
Components Group and Director
Subject to the employment agreements and severance benefit agreements listed
as Exhibits to this Report, officers serve at the pleasure of the Board of
Directors.
Harry M. Cornell, Jr. has served as the Company's Chief Executive Officer,
Chairman of the Board and Chairman of the Board's Executive Committee for more
than the last five years.
Felix E. Wright has served as the Company's President and Chief Operating
Officer for more than the last five years.
Bob L. Gaddy, joined the Company in May, 1996 with the Company's acquisition
of Pace Industries, Inc. At that time he was elected a Senior Vice President
of the Company and became Chairman and Chief Executive Officer of the Aluminum
Group. From 1984 to 1993, Mr. Gaddy was President and Chief Operating Officer
of Pace Industries, Inc. and served as Chairman of the Board and Chief
Executive Officer of Pace Industries, Inc. thereafter until May, 1996.
9
Roger D. Gladden was elected Senior Vice President in 1992. He has been
President--Commercial Fixtures and Displays since 1984.
Michael A. Glauber has served as the Company's Senior Vice President,
Finance and Administration for more than the last five years.
David S. Haffner was elected Executive Vice President in 1995. He previously
served as Senior Vice President and President--Furniture and Automotive
Components Group from 1992 to 1995.
Jerry H. Hudkins has served the Company as Vice President and President--
Wire Group for more than the last five years.
Robert A. Jefferies, Jr. has served as the Company's Senior Vice President,
Mergers, Acquisitions and Strategic Planning for more than the last five
years.
Ernest C. Jett was elected Vice President and Secretary in 1995. He
previously served the Company as Assistant General Counsel from 1979 to 1995
and as Managing Director of the Legal Department since 1991.
Allan J. Ross has served the Company as Vice President, Accounting since
April, 1993. In May, 1996 Mr. Ross was designated by the Board of Directors as
the Company's Chief Accounting Officer. Prior to that time Mr. Ross served in
various accounting management positions with Monsanto Company, a chemical
manufacturing business.
Duane W. Potter was elected Senior Vice President and President--Foam
Components Group in 1995. He previously served as Senior Vice President and
President--Bedding Components Group from 1983 to 1995.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation and Related Matters" in the
Company's definitive Proxy Statement for the Company's Annual Meeting of
Shareholders to be held on May 14, 1997, is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Ownership of Common Stock" in the Company's definitive
Proxy Statement for the Company's Annual Meeting of Shareholders to be held on
May 14, 1997, is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The subsection entitled "Related Transactions" of the section entitled
"Executive Compensation and Related Matters" in the Company's definitive Proxy
Statement for the Company's Annual Meeting of Shareholders to be held on May
14, 1997 is incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE COVERED BY REPORT
OF INDEPENDENT ACCOUNTANTS
The Financial Statements listed below are included in this Report:
. Consolidated Statements of Earnings for each of the years in the
three year period ended December 31, 1996
. Consolidated Balance Sheets at December 31, 1996 and 1995
10
. Consolidated Statements of Cash Flows for each of the years in the
three year period ended December 31, 1996
. Consolidated Statements of Changes in Shareholders' Equity for each
of the years in the three year period ended December 31, 1996
. Notes to Consolidated Financial Statements
. Schedule for each of the years in the three year period ended
December 31, 1996
II--Valuation and Qualifying Accounts and Reserves
All other information schedules have been omitted as the required
information is inapplicable, not required, or the information is included in
the financial statements or notes thereto.
2. EXHIBITS--See Exhibit Index.
3. REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF 1996: None.
11
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
(DOLLAR AMOUNTS IN
MILLIONS,
EXCEPT PER SHARE DATA)
Net sales........................................... $2,466.2 $2,256.9 $2,009.1
Cost of goods sold.................................. 1,842.7 1,722.0 1,537.4
-------- -------- --------
Gross profit.................................... 623.5 534.9 471.7
Selling, distribution and administrative expenses... 303.5 272.3 239.7
Amortization of excess cost of purchased companies
and other intangibles.............................. 16.4 15.4 14.1
Interest expense.................................... 30.0 30.4 26.0
Merger expense...................................... 26.6 -- --
Other income, net of other deductions............... 2.7 3.8 4.4
-------- -------- --------
Earnings before income taxes and extraordinary
item........................................... 249.7 220.6 196.3
Income taxes........................................ 96.7 86.3 76.8
-------- -------- --------
Net earnings before extraordinary item.......... 153.0 134.3 119.5
Extraordinary item from the extinguishment of debt.. 12.5 -- --
-------- -------- --------
Net earnings.................................... $ 140.5 $ 134.3 $ 119.5
======== ======== ========
Earnings Per Share
Net earnings before extraordinary item.......... $ 1.67 $ 1.49 $ 1.36
======== ======== ========
Net earnings.................................... $ 1.53 $ 1.49 $ 1.36
======== ======== ========
The accompanying notes are an integral part of these financial statements.
12
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
------------------
1996 1995
-------- --------
(DOLLAR AMOUNTS
IN MILLIONS,
EXCEPT PER SHARE
DATA)
ASSETS
------
Current Assets
Cash and cash equivalents..................................... $ 3.7 $ 8.2
Trade receivables, less allowance of $8.6 in 1996 and $7.5 in
1995......................................................... 326.8 290.5
Other receivables............................................. 8.5 8.8
Inventories
Finished goods.............................................. 204.2 186.3
Work in process............................................. 39.4 39.1
Raw materials and supplies.................................. 147.7 136.1
LIFO reserve................................................ (11.7) (17.4)
-------- --------
Total inventories......................................... 379.6 344.1
Other current assets.......................................... 44.7 35.0
-------- --------
Total current assets...................................... 763.3 686.6
Property, Plant and Equipment--at cost
Machinery and equipment....................................... 646.7 561.5
Buildings and other........................................... 333.8 285.4
Land.......................................................... 34.6 28.6
-------- --------
1,015.1 875.5
Less accumulated depreciation................................. 432.2 364.9
-------- --------
Net property, plant and equipment......................... 582.9 510.6
Other Assets
Excess cost of purchased companies over net assets acquired,
less
accumulated amortization of $28.4 in 1996 and $21.6 in 1995.. 290.3 210.3
Other intangibles, less accumulated amortization of
$30.3 in 1996 and $24.2 in 1995.............................. 30.2 31.7
Sundry........................................................ 46.2 38.9
-------- --------
Total other assets........................................ 366.7 280.9
-------- --------
Total assets.............................................. $1,712.9 $1,478.1
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Current maturities of long-term debt.......................... $ 3.9 $ 7.5
Accounts payable.............................................. 110.3 127.5
Income taxes.................................................. 14.9 7.3
Accrued expenses.............................................. 125.2 109.8
Other current liabilities..................................... 38.5 23.0
-------- --------
Total current liabilities................................. 292.8 275.1
Long-Term Debt.................................................. 388.5 380.6
Other Liabilities............................................... 36.0 21.3
Deferred Income Taxes........................................... 54.5 54.3
Shareholders' Equity
Capital stock
Preferred stock--authorized, 100,000,000 shares; none issued
Common stock--authorized, 300,000,000 shares of $.01 par
value;
issued 92,113,786 and 89,407,103 shares in 1996 and 1995,
respectively............................................... .9 .9
Additional contributed capital................................ 240.2 164.0
Retained earnings............................................. 704.4 601.6
Cumulative translation adjustment............................. (4.2) (5.0)
Less treasury stock--at cost (6,270 and 644,539 shares in
1996 and 1995, respectively)................................. (.2) (14.7)
-------- --------
Total shareholders' equity................................ 941.1 746.8
-------- --------
Total liabilities and shareholders' equity................ $1,712.9 $1,478.1
======== ========
The accompanying notes are an integral part of these financial statements.
13
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
(DOLLAR AMOUNTS IN
MILLIONS)
Operating Activities
Net earnings...................................... $ 140.5 $ 134.3 $ 119.5
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation.................................... 75.8 62.6 52.5
Amortization.................................... 16.4 15.4 14.1
Merger expense (non-cash portion)............... 24.4 -- --
Extraordinary item (non-cash portion)........... 4.0 -- --
Stock and deferred compensation................. 14.2 4.9 3.5
Deferred income tax benefit..................... (13.4) (1.9) (4.8)
Other........................................... .5 (2.8) .8
Other changes, net of effects from purchases of
companies
(Increase) decrease in accounts receivable,
net.......................................... (17.0) 1.0 (42.9)
(Increase) in inventories..................... (10.3) (35.8) (35.2)
Decrease (increase) in other current assets... .7 (5.0) (6.7)
Increase in current liabilities............... 2.3 15.1 71.1
------- ------- -------
Net Cash Provided by Operating Activities... 238.1 187.8 171.9
Investing Activities
Additions to property, plant and equipment........ (96.2) (106.8) (97.1)
Purchases of companies, net of cash acquired...... (89.7) (28.6) (88.9)
Other............................................. (3.1) .5 (.1)
------- ------- -------
Net Cash Used for Investing Activities...... (189.0) (134.9) (186.1)
Financing Activities
Additions to debt................................. 292.9 108.7 68.4
Payments on debt.................................. (309.4) (100.4) (30.0)
Dividends paid.................................... (30.3) (31.9) (25.4)
Issuances of common stock......................... 5.0 3.0 2.2
Purchases of common stock......................... (10.1) (24.5) (1.1)
Other............................................. (1.7) (2.6) 2.4
------- ------- -------
Net Cash (Used for) Provided by Financing
Activities................................. (53.6) (47.7) 16.5
------- ------- -------
(Decrease) Increase in Cash and Cash Equivalents.... (4.5) 5.2 2.3
Cash and Cash Equivalents--Beginning of Year........ 8.2 3.0 .7
------- ------- -------
Cash and Cash Equivalents--End of Year.............. $ 3.7 $ 8.2 $ 3.0
======= ======= =======
Supplemental Information
Interest paid..................................... $ 28.8 $ 30.8 $ 24.9
Income taxes paid................................. 92.8 90.3 69.8
Liabilities assumed of acquired companies......... 47.3 21.7 40.4
Common stock issued for acquired companies........ 58.3 18.3 13.8
Stock issued for employee stock plans............. 39.4 17.4 8.2
The accompanying notes are an integral part of these financial statements.
14
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
ADDITIONAL CUMULATIVE TREASURY STOCK
COMMON CONTRIBUTED RETAINED TRANSLATION ---------------
STOCK CAPITAL EARNINGS ADJUSTMENT COST SHARES
------ ----------- -------- ----------- ----- --------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
Balances--January 1,
1994................... $.4 $116.2 $401.1 $(2.8) $ (.3) 7,578
Common stock issued,
primarily for
employee stock plans
(1,282,213 shares)... 17.0
Treasury stock issued
for employee stock
plans................ (.1) 2.1 (47,773)
Treasury stock
purchased, primarily
for employee stock
plans................ (2.1) 51,260
Tax benefit related to
stock options........ .5
Translation
adjustment........... (3.3)
Retained earnings of
pooled companies at
date of acquisition.. 5.5
Net earnings for the
year................. 119.5
Cash dividends
declared ($.31 per
share)............... (25.4)
--- ------ ------ ----- ----- --------
Balances--December 31,
1994................... .4 133.6 500.7 (6.1) (.3) 11,065
Common stock issued
for acquired
companies and
employee stock plans
(890,257 shares)..... .1 32.6
Treasury stock issued
for employee stock
plans................ (2.3) 11.4 (372,906)
Treasury stock
purchased, primarily
for employee stock
plans and to replace
shares issued for
purchased companies.. (25.8) 887,712
Tax benefit related to
stock options........ .5
Additional shares
issued in two-for-one
stock split effected
in the form of a
stock dividend
September 15, 1995
(42,194,946 shares).. .4 (.4) 118,668
Translation
adjustment........... 1.1
Retained earnings of
pooled company at
date of acquisition.. (1.5)
Net earnings for the
year................. 134.3
Cash dividends
declared ($.38 per
share)............... (31.9)
--- ------ ------ ----- ----- --------
Balances--December 31,
1995................... .9 164.0 601.6 (5.0) (14.7) 644,539
Common stock issued
for acquired
companies and
employee stock plans
(2,994,676 shares)... 90.2
Treasury stock issued
for employee stock
plans................ (5.7) 17.5 (747,033)
Treasury stock
purchased, primarily
shares received in
stock-for-stock
option exercises and
shares to replace
those issued for
purchased companies.. (3.0) 108,764
Treasury stock
purchased under
contractual
agreements and
effectively retired
(287,993 shares)..... (9.6)
Tax benefit related to
stock options........ 1.3
Translation
adjustment........... .8
Retained earnings of
pooled company at
date of acquisition.. 3.6
Net earnings for the
year................. 140.5
Cash dividends
declared ($.46 per
share)............... (41.3)
--- ------ ------ ----- ----- --------
Balances--December 31,
1996................. $.9 $240.2 $704.4 $(4.2) $ (.2) 6,270
=== ====== ====== ===== ===== ========
The accompanying notes are an integral part of these financial statements.
15
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Leggett & Platt, Incorporated (Leggett & Platt) and its
majority-owned subsidiaries (the Company). All significant intercompany
transactions and accounts have been eliminated in consolidation.
Cash Equivalents: Cash equivalents include cash in excess of daily
requirements which is invested in various financial instruments with original
maturities of three months or less.
Inventories: All inventories are stated at the lower of cost or market. Cost
includes materials, labor and production overhead. Cost is determined by the
last-in, first-out (LIFO) method for approximately 55% of the inventories at
December 31, 1996 and 1995. The first-in, first-out (FIFO) method is
principally used for the remainder. The FIFO cost of inventories at December
31, 1996 and 1995 approximated replacement cost.
Depreciation, Amortization and Asset Impairment: Property, plant and
equipment are depreciated by the straight-line method. The rates of
depreciation range from 6.7% to 25% for machinery and equipment, 2.5% to 6.7%
for buildings and 12.5% to 33% for other items. Accelerated methods are used
for tax purposes. The excess cost of purchased companies over net assets
acquired is amortized by the straight-line method over forty years. Other
intangibles are amortized by the straight-line method over their estimated
lives. Long-lived assets, including intangibles, are evaluated for probable
recovery of their carrying amount. Appropriate adjustment, using current
market prices, estimates of discounted future cash flows and other methods, is
made when recovery of the carrying amount is not reasonably assured.
Computations of Earnings Per Share: Earnings per share is based on the
weighted average number of common and common equivalent shares outstanding.
Common stock equivalents result principally from the assumed issuance of
shares under stock option plans.
Concentration of Credit Risks, Exposures and Financial Instruments: The
Company specializes in manufacturing, marketing, and distributing components
and other related products for furnishings and diversified markets. The
Company's operations are principally in the United States, although the
Company also has manufacturing subsidiaries in Canada, Europe and Mexico and
marketing and distribution operations in other areas.
The Company performs ongoing credit evaluations of its customers' financial
conditions and, generally, requires no collateral from its customers, some of
which are highly leveraged. The Company maintains allowances for potential
credit losses and such losses have generally been within management's
expectations.
From time to time, the Company will enter into forward exchange contracts to
hedge equipment purchases and other commitments in foreign currencies. The
amounts outstanding under the forward contracts at any point in time are not
significant to the Company. The Company has minimal continuing exposures to
other foreign currency transactions and interest rate fluctuations.
The carrying value of cash and short-term financial instruments approximates
fair value due to the short maturity of those instruments. The carrying value
of all other long-term debt approximates fair value due to the use of variable
interest rates and fixed rate debt which approximates current interest rates.
Other Risks: The Company obtains insurance for workers' compensation,
automobile, product and general liability, property loss and medical claims.
However, the Company has elected to retain a significant portion of expected
losses through the use of deductibles. Provisions for losses expected under
these programs are recorded based upon the Company's estimates of the
aggregate liability for claims incurred. These estimates utilize the Company's
prior experience and actuarial assumptions that are provided by the Company's
insurance carrier.
16
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Income Taxes: The Company provides for taxes on undistributed earnings of
foreign subsidiaries where appropriate. The tax effect of most such
distributions would be significantly offset by available foreign tax credits.
Stock-Based Compensation: The Company applies the intrinsic value based
method of accounting prescribed by APB Opinion No. 25 and related
interpretations in accounting for stock-based compensation plans. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the
amount an employee must pay to acquire the stock.
Foreign Currency Translation: The functional currency for most foreign
operations is the local currency. The translation of foreign currencies into
U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for income and expense accounts
using monthly average exchange rates. The cumulative effects of translating
the functional currencies into the U.S. dollar are included in shareholders'
equity. Foreign entities whose functional currency is the U.S. dollar are not
significant.
B--ACQUISITIONS
On May 13, 1996, the Company issued 5,134,092 shares of common stock to
acquire Pace Holdings, Inc. (Pace) in a transaction accounted for as a pooling
of interests. Pace is a leading manufacturer and marketer of non-automotive
aluminum die cast components. Previously issued financial statements were
restated to reflect the pooling. Results of operations for the separate and
combined companies prior to the pooling are as follows:
THREE MONTHS TWELVE MONTHS
ENDED ENDED
MARCH 31, DECEMBER 31,
1996 1995
------------ -------------
Net sales
Leggett & Platt.............................. $524.2 $2,059.3
Pace......................................... 67.0 197.6
------ --------
Combined................................... $591.2 $2,256.9
====== ========
Net earnings
Leggett & Platt.............................. $ 36.4 $ 134.9
Pace......................................... 1.3 .4
Restatement Adjustments...................... -- (1.0)
------ --------
Combined................................... $ 37.7 $ 134.3
====== ========
Included in the restatement adjustments is the impact of conforming
inventory accounting principles used by the Company's aluminum operations to
those of Pace.
In connection with a 1993 leveraged buyout transaction, Pace adopted an
employee stock option/bonus plan that provided for the granting of options,
under certain conditions, at an exercise price of $.01 per Pace share. In
17
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
May 1996, prior to the acquisition, options were granted and exercised under
the plan resulting in compensation expense of $12 before taxes. Other merger
expense, including costs for the accrual of commitments under contracts no
longer benefiting the Company and legal and environmental issues, was $14.6
before taxes in 1996.
Following the acquisition, the Company issued a tender offer to all holders
of the Pace 10.625% senior notes disclosed in Note D. In June 1996, the notes
were redeemed at approximately 113% of par value, plus accrued interest. The
cash required for the redemption was provided through the issuance of medium
term notes and the Company's revolving credit agreements. The Company
recognized an extraordinary charge, net of related tax benefits, of $12.5 from
the extinguishment of debt.
Also during 1996, the Company acquired the assets of twelve companies in
transactions accounted for as purchases. These transactions required the use
of $89.7 in cash, net of cash acquired, and 2,128,124 shares of common stock
and common stock equivalents. In addition, the Company issued 562,429 shares
to acquire another business in a transaction accounted for as a pooling of
interests. The Company elected not to restate its financial statements as the
effect of this pooling was not material. These acquired businesses manufacture
and distribute products to the furnishings and diversified markets.
Pro forma consolidated net sales for the years ended December 31, 1996 and
1995 as though the 1996 acquisitions, except Pace, had occurred on January 1
of each year presented were $2,566.8 and $2,464.7, respectively. Pro forma
consolidated net earnings and earnings per share are not materially different
from the amounts reflected in the accompanying financial statements. These pro
forma amounts are not necessarily indicative of either results of operations
that would have occurred had the purchases been made on January 1 of each year
or of future results of the combined companies.
During 1995, the Company acquired the assets of nine companies that
primarily manufacture and distribute components to the furnishings industry.
These transactions, accounted for as purchases, resulted in the use of $28.6
in cash, net of cash acquired, and 642,441 shares of common stock. The Company
also issued 325,000 shares of common stock to acquire a business in a
transaction accounted for as a pooling of interests. The Company elected not
to restate its financial statements as the effect of the pooling was not
material. This company manufactures and distributes formed wire products to
the furnishings industry.
During 1994, the Company acquired certain assets of eight companies in
exchange for $78.8 in cash, net of cash acquired, and 44,756 shares of common
stock in transactions accounted for as purchases. These companies primarily
specialize in manufacturing and distributing components and certain other
products to the furnishings industry. The Company also issued 1,156,872 shares
of common stock to acquire two companies during the year in transactions
accounted for as poolings of interests. The Company elected not to restate its
financial statements as the effect of the poolings was not material. The
pooled companies specialize in manufacturing and distributing point-of-
purchase store displays and other formed wire products to the furnishings and
diversified industries.
The results of operations of the above acquired companies, except the 1996
Pace pooling, have been included in the consolidated financial statements
since the dates of acquisition.
18
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
C--ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at December 31 consist of the
following:
1996 1995
------ ------
Accrued expenses
Wages and commissions payable............................ $ 33.9 $ 29.4
Workers' compensation, medical, auto and product
liability insurance..................................... 37.5 36.9
Sales promotions......................................... 13.7 12.2
Other.................................................... 40.1 31.3
------ ------
$125.2 $109.8
====== ======
Other current liabilities
Outstanding checks in excess of book balances............ $ 19.1 $ 16.3
Other.................................................... 19.4 6.7
------ ------
$ 38.5 $ 23.0
====== ======
D--LONG-TERM DEBT
Long-term debt, weighted average interest rates and due dates at December 31
are as follows:
1996 1995
------ ------
Medium-term notes, fixed interest rates of 6.8% and 6.5%
for 1996 and 1995, respectively, due dates through 2008.. $250.0 $127.5
Pace senior notes, fixed interest rates of 10.625% for
1995..................................................... -- 115.0
Pace revolving credit agreements, variable interest rates
of 8.2% for 1995, secured................................ -- 47.2
Commercial paper, variable interest rates of 6.6% and 6.0%
for 1996 and 1995, respectively, due dates in 1997 and
1996..................................................... 56.1 17.5
Industrial development bonds, principally variable
interest rates of 4.6% and 5.5% for 1996 and 1995,
respectively, due dates through 2030..................... 38.9 39.6
Other, partially secured.................................. 47.4 41.3
------ ------
392.4 388.1
Less current maturities................................... 3.9 7.5
------ ------
$388.5 $380.6
====== ======
Pace senior notes and revolving credit agreements were refinanced during
1996 as discussed in Note B.
The current revolving credit agreements provide for a maximum line of credit
of $215. For any revolving credit agreement, the Company may elect to pay
interest based on 1) the bank's base lending rate, 2) LIBOR, 3) an adjusted
certificate of deposit rate, or 4) the money market rate, as specified in the
revolving agreements. The agreements will terminate during 2000, at which time
all outstanding balances will become due. Annual facility fees are 1/10 of 1%
of the total credit line, payable on a quarterly basis.
Commercial paper and medium-term notes that mature in the current year are
classified as long-term debt since the Company intends to refinance them on a
long-term basis either through continued issuance or unused credit available
under the revolving credit agreements.
19
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The revolving credit agreements and certain other long-term debt contain
restrictive covenants which, among other restrictions, limit the amount of
additional debt, require working capital to be maintained at specified amounts
and restrict payments of dividends. Unrestricted retained earnings available
for dividends at December 31, 1996 were approximately $184.9.
Maturities of long-term debt for each of the five years following 1996 are:
Year ended December 31,
1997............................ $ 3.9
1998............................ 8.4
1999............................ 4.3
2000............................ 144.4
2001............................ 53.0
E--LEASE OBLIGATIONS
The Company conducts certain of its operations in leased premises and also
leases most of its automotive and trucking equipment and some other assets.
Terms of the leases, including purchase options, renewals and maintenance
costs, vary by lease.
Total rental expense entering into the determination of results of
operations was $24.3, $22.7 and $21.1 for the years ended December 31, 1996,
1995 and 1994, respectively.
Future minimum rental commitments for all long-term noncancelable operating
leases are as follows:
Year ended December 31,
1997............................. $13.7
1998............................. 9.5
1999............................. 7.0
2000............................. 5.0
2001............................. 3.2
Later years........................ 4.2
-----
$42.6
=====
The above lease obligations expire at various dates through 2010. Certain
leases contain renewal and/or purchase options. Aggregate rental commitments
above include renewal amounts where it is the intention of the Company to
renew the lease.
F--CAPITAL STOCK
At December 31, 1996, the Company had 6,197,540 common shares authorized for
issuance under stock option plans. Generally, options become exercisable in
varying installments, beginning 6 to 18 months after the date of grant, and
have a maximum term of 5-15 years. Options exercisable were 1,826,827,
1,656,270 and 1,077,572 at December 31, 1996, 1995 and 1994, respectively. The
weighted average exercise price for these shares was $9.06, $10.27 and $8.04
for 1996, 1995 and 1994, respectively. Options may be issued with exercise
prices at or below market price. Compensation cost charged against income
related to the Company's stock option grants for each of the years ending
December 31, 1996, 1995 and 1994 was $13.7, $2.4 and $1.5 respectively.
Compensation cost includes amounts for options granted under the deferred
compensation plan for certain executives, which allows the executive to elect
stock options in lieu of future salary and bonuses. Had compensation cost for
the Company's stock-based compensation plans been determined based on the
estimated
20
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
fair value of the options at the grant dates, consistent with the method of
FASB Statement No. 123, the Company's net income and earnings per share would
not be significantly reduced. The Company does not anticipate that FASB
Statement No. 123's method of determining compensation cost will have a
significant impact in future years.
A summary of the Company's stock option plans as of December 31, 1996, 1995
and 1994, and changes during the years ending on those dates is presented
below:
WEIGHTED
AVERAGE
EXERCISE PRICE
SHARES PER SHARE
--------- --------------
Outstanding at
January 1, 1994................................ 2,837,172 $11.20
Granted....................................... 368,862 8.91
Exercised..................................... (320,064) 7.94
Forfeited..................................... (104,714) 13.61
---------
Outstanding at
December 31, 1994.............................. 2,781,256 11.17
Granted....................................... 344,800 9.44
Exercised..................................... (418,533) 10.55
Forfeited..................................... (75,134) 15.94
---------
Outstanding at
December 31, 1995.............................. 2,632,389 10.87
Granted....................................... 2,477,157 20.27
Exercised..................................... (671,310) 11.22
Forfeited..................................... (42,584) 20.89
---------
Outstanding at
December 31, 1996.............................. 4,395,652 16.01
=========
The weighted average fair value per share at date of grant for options
granted at an exercise price equal to market value was $5.05 and $4.62 for 1996
and 1995, respectively. The weighted average exercise price for these shares
was $23.77 and $21.03 for 1996 and 1995, respectively. The weighted average
fair value per share at date of grant for options granted at an exercise price
below market value was $16.87 and $14.27 for 1996 and 1995, respectively. The
weighted average exercise price for these shares was $13.52 and $6.57 in 1996
and 1995, respectively. The fair value of options at date of grant were
estimated using the Black-Scholes option-pricing model with the following
weighted average assumptions: risk-free interest rate of approximately 6.0%;
expected life of approximately 4 years; expected volatility of 19% and expected
dividend yield of 1.7%.
The following table summarizes information about stock options outstanding at
December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- --------------------------
WEIGHTED-AVERAGE
REMAINING WEIGHTED- WEIGHTED-
RANGE OF NUMBER CONTRACTUAL LIFE AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING IN YEARS EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
$ .01-
$ .50 424,074 14 $ .20 348,378 $ .23
3.63-
6.28 358,108 2 5.95 358,108 5.95
9.56-
11.50 928,736 1 11.36 928,736 11.36
15.00-
20.00 857,190 4 17.16 75,862 17.94
20.38-
25.00 1,502,288 4 22.64 115,743 21.00
25.88-
30.88 325,256 9 27.36 -- --
21
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has also authorized shares for issuance in connection with
certain employee stock benefit plans discussed in Note G.
In 1993, the Company's shareholders approved an amendment to the Company's
Restated Articles of Incorporation reducing the par value of Common Stock to
$.01 from $1. The amendment provided that the stated capital of the Company
would not be affected as of the date of the amendment. Accordingly, stated
capital of the Company exceeds the amount reported as common stock in the
financial statements by approximately $39.
In 1989, the Company declared a dividend distribution of one preferred stock
purchase right (a Right) for each share of common stock. The Rights are
attached to and traded with the Company's common stock. The Rights may only
become exercisable under certain circumstances involving actual or potential
acquisitions of the Company's common stock. Depending upon the circumstances,
if the Rights become exercisable, the holder may be entitled to purchase
shares of Series A junior preferred stock of the Company, shares of the
Company's common stock or shares of common stock of the acquiring entity. The
Rights remain in existence until February 15, 1999, unless they are exercised,
exchanged or redeemed at an earlier date.
G--EMPLOYEE BENEFIT PLANS
The Company sponsors contributory and non-contributory pension and
retirement plans. Substantially all employees, other than union employees
covered by multiemployer plans under collective bargaining agreements, are
eligible to participate in the plans. Retirement benefits under the
contributory plans are based on career average earnings. Retirement benefits
under the non-contributory plans are based on years of service, employees'
average compensation and social security benefits. It is the Company's policy
to fund actuarially determined costs as accrued.
Information at December 31, 1996, 1995 and 1994 as to the funded status of
Company sponsored defined benefit plans, net pension income from the plans for
the years then ended and weighted average assumptions used in the calculations
are as follows:
1996 1995 1994
------ ------ ------
Funded Status
Actuarial present value of benefit obligations
Vested benefits................................. $(64.5) $(58.8) $(50.5)
Nonvested benefits.............................. (.8) (.6) (.6)
------ ------ ------
Accumulated benefit obligations................... (65.3) (59.4) (51.1)
Provision for future compensation increases....... (3.9) (3.1) (3.6)
------ ------ ------
Projected benefit obligations..................... (69.2) (62.5) (54.7)
Plan assets at fair value......................... 98.8 87.1 75.2
------ ------ ------
Plan assets in excess of projected benefit
obligations...................................... 29.6 24.6 20.5
Unrecognized net experience gain.................. (7.6) (3.4) (.4)
Unrecognized net transition asset................. (2.7) (3.4) (4.1)
------ ------ ------
Prepaid pension costs included in other assets.. $ 19.3 $ 17.8 $ 16.0
====== ====== ======
Components of Pension Income (Expense)
Service cost...................................... $ (1.7) $ (.8) $ (1.3)
Interest cost..................................... (4.5) (4.1) (3.5)
Actual return on plan assets...................... 12.4 12.5 (1.9)
Net amortization and deferral..................... (4.7) (5.8) 9.0
------ ------ ------
Net pension income from defined benefit plans... $ 1.5 $ 1.8 $ 2.3
====== ====== ======
Weighted Average Assumptions
Discount rate..................................... 7.25% 7.25% 7.50%
Rate of increase in compensation levels........... 5.19% 5.18% 5.17%
Expected long-term rate of return on plan assets.. 8.00% 8.00% 8.00%
====== ====== ======
22
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Plan assets are invested in a diversified portfolio of equity, debt and
government securities, including 588,000 shares of the Company's common stock
at December 31, 1996.
Contributions to union sponsored, defined benefit, multiemployer pension
plans were $.2 in 1996, 1995 and 1994. These plans are not administered by the
Company and contributions are determined in accordance with provisions of
negotiated labor contracts. As of 1996, the actuarially computed values of
vested benefits for these plans were primarily equal to or less than the net
assets of the plans. Therefore, the Company would have no material withdrawal
liability. However, except for a recent acquisition, the Company has no
present intention of withdrawing from any of these plans, nor has the Company
been informed that there is any intention to terminate such plans.
Net pension (expense) income, including Company sponsored defined benefit
plans, multiemployer plans and other plans, was $(.4), $.2 and $.9 in 1996,
1995 and 1994, respectively.
The Company also has a contributory stock purchase/stock bonus plan (SPSB
Plan), a non-qualified executive stock purchase program (ESPP) and an
employees' discount stock plan (DSP). The SPSB Plan provides Company pre-tax
contributions of 50% of the amount of employee contributions. The ESPP
provides cash payments of 50% of the employees' contributions, along with an
additional payment to assist employees in paying taxes on the cash payments.
To the extent possible, contributions to the ESPP are invested in the
Company's common stock through the DSP. In addition, the Company matches its
contributions when certain profitability levels, as defined in the SPSB Plan
and the ESPP, have been attained. The Company's total contributions to the
SPSB Plan and the ESPP were $4.7, $4.3 and $3.3 for 1996, 1995 and 1994,
respectively.
Under the DSP, eligible employees may purchase a maximum of 8,000,000 shares
of Company common stock. The purchase price per share is 85% of the closing
market price on the last business day of each month. Shares purchased under
the DSP were 504,605, 506,613 and 415,408 during 1996, 1995 and 1994,
respectively. Purchase prices ranged from $15 to $29 per share. Since
inception of the DSP in 1982, a total of 5,667,452 shares have been purchased
by employees.
H--INCOME TAXES
The components of earnings before income taxes and extraordinary item are as
follows:
YEAR ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
Domestic............................................. $218.0 $198.7 $179.9
Foreign.............................................. 31.7 21.9 16.4
------ ------ ------
$249.7 $220.6 $196.3
====== ====== ======
23
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense is comprised of the following components:
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995 1994
------ ----- -----
Current
Federal........................................... $ 86.3 $71.1 $64.0
State and local................................... 12.1 9.7 11.0
Foreign........................................... 11.7 7.4 6.6
------ ----- -----
110.1 88.2 81.6
Deferred
Federal........................................... (12.8) (3.7) (4.6)
State and local................................... (.5) 1.2 .3
Foreign........................................... (.1) .6 (.5)
------ ----- -----
(13.4) (1.9) (4.8)
------ ----- -----
$ 96.7 $86.3 $76.8
====== ===== =====
In addition to the above income tax expense, the Company recognized a current
benefit from an extraordinary item of $7.7 in 1996.
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities. The major temporary differences that give rise to deferred tax
assets or liabilities at December 31, 1996 and 1995, are as follows:
DECEMBER 31,
--------------
1996 1995
------ ------
Property, plant and equipment............................ $(47.9) $(41.5)
Accrued expenses......................................... 42.8 29.9
Prepaid pension cost..................................... (7.7) (6.9)
Intangible assets........................................ 2.6 (2.1)
Other, net............................................... (14.4) (11.2)
------ ------
$(24.6) $(31.8)
====== ======
Deferred tax assets and liabilities included in the consolidated balance
sheet are as follows:
DECEMBER 31,
--------------
1996 1995
------ ------
Other current assets...................................... $ 29.9 $ 22.5
Deferred income taxes..................................... (54.5) (54.3)
------ ------
$(24.6) $(31.8)
====== ======
Income tax expense, as a percentage of earnings before income taxes and
extraordinary item, differs from the statutory federal income tax rate as
follows:
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
Statutory federal income tax rate............. 35.0% 35.0% 35.0%
Increases in rate resulting primarily from
state and other jurisdictions................ 3.7 4.1 4.1
------- ------- -------
Effective tax rate............................ 38.7% 39.1% 39.1%
======= ======= =======
24
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
I--INDUSTRY SEGMENT INFORMATION
The Company's operations principally consist of manufacturing and marketing
components and related finished products for the furnishings industry. In
addition, the Company supplies a diversified group of industries with products
which are similar in manufacturing technology to its furnishings operations.
Other than furnishings, no industry segment is significant.
Operating profit is determined by deducting from net sales the cost of goods
sold and the selling, distribution, administrative and other expenses
attributable to the segment operations. Operating profit was reduced in the
furnishings segment by $18.8 and the diversified group by $7.8 because of non-
recurring merger costs for the Pace acquisition. Corporate expenses not
allocated to the segments include corporate general and administrative
expenses, interest expense and certain other income and deduction items which
are incidental to the Company's operations. Capital expenditures, as defined
herein, include amounts relating to acquisitions as well as internal
expenditures. The identifiable assets of industry segments are those used in
the Company's operations of each segment. Corporate identifiable assets
include cash, land, buildings and equipment used in conjunction with corporate
activities and sundry assets. Financial information by segment is as follows:
YEAR ENDED DECEMBER 31, FURNISHINGS DIVERSIFIED CORPORATE CONSOLIDATED
----------------------- ----------- ----------- --------- ------------
1996
Net sales.............. $1,900.5 $565.7 $ -- $2,466.2
Operating profit....... 243.1 53.9 (47.3) 249.7
Capital expenditures... 117.5 27.5 5.4 150.4
Depreciation and
amortization expense.. 71.0 18.4 2.8 92.2
Identifiable assets.... 1,313.0 363.9 36.0 1,712.9
1995
Net sales.............. $1,727.8 $529.1 $ -- $2,256.9
Operating profit....... 214.1 51.5 (45.0) 220.6
Capital expenditures... 94.7 26.9 4.2 125.8
Depreciation and
amortization expense.. 58.7 15.9 3.4 78.0
Identifiable assets.... 1,134.2 290.0 53.9 1,478.1
1994
Net sales.............. $1,522.4 $486.7 $ -- $2,009.1
Operating profit....... 171.9 60.0 (35.6) 196.3
Capital expenditures... 98.4 31.8 3.9 134.1
Depreciation and
amortization expense.. 48.9 15.1 2.6 66.6
Identifiable assets.... 983.9 295.8 47.3 1,327.0
The Company's areas of operation outside of the United States principally
include Canada, Europe and Mexico, none of which is significant to
consolidated operations. A mid-year 1996 acquisition increased foreign
identifiable assets to 13% of total assets. Prior years' net sales and
identifiable assets were not significant. Information about the Company's
operations in different geographic locations for 1996 follows:
UNITED
STATES FOREIGN CORPORATE CONSOLIDATED
-------- ------- --------- ------------
Net sales......................... $2,304.8 $161.4 $ -- $2,466.2
Inter-area sales.................. 7.5 65.6 -- 73.1
Operating profit.................. 261.3 35.7 (47.3) 249.7
Identifiable assets............... 1,446.1 230.8 36.0 1,712.9
25
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
J--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 is still under appeal.
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.
26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Leggett & Platt, Incorporated:
In our opinion, the financial statements listed in the index appearing under
Item 14 on pages 10 and 11 present fairly, in all material respects, the
financial position of Leggett & Platt, Incorporated and Subsidiaries at
December 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
St. Louis, Missouri
February 5, 1997
27
LEGGET & PLATT, INCORPORATED AND SUBSIDIARIES
QUARTERLY SUMMARY OF EARNINGS
(UNAUDITED)
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1996 FIRST SECOND THIRD FOURTH TOTAL
- ---------------------------- ------ ------ ------ ------ --------
Net sales................................. $591.2 $620.0 $628.6 $626.4 $2,466.2
Gross profit.............................. 144.6 157.6 157.3 164.0 623.5
Earnings before income taxes and
extraordinary item....................... 61.4 43.8 71.9 72.6 249.7
Net earnings before extraordinary item.... 37.7 26.6 44.0 44.7 153.0
Net earnings.............................. 37.7 14.1 44.0 44.7 140.5
====== ====== ====== ====== ========
Earnings per share
Net earnings before extraordinary item.. $ .42 $ .29 $ .48 $ .48 $ 1.67
====== ====== ====== ====== ========
Net earnings............................ $ .42 $ .15 $ .48 $ .48 $ 1.53
====== ====== ====== ====== ========
YEAR ENDED DECEMBER 31, 1995
- ----------------------------
Net sales................................. $579.5 $584.5 $551.3 $541.6 $2,256.9
Gross profit.............................. 137.2 137.8 128.4 131.5 534.9
Earnings before income taxes.............. 59.3 57.5 51.1 52.7 220.6
Net earnings.............................. 35.7 34.3 31.6 32.7 134.3
====== ====== ====== ====== ========
Earnings per share........................ $ .40 $ .38 $ .35 $ .36 $ 1.49
====== ====== ====== ====== ========
Previously reported 1995 and first quarter 1996 amounts have been restated
to reflect the May 1996 pooling of interests.
Merger related costs of $26.6 pre-tax and $16.4 after-tax, or $.18 per share
are included in 1996 second quarter net earnings before extraordinary item.
28
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(AMOUNTS IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ --------- ---------- ----------
ADDITIONS
CHARGED
BALANCE AT TO COST BALANCE AT
BEGINNING OF AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ------------ --------- ---------- ----------
Year ended December 31, 1996
Allowance for doubtful
receivables.................... $7.5 $4.8 $3.7(A) $8.6
==== ==== ==== ====
Year ended December 31, 1995
Allowance for doubtful
receivables.................... $8.1 $5.8 $6.4(A) $7.5
==== ==== ==== ====
Year ended December 31, 1994
Allowance for doubtful
receivables.................... $7.8 $5.7 $5.4(A) $8.1
==== ==== ==== ====
- --------
(A) Uncollectible accounts charged off, net of recoveries.
29
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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
/s/ Harry M. Cornell, Jr.
By:__________________________________
Harry M. Cornell, Jr.
Chairman of the Board and Chief
Executive Officer
Dated: March 27, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
(A) PRINCIPAL EXECUTIVE OFFICER:
/s/ Harry M. Cornell, Jr. Chairman of the Board and March 27, 1997
____________________________________ Chief Executive Officer
Harry M. Cornell, Jr.
(B) PRINCIPAL FINANCIAL OFFICER:
/s/ Michael A. Glauber Senior Vice President, March 27, 1997
____________________________________ Finance & Administration
Michael A. Glauber
(C) PRINCIPAL ACCOUNTING OFFICER:
/s/ Allan J. Ross Vice President, Accounting March 27, 1997
____________________________________
Allan J. Ross
(C) DIRECTORS:
Raymond F. Bentele* Director
____________________________________
Raymond F. Bentele
Robert Ted Enloe, III* Director
____________________________________
Robert Ted Enloe, III
Richard T. Fisher* Director
____________________________________
Richard T. Fisher
30
Bob L. Gaddy* Director
____________________________________
Bob L. Gaddy
David S. Haffner* Director
____________________________________
David S. Haffner
Thomas A. Hays* Director
____________________________________
Thomas A. Hays
Robert A. Jefferies, Jr.* Director
____________________________________
Robert A. Jefferies, Jr.
Alexander M. Levine* Director
____________________________________
Alexander M. Levine
Richard L. Pearsall* Director
____________________________________
Richard L. Pearsall
Duane W. Potter* Director
____________________________________
Duane W. Potter
Maurice E. Purnell, Jr.* Director
____________________________________
Maurice E. Purnell, Jr.
Felix E. Wright* Director
____________________________________
Felix E. Wright
/s/ Ernest C. Jett March 27, 1997
*By ___________________________
Ernest C. Jett
Attorney-in-Fact pursuant to
Power of
Attorney dated March 14, 1997
31
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- ----------
3.1 The Restated Articles of Incorporation of the Compa-
ny, filed as Exhibit 3 to Registrant's Form 10-Q for
the quarter ended June 30, 1987, are incorporated by
reference.
3.2 Amendment to Restated Articles of Incorporation of
the Company, filed as Exhibit 3.1 to Form S-4 (Regis-
tration No. 33-66238 which was filed with the Securi-
ties and Exchange Commission on July 19, 1993), is
incorporated by reference.
3.3 By-Laws of the Company as amended and restated as of
August 11, 1993, filed as Exhibit 3.2 to Registrant's
Form 10-Q for the quarter ended June 30, 1993, are
incorporated by reference.
4.1 Article III of Registrant's Restated Articles of In-
corporation, filed as Exhibit 3.1 above, is incorpo-
rated by reference.
4.2 Rights Agreement dated February 15, 1989 between Reg-
istrant and The Chase Manhattan Bank, N.A., pertain-
ing to preferred stock rights distributed by Regis-
trant, filed as Exhibit 1 to Registrant's Form 8-A
dated February 15, 1989, and Amendment No. 1 to
Rights Agreement dated August 29, 1994, filed as Ex-
hibit 3 to Registrant's Form 8-A/A dated September 8,
1994, are incorporated by reference.
4.2A Letter Agreement dated December 18, 1991 between Reg-
istrant and Mellon Securities Trust Company
("Mellon") relating to appointment of Mellon as
Rights Agent under the Rights Agreement, filed as Ex-
hibit 4.2A to Registrant's Form 10-K for the year
ended December 31, 1991, is incorporated by refer-
ence.
10.1(1) Restated and Amended Employment Agreement between
Harry M. Cornell, Jr. and Leggett & Platt, Incorpo-
rated dated as of August 14, 1996.
10.2(1) Employment Agreement between the Company and Mr.
Wright dated May 1, 1981, as amended, filed as Ex-
hibit 10.2 to Registrant's Form 10-K for the year
ended December 31, 1989, is incorporated by refer-
ence.
10.3(1) Employment Agreement between the Company and Mr.
Jefferies dated November 7, 1990, filed as Exhibit
10.3 to Registrant's Form 10-K for the year ended De-
cember 31, 1990, and Amendment No. 1 to Employment
Agreement dated January 1, 1993, filed as Exhibit
10.3 to Registrant's Form 10-K for the year ended De-
cember 31, 1992, are incorporated by reference.
10.4(1) Severance Benefit Agreement between the Company and
Harry M. Cornell, Jr. dated May 9, 1984 filed as Ex-
hibit 10.4 to Registrant's Form 10-K for the year
ended December 31, 1994, is incorporated by refer-
ence.
10.5(1) Severance Benefit Agreement between the Company and
Felix E. Wright dated May 9, 1984 filed as Exhibit
10.5 to Registrant's Form 10-K for the year ended De-
cember 31, 1994, is incorporated by reference.
10.6(1) Severance Benefit Agreement between the Company and
Robert A. Jefferies, Jr. dated May 9, 1984 filed as
Exhibit 10.6 to Registrant's Form 10-K for the year
ended December 31, 1994, is incorporated by refer-
ence.
10.7(1) Reference is made to Appendix A to Registrant's de-
finitive Proxy Statement dated April 4, 1994 used in
conjunction with Registrant's Annual Meeting of
Shareholders held on May 11, 1994 for a copy of the
Company's 1989 Flexible Stock Plan, as amended, which
is incorporated by reference.
32
SEQUENTIAL
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- ----------
10.8(1) Summary description of the Company's Key Management
Incentive Compensation Plan filed as Exhibit 10.7 of
Registrant's Form 10-K for the year ended December
31, 1993, is incorporated by reference.
10.9(1) Reference is made to description of certain long-term
disability arrangements between Registrant and its
salaried employees filed as Exhibit 10.7 of Regis-
trant's Form 10-K for the year ended December 31,
1991, which is incorporated by reference.
10.10(1) Form of Indemnification Agreement approved by the
shareholders of Registrant and entered into between
Registrant and each of its directors and executive
officers, filed as Exhibit 10.10 to Registrants Form
10-K for the year ended December 31, 1995, is incor-
porated by reference. .
10.11(1) Registrant's Director Stock Option Plan, as amended
through November 13, 1996.
10.12(1) Leggett & Platt, Incorporated Executive Stock Pur-
chase Program adopted June 6, 1989 under the
Company's 1989 Flexible Stock Plan, and effective as
of July 1, 1989, as amended on November 13, 1991,
filed as Exhibit 10.11 of Registrant's Form 10-K for
the year ended December 31, 1991, is incorporated by
reference.
10.13(1) Revised Employment Agreement between Bob L. Gaddy,
Pace Industries, Inc. and Leggett & Platt, Incorpo-
rated.
10.14(1) Stock Award Agreement dated August 1, 1995 between
the Company and Felix E. Wright filed as Exhibit
10.14 of Registrant's Form 10-K for the year ended
December 31, 1995, which is incorporated by refer-
ence.
10.15(1) Stock Award Agreement dated August 1, 1995 between
the Company and Duane W. Potter, filed as Exhibit
10.15 of Registrant's Form 10-K for the year ended
December 31, 1995, is incorporated by reference.
10.16(1) Stock Award Agreement dated August 1, 1995 between
the Company and David S. Haffner, filed as Exhibit
10.16 of Registrant's Form 10-K for the year ended
December 31, 1995, is incorporated by reference.
10.17(1) Stock Award Agreement dated December 28, 1995 between
the Company and Harry M. Cornell, Jr., filed as Ex-
hibit 10.17 of Registrant's Form 10-K for the year
ended December 31, 1995, is incorporated by refer-
ence.
10.18(1) Stock Award Agreement dated December 31, 1996 between
the Company and Harry M. Cornell, Jr.
10.19(1) Stock Award Agreement dated June 1, 1996 between the
Company and Felix E. Wright.
10.20(1) Stock Award Agreement dated June 1, 1996 between the
Company and Duane W. Potter.
10.21(1) Stock Award Agreement dated June 1, 1996 between the
Company and David S. Haffner.
10.22(1) Stock Award Agreement dated September 1, 1996 between
the Company and Jerry H. Hudkins.
10.23(1) Stock Award Agreement dated September 1, 1996 between
the Company and Michael A. Glauber.
10.24(1) The summary description of the Company's Deferred
Compensation Program, filed as Exhibit 10.18 to Reg-
istration Form 10-K for the year ended December 31,
1995, is incorporated by reference.
10.25(1) Noncompetition Agreement, dated as of May 13, 1996
between Bob L. Gadday and Leggett & Platt, Incorpo-
rated.
33
SEQUENTIAL
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- ----------
10.26(1) Promissory note made by Bob L. Gadday payable to Pace
Holdings, Inc.
10.27(1) Pace Industries, Inc., Revised and Restated Employee
Incentive Compensation Plan.
11 Statement of Computation of Earnings Per Common
Share.
21 Schedule of Subsidiaries of Registrant.
23 Consent of Independent Accountants.
24 Power of Attorney executed by members of the
Company's Board of Directors regarding this Form 10-K
and certain registration statements.
27 Financial Data Schedule
- --------
(1) Denotes management contract or compensatory plan or arrangement.
34