- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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, 2000 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: <TABLE> <CAPTION> Name of Each Exchange on Title of Each Class Which Registered ------------------- ------------------------ <S> <C> Common Stock, $.01 par value New York Stock Exchange Pacific Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Pacific Stock Exchange </TABLE> 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 $3,327,728,221 on March 14, 2001. There were 196,519,866 shares of the Registrant's common stock outstanding as of March 14, 2001. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement for its Annual Meeting of Shareholders to be held May 9, 2001, are incorporated by reference into Part III of this report. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PART I Item 1. Business. The Company is a diversified manufacturer of a wide range of engineered products. It was incorporated in 1901 as the successor to a partnership formed in 1883 at Carthage, Missouri. That partnership was a pioneer in the development of steel coil bedsprings. The Company today serves markets for: . Residential Furnishings--components for bedding, furniture and other furnishings, as well as related consumer products. . Commercial Furnishings--retail store fixtures, displays, storage and material handling systems, components for office and institutional furnishings and plastic components. . Aluminum Products--die castings, custom tooling and dies, machining, coating and other value added processes and smelting of aluminum ingot. . Industrial Materials--drawn steel wire, specialty wire products and welded steel tubing. . Specialized Products--automotive seating suspension, control cable systems, and lumbar supports for automotive, office and residential applications, and specialized machinery and manufacturing equipment. The term "Company," unless the context requires otherwise, refers to Leggett & Platt, Incorporated and its majority owned subsidiaries. General Development of Business. The Company acquired twenty-one businesses during the year ended December 31, 2000 representing annualized sales of approximately $450 million. These acquired businesses expanded annualized sales within the Company's business segments as follows: Residential Furnishings--$75 million, Commercial Furnishings--$175 million, Aluminum Products--$10 million, Industrial Materials--$45 million and Specialized Products--$145 million. Reference is also made to Note B of the Notes to Consolidated Financial Statements for further information about the Company's acquisitions. Residential Furnishings. The Company's residential furnishings products include a broad line of components used by manufacturers to make finished bedding and residential furniture products. Examples of residential furnishings components manufactured by the Company include (i) innerspring units for mattresses, and wood frames, coils and modules for boxsprings; (ii) foam, textile and fiber cushioning materials, woven and non-woven construction fabrics for bedding, home furnishings and industrial applications; (iii) springs and seating suspensions for chairs, sofas and other residential furniture; (iv) steel mechanisms and hardware for reclining chairs, sleeper sofas and other types of motion furniture; and (v) other furniture supplies and cut-to-size dimension lumber. The Company also manufactures or distributes finished residential furnishings. These finished products include bed frames, daybeds, headboards, adjustable electric beds, fashion beds, carpet underlay and non-slip coated fabrics. Most of the Company's customers for residential furnishings manufacture finished bedding (mattresses and boxsprings) or upholstered and non- upholstered furniture for residential use. Finished residential furnishings are sold to bedding and furniture manufacturers for resale, or directly to retailers and distributors. The Company's diverse range of components gives its residential furnishings manufacturer-customers access to a single source for most of their component needs. For example, a manufacturer of bedding can come to the Company for almost every component part of a mattress and boxspring, except the outer upholstery fabric. This same principle holds true for manufacturers of other residential furnishings such as upholstered recliner 2
chairs, sofas and loveseats. 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 residential furnishings products, rather than the production of components. Commercial Furnishings. The Company manufactures a variety of commercial furnishings products, including both finished products and components. Finished commercial furnishings include point-of-purchase displays, store fixtures and shelving, racking, counters and carts used to store and handle materials and utility vehicle rack systems. Point-of-purchase displays and store fixtures, made of wood, metal, wire and plastics, are used by a wide range of customers, including manufacturers, distributors and retailers of branded consumer products. The Company has the ability to provide custom designed full store fixture packages as well as standardized shelving used by large retailers, grocery stores, discount chains and the like. Commercial storage products provide for the efficient storage, organization and handling of materials used in food service, health care and other applications. Customers for these storage products include retailers, restaurants, light industrial, and many other diverse businesses. Commercial furnishings components include chair controls (devices which allow office chairs to be adjusted to height, tilt and swivel), chair bases, columns, backrests, casters and other components used by customers that manufacture office, institutional and other commercial furnishings. The Company also produces plastic components for commercial furnishings customers as well as customers that make lawn care products, power tools, and other consumer or commercial products. Aluminum Products. The Company die casts aluminum components for use in a number of different industries primarily for non-automotive applications. Some zinc and magnesium die castings are also produced. The Company's die casting products are sold to a diverse group of customers that manufacture industrial and consumer products. The Company's customers use these components in their production of gas barbecue grills, outdoor lighting fixtures, cable line amplifiers, wireless communications systems and other cable and telecommunication products, computer and electronics products, electric motors, consumer appliances, power tools, small to mid-size gasoline engines, mid-to-large size diesel engines, motorcycles, snowmobiles, ATVs, trucks and automobiles. The Company also manufactures and refurbishes dies (also known as molds or tools) for all types and sizes of die casting machines. These complementary products are sold to customers that buy the Company's die castings and to others. The Company also provides extensive secondary machining, coating, sub- assembly and other value-added services. In addition, the Company operates an aluminum smelting plant where aluminum ingot is produced from aluminum scrap. Some of this aluminum is used by the Company's die casting operations and the balance is sold to unaffiliated customers. In late 2000, the Company sold one plant which produced other forms of aluminum raw materials from scrap. Industrial Materials. The Company produces drawn steel wire and welded steel tubing as well as specialty wire products. Drawn wire and welded steel tubing are important raw materials used widely in manufacturing the Company's products. For example, wire is used to make bedding and furniture components, commercial furnishings, automotive seating components and other products. Welded steel tubing is used in many of the same types of products, including furniture actuation mechanisms, store fixtures, displays, shelving and storage products and finished residential furnishings. In addition to supplying the Company's needs for important materials, the Company sells drawn wire and welded steel tubing to a diverse group of industrial customers such as manufacturers of lawn and garden equipment, recreational equipment, mechanical springs, automotive interiors and other products. 3
Specialty wire products using wire drawn by the Company include wire ties that secure cotton bales and solid waste materials. Customers for these products include cotton gins, textile companies, recyclers and solid waste removal businesses. The Company also manufactures and sells tying heads of various types which customers use to tie wire. Specialized Products. Two smaller business units are engaged in manufacturing specialized products. One concentrates on manufacturing components primarily for automotive interior applications. The other business unit designs, builds and sells specialized machinery and equipment. In the automotive area the Company manufactures seating suspension, lumbar support and control cable systems. Subcontractors to automobile manufacturers as well as the manufacturers themselves are the primary customers for these products. In the machinery area the Company manufactures highly automated quilting machines for fabrics used to cover mattresses and in other home furnishings applications, coilers used to fabricate springs of various types, industrial sewing machines and other equipment designed primarily for the assembly of bedding, including material handling systems and other products for factory automation. While manufacturers of bedding are the primary customers for the Company's machinery, the Company also designs and produces some of these specialized products for its own use. The Company's products are sold and distributed primarily through its own sales personnel. Reference is made to Note J of the Notes to Consolidated Financial Statements for further information concerning sales of each of the Company's business segments. Foreign Operations. The majority of the Company's international operations are in Canada and primarily manufacture commercial furnishings and components for the Company's residential furnishings customers and lumbar supports primarily for the automotive industry. The Company's other international operations are primarily located in Europe and Mexico and involve (i) the sale of machinery and equipment designed to manufacture innersprings and other bedding related components, (ii) aluminum die casting, and (iii) the production of seating components, lumbar support products, commercial furnishings and bedding components. In 2000, the Company added facilities in Austria, Canada, Croatia, France, Germany, Mexico, Spain, Switzerland and the United Kingdom. Reference is made to Note J 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, woven and nonwoven fabrics, aluminum ingot, aluminum scrap, angle iron, coil and sheet steel, dimension lumber, textile scrap, foam chemicals, foam scrap, and plastic resin. 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. Examples of products produced using steel wire include residential furnishings such as innersprings and box springs, commercial furnishings such as displays, shelving and racks and automotive seating systems. The Company also produces, at various locations, for its own consumption and for sale to customers not affiliated with the Company, welded steel tubing, textile fibers, dimension lumber and aluminum ingot from scrap aluminum. 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 SEMI-FLEX(TM), LOK-Fast(TM) and DYNA-Lock(TM) (boxspring components and foundations); Mira-Coil(R) and Lura-Flex(TM) (mattress innersprings); Nova-Bond(R) and Flexnet(TM) (insulators for mattresses); ADJUSTA-MAGIC(R) (adjustable electric beds); Wallhugger(R) and Hi-Style(TM) (recliner chairs); SUPER SAGLESS(R) (motion and sofa sleeper mechanisms) and No-Sag(R) (sinuous wire). 4
Research and Development. The Company maintains research, engineering and testing centers at Carthage, Missouri, and also does research and development work at many of its other facilities. The Company is unable to precisely calculate the cost of research and development because the personnel involved in product and machinery development also spend portions of their time in several different areas. However, the Company believes the cost of research and development was approximately $19 million in 2000, $17 million in 1999 and $12 million in 1998. Employees. The Company has approximately 34,000 employees of whom approximately 26,000 are engaged in production. Approximately 29% 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 2000. 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 2001. 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 the companies competing with respect to any class or type of product 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 include 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 residential furnishings industry. Seasonality. The Company's business is not significantly seasonal. For further information, see the discussion of "Seasonality" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, beginning on page 11. 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. 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. Item 2. Properties. The Company's most important physical properties are its manufacturing plants. Facilities manufacturing, assembling or distributing residential furnishings products are located in over thirty states as well as Canada, Europe, Asia, Australia, Brazil and Mexico. Commercial furnishings manufacturing plants and distribution facilities are located in nineteen states, Canada, Mexico and the United Kingdom. The Aluminum Products segment has die casting facilities in nine states and Mexico, die and tooling production facilities in Alabama, Minnesota and Missouri and a smelting operation in Alabama. Industrial Materials are produced at six wire drawing mills and three welded steel tubing plants and are manufactured in fifteen states, Canada and the United Kingdom. Specialized products and machinery are produced in facilities in the United States, Canada, Mexico, Argentina, China and Europe. Most of the Company's major manufacturing plants are owned by the Company. The Company also conducts certain 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 F of the Notes to Consolidated Financial Statements. 5
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. These properties are located to allow quick and efficient deliveries and necessary service to the Company's diverse customer base. Item 3. Legal Proceedings. The Company is a defendant in various workers' compensation, product liability, vehicle accident, employment, intellectual property, labor practices 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 party to a small number of proceedings in which a governmental authority is a party and which involve laws 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. PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters. STOCK MARKET AND OWNERSHIP DATA 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. <TABLE> <CAPTION> Price Range Volume of --------------- Shares Dividend High Low Traded Declared ------- ------- ----------- -------- <S> <C> <C> <C> <C> 2000 Fourth Quarter........................... $19.563 $14.625 25,216,000 $.11 Third Quarter............................ 19.875 14.188 27,634,000 .11 Second Quarter........................... 22.563 15.063 34,440,000 .10 First Quarter............................ 21.813 15.250 34,425,000 .10 ------- ------- ----------- ---- For the Year............................. $22.563 $14.188 121,715,000 $.42 ======= ======= =========== ==== 1999 Fourth Quarter........................... $24.188 $18.625 40,107,000 $.09 Third Quarter............................ 28.000 19.438 19,910,000 .09 Second Quarter........................... 28.313 19.438 21,907,600 .09 First Quarter............................ 22.688 19.063 26,443,700 .09 ------- ------- ----------- ---- For the Year............................. $28.313 $18.625 108,368,300 $.36 ======= ======= =========== ==== </TABLE> - -------- Price and volume data reflect composite transactions and prices as reported daily. The Company was added to the S&P 500 Index in the fourth quarter of 1999 accounting for unusually high volume. 6
The Company had 17,107 shareholders of record on March 14, 2001. Item 6. Selected Financial Data. <TABLE> <CAPTION> 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- (Dollar amounts in millions, except per share data) <S> <C> <C> <C> <C> <C> Summary of Operations Net sales....................... $4,276.3 $3,779.0 $3,370.4 $2,909.2 $2,466.2 Earnings from continuing operations..................... 264.1 290.5 248.0 208.3 153.0 Earnings per share from continuing operations Basic......................... 1.33 1.46 1.25 1.09 .84 Diluted....................... 1.32 1.45 1.24 1.08 .83 Cash dividends declared per share.......................... .42 .36 .315 .27 .23 ======== ======== ======== ======== ======== Summary of Financial Position Total assets.................... $3,373.2 $2,977.5 $2,535.3 $2,106.3 $1,712.9 Long-term debt.................. 988.4 787.4 574.1 466.2 388.5 ======== ======== ======== ======== ======== </TABLE> Merger related costs of $16.4 after-tax, or $.09 per basic and diluted share are included in 1996 earnings from continuing operations. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Capital Resources and Liquidity The Company's financial position reflects management's capital policy guidelines. These guidelines are intended to ensure that corporate liquidity is adequate to support the Company's projected growth rate. Also, liquidity is necessary to finance the Company's ongoing operations in periods of economic downturn. In a normal operating environment, management intends to direct capital to ongoing operations, strategic acquisitions and other investments that provide opportunities for expansion and enhanced profitability. The expansion of capital resources--debt and equity--is planned to allow the Company to take advantage of favorable capital market conditions, rather than respond to short-term needs. Such financial flexibility is considered more important than short-term maximization of earnings per share through excessive leverage. Therefore, management continuously provides for available credit in excess of near-term projected cash needs and has maintained a guideline for long-term debt as a percentage of total capitalization in a range of 30% to 40%. 7
Total Capitalization The following table shows the Company's total capitalization at the end of the three most recent years. Also, the table shows the amount of unused committed credit available through the Company's revolving bank credit agreements and the amount of cash and cash equivalents at the end of the three most recent years. <TABLE> <CAPTION> 2000 1999 1998 -------- -------- -------- (Dollar amounts in millions) <S> <C> <C> <C> Long-term debt outstanding: Scheduled maturities............................ $ 988.4 $ 642.7 $ 574.1 Average interest rates........................ 6.8% 6.7% 6.6% Average maturities in years................... 4.8 5.5 6.2 Revolving credit/commercial paper............... -- 144.7 -- -------- -------- -------- Total long-term debt........................ 988.4 787.4 574.1 Deferred income taxes and other liabilities....... 114.4 112.4 123.0 Shareholders' equity.............................. 1,793.8 1,646.2 1,436.8 -------- -------- -------- Total capitalization........................ $2,896.6 $2,546.0 $2,133.9 ======== ======== ======== Unused committed credit: Long-term....................................... $ 215.0 $ 52.8 $ 217.5 Short-term...................................... 112.5 97.5 82.5 -------- -------- -------- Total unused committed credit..................... $ 327.5 $ 150.3 $ 300.0 ======== ======== ======== Cash and cash equivalents......................... $ 37.3 $ 20.6 $ 83.5 ======== ======== ======== </TABLE> Cash provided by operating activities was $440.8 million, $370.8 million and $354.9 million for 2000, 1999 and 1998, respectively, or a three year total of $1,166.5 million. The increase in cash provided by operating activities during 2000 compared to the prior year principally reflects an increase in EBITDA (earnings before interest, taxes, depreciation and amortization), a reduction in current tax expense and a smaller increase in working capital (excluding acquisitions), partially offset by higher interest costs. During 1999, the increase in cash provided by operating activities principally reflected earnings improvements, offset somewhat by higher working capital requirements. Long-term debt outstanding was 34.1%, 30.9% and 26.9% of total capitalization at the end of 2000, 1999 and 1998, respectively. As shown in the preceding table, obligations having scheduled maturities are the primary source of the Company's debt capital. At the end of 2000, these obligations consisted primarily of the Company's privately placed medium-term notes and tax-exempt industrial development bonds. In February 2000, $350 million of 7.65% five-year notes were issued under a $500 million shelf registration completed in November 1999. These notes were converted to variable rate notes under an interest rate swap agreement. The proceeds of the offering were used to pay down commercial paper and to fund the Company's capital expenditures and acquisition activity. In the second and third quarters of 1999, the Company issued a total of $104 million in medium-term notes, the proceeds of which were used to repay maturing notes and for acquisitions. In the first and second quarters of 1998, the Company issued a total of $176 million in medium-term notes. Proceeds from the notes were used to repay commercial paper outstanding and to provide financing for acquisitions. A portion of the proceeds were temporarily held in cash and cash equivalents at December 31, 1998. The secondary source of the Company's debt capital consists of revolving bank credit agreements and commercial paper issuances. Management has negotiated bank credit agreements and established a commercial paper program to continuously support the Company's projected growth and to maintain highly flexible sources of debt capital. The majority of the credit under these arrangements is a long-term obligation. If needed, however, the credit is available for short-term borrowings and repayments. To further facilitate the issuance of debt capital, 8
the Company has in effect a $500 million shelf registration of debt. The current shelf registration restored to $500 million the original amount of a shelf registration previously completed in November 1999. At the end of 2000, the Company had no commercial paper outstanding. Additional details of long- term debt, including scheduled maturities, revolving credit and commercial paper are discussed in Note E of the Notes to Consolidated Financial Statements. Uses of Capital Resources The Company's internal investments to modernize and expand manufacturing capacity totaled $476.4 million in the last three years. In 2001, management anticipates internal investments will approximate $150 million, down from the nearly $170 million spent in 2000. During the last three years, the Company employed $659.5 million in cash (net of cash acquired) and issued 4.2 million shares of common stock in acquisitions. During 2000, twenty-one businesses were acquired for $252.3 million in cash (net of cash acquired) and 268,791 shares or share equivalents. In addition, the Company assumed $123.4 million of acquisition companies' debt and other liabilities. Of the twenty-one 2000 acquisitions, eight were made in Residential Furnishings, six in Commercial Furnishings, one in Aluminum Products, two in Industrial Materials and four in Specialized Products. Additional details of acquisitions are discussed in Note B of the Notes to Consolidated Financial Statements. Additions, by segment, to property, plant and equipment and purchases of long-lived assets are shown in Note J of the Notes to Consolidated Financial Statements. Company purchases of its common stock (net of issuances) totaled $49.2 million in 2000, $77.5 million in 1999, and $8.5 million in 1998. These purchases were made primarily for employee stock plans, to replace shares issued in purchase acquisitions and to satisfy contractual obligations. The Board of Directors annually authorizes management, at its discretion, to buy up to 2,000,000 shares of Leggett stock for use in employee benefit plans. This authorization is continuously replenished as shares acquired are reissued for these benefit plans. In addition, management is authorized, again at its discretion, to repurchase any shares issued in acquisitions accounted for as purchases. At the end of the third quarter 2000, the Board of Directors authorized management to buy up to an additional 10,000,000 shares of Leggett stock as part of the Company's performance improvement plan also announced at that time. No specific schedule of purchases has been established under this authorization. The amount and timing of any purchases will depend on availability of cash, economic and market conditions, acquisition activity and other factors. Cash dividends on the Company's common stock in the last three years totaled $207.6 million. Over this three-year period, cash dividends per share have increased at a 15.9% compounded annual rate. As a percent of earnings per share (diluted), cash dividends per share were 31.8% in 2000, 24.8% in 1999 and 25.4% in 1998. Future commitments under lease obligations are described in Note F and contingencies are discussed in Note K of the Notes to Consolidated Financial Statements. 9
Short-term Liquidity Working capital, excluding cash and acquisitions, increased over the prior year by $30.8 million, $96.1 million and $56.9 million for the years 2000, 1999 and 1998, respectively. During the three-year period, the Company also assumed a total of $143.2 million in working capital through acquisitions. During the last half of 2000, the Company concentrated on reducing working capital levels. Due to the softening in market demand discussed below under "Results of Operations", the desired reduction in inventory has not yet been achieved. The increase in working capital during 1999 and 1998 was due in large part to increased same location sales volume, with some inventory build- up at the end of 1999 due to anticipation of higher prices for certain key raw materials. The following table shows the annual turnover on average year-end working capital, trade receivables and inventories. The ratios may be affected by timing of the Company's acquisitions. <TABLE> <CAPTION> 2000 1999 1998 ---- ---- ---- <S> <C> <C> <C> Working capital turnover (excluding cash and cash equivalents)...................................... 5.0x 5.2x 5.5x Trade receivables turnover......................... 7.2 7.3 7.2 Inventory turnover................................. 5.0 5.1 5.4 </TABLE> Receivables turnover in the Aluminum Products segment is lower than in the other segments due principally to the seasonal nature of its gas barbecue grill business. Also, aluminum commitments to certain customers result in carrying higher levels of inventory than the Company's other segments. Recent acquisitions concentrated in the Commercial Furnishings and Specialized Products segments also contributed to reductions in working capital turnover and inventory turnover due to increased production time and extended delivery schedules in these businesses. Results of Operations Discussion of Consolidated Results The results of operations during the last three years reflect various elements of the Company's long-term growth strategy, along with general economic trends and the specific market conditions. The Company's growth strategy continues to include internal initiatives and acquisitions which provide for increased market penetration and operating efficiencies and broader product lines. 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. For the years 2000, 1999 and 1998, sales increased 13.2%, 12.1% and 15.9%, respectively, while same location sales increased .2%, 2.9% and 3.8% for the same periods. Same location sales growth primarily reflected increases in unit volumes. Internal growth during 2000 was negatively impacted by reduced market demand across all segments, particularly in the last half of the year. Selling prices in 2000 for certain products include some recovery of higher raw material costs. Trends in the general economy were very favorable during 1999 and 1998, which had a positive impact on unit volume, although 1999 was also impacted by lower selling prices for certain products. Residential Furnishings accounted for 36.1% of the 2000 increase in consolidated sales and Commercial Furnishings accounted for 41.3% of the increase. In 1999, Residential Furnishings accounted for 41.4% of the consolidated sales increase over 1998 and Commercial Furnishings accounted for 37.9% of the increase. 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 ratio of earnings to fixed charges. <TABLE> <CAPTION> 2000 1999 1998 ---- ---- ---- <S> <C> <C> <C> Gross profit margin..................................... 25.4% 27.0% 25.9% EBIT (Earnings before interest and taxes) margin........ 11.2 13.3 12.7 Net profit margin....................................... 6.2 7.7 7.4 Effective income tax rate............................... 36.9 37.2 37.3 Ratio of earnings to fixed charges...................... 6.4x 9.8x 9.6x </TABLE> 10
The Company's gross profit margin declined during 2000 after improvements in each of the previous two years. The decline in 2000 primarily reflected weakened demand in all of the Company's business segments, as well as lower than expected performance in the Company's Aluminum Products segment and some parts of the Residential and Commercial Furnishings segments. Production cutbacks, plant closure costs and a supplier disruption at a single plant contributed to reduced plant utilization and lower overhead absorption, which significantly impacted profit and EBIT margins. Margins were also reduced by increased medical expenses and higher energy costs. Higher interest expense during 2000 contributed to the decline in net margin. The lower effective tax rate in 2000 primarily reflects a reduction in foreign statutory rates. The Company has begun implementation of its tactical plan announced at the end of the third quarter 2000, aimed at improving performance, margins and shareholder return. The primary objective of the tactical plan is to fix problems in underperforming businesses. Operations that cannot be fixed will be consolidated, closed or sold. In addition, the Company is reducing acquisitions and capital spending in operational areas that are under- performing. The Company expects to continue this tactical course for several quarters and possibly longer, as conditions warrant. Once performance improves, the Company expects to return to its traditional level of acquisition activity. The Company's strategic, long-term growth plans remain unchanged. The increase in gross profit margin in 1999 reflected several favorable factors. These included continued increases in production efficiencies, increased sales of products with above average margins, lower material costs and better manufacturing overhead absorption. The EBIT margin also increased due to these factors, offset somewhat by higher operating costs as a percentage of sales. The higher operating expenses as a percentage of sales, which include some amount of fixed administrative and other costs, was impacted by the effect on sales of lower selling prices in certain product lines and higher operating costs in acquired companies as a percentage of sales. Seasonality The percent of consolidated net sales by quarter, excluding the impact of acquisitions, is as follows for the last three years: <TABLE> <CAPTION> 2000 1999 1998 ----- ----- ----- <S> <C> <C> <C> First Quarter........................................ 24.7% 23.9% 23.6% Second Quarter....................................... 25.4 25.6 25.1 Third Quarter........................................ 26.1 25.7 25.9 Fourth Quarter....................................... 23.8 24.8 25.4 ----- ----- ----- Year................................................. 100.0% 100.0% 100.0% ===== ===== ===== </TABLE> The Company does not experience significant seasonality, however, as indicated in the above table, quarter-to-quarter sales can vary in proportion to the total year by 1-2%. Management estimates that this 1-2% sales impact can have, at current average net margins and considering overhead absorption, an approximately 5-10% plus or minus impact on quarter-to-quarter earnings. The timing of acquisitions and economic factors (e.g. the fourth quarter of 2000) in any year can distort the underlying seasonality in certain of the Company's businesses. For the Company's businesses in total, the second and third quarters have proportionately greater sales, while the first and fourth quarters are lower. This small seasonality has become somewhat more pronounced, with the fourth quarter particularly showing proportionately lower sales due to the growth of the store fixtures business of Commercial Furnishings. Residential Furnishings and Commercial Furnishings typically have their strongest sales in the second and third quarters. Commercial Furnishings particularly has heavy third quarter sales of its store fixtures products, with the first and fourth quarters generally lower. Aluminum Products sales are proportionately greater in the first two calendar quarters due to gas barbecue grill castings. Industrial Materials sales peak in the third and fourth quarters from wire products used for baling cotton. Specialized Products has relatively little quarter-to- 11
quarter variation in sales, although the automotive business is somewhat heavier in the first two quarters of the year, and somewhat lower in the third quarter, due to model changeovers and plant shutdowns in the automobile industry during the summer. Discussion of Segment Results A description of the products included in each segment, segment sales, segment earnings before interest and taxes (EBIT) and other segment data appear in Note J of the Notes to Consolidated Financial Statements. Following is a comparison of EBIT margins (Segment EBIT divided by Total Segment Sales): <TABLE> <CAPTION> 2000 1999 1998 ---- ---- ---- <S> <C> <C> <C> Residential Furnishings................................. 10.5% 11.2% 11.1% Commercial Furnishings.................................. 11.2 16.2 17.8 Aluminum Products....................................... 6.7 9.6 6.3 Industrial Materials.................................... 13.8 14.5 11.2 Specialized Products.................................... 12.5 12.1 11.6 </TABLE> Residential Furnishings sales increased 9.2% in 2000, with same location growth of 2.4%. Numerous acquisitions accounted for the balance of the growth. EBIT increased 2.0%, with strong volume and efficiency gains in the first half of the year offset by softening industry demand, efforts to reduce finished goods inventory which resulted in lower production, and reduced overhead absorption and efficiency starting in the third quarter. For 1999, Residential Furnishings sales were up 9.6%, principally from acquisitions, although volume growth was also a significant factor. The growth in sales was negatively impacted by declining selling prices in certain product lines. EBIT increased 10.8% in 1999 versus 1998, and EBIT margin increased slightly as higher volume improved operating efficiencies and raw material costs were lower. Commercial Furnishings sales increased 26.7% in 2000 due to numerous acquisitions. Same location sales were down 3.0% for the period, as some customers for store fixture, display, and storage products reduced purchases. EBIT declined 13.0% in 2000 due to demand shortfalls, reduced margins attributable to the changing mix of businesses, plant inefficiencies and a supplier disruption at a store fixture and design firm acquired in 1999. Plant restructuring costs and integration benefits from acquisitions that have not been fully realized also had a negative impact on EBIT margins. In 1999, Commercial Furnishings sales increased 25.0% over the prior year due primarily to acquisition activity. EBIT in 1999 improved 14.2% over 1998, but EBIT margin declined due to product mix, lower volume in certain product lines and the fact that the Company had not yet fully realized the integration benefits of the substantial acquisition activity in this segment. Aluminum Products sales decreased .5% in 2000. Same location sales declined 1.6%, and were partially offset by one acquisition. Starting in the second quarter, reduced die cast component sales reflected weak market demand for a variety of consumer and industrial products, including castings for barbecue grills, diesel truck engine components, small gasoline engines, outdoor lighting and electrical products. EBIT decreased 30.6%, reflecting significantly reduced production in the second half of the year, plant under utilization, higher natural gas costs, smelting losses, and plant closure costs. In 1999, Aluminum Product sales increased 5.9%, principally from improved operations. This improvement was moderated by declining aluminum prices. EBIT increased 61.3% and EBIT margin improved from gains in operating efficiency and a shift to higher margin products at certain die cast facilities. Industrial Materials sales in 2000 increased 8.4%, with same location growth of 2.5%. Acquisitions accounted for the balance of the sales growth. EBIT improved 3.7% in 2000, however, EBIT margins were down reflecting higher raw materials costs, primarily for steel rod and flat rolled steel used to make wire and welded steel tubing, and production inefficiencies. In 1999, Industrial Materials sales were 4.7% higher than 1998, principally reflecting acquisition related sales. The sales improvement was lower than unit volume gains as selling prices declined for drawn wire. EBIT improved 35.1% in 1999 and EBIT margin was better reflecting lower raw material prices and improved operating efficiencies. 12
Specialized Product sales increased 32.2% in 2000 due to acquisitions. Same location sales declined .3%. EBIT increased 36.1%, reflecting acquisitions, increased sales of specialized machinery with higher margins, and improved efficiencies. In 1999, Specialized Products sales increased 14.3%, due primarily to acquisitions. EBIT improved 19.2%, reflecting acquisition growth and higher automotive sales. EBIT margin was up somewhat from improved efficiencies and acquisitions. New Financial Accounting Standards Board Statements During 1998, the Financial Accounting Standards Board (FASB) issued a new accounting standard on "Accounting for Derivative Instruments and Hedging Activities" (FASB No. 133). In June 2000, the FASB issued Statement No. 138, which deferred implementation of FASB No. 133, which will become effective for the Company beginning January 1, 2001. FASB No. 133 will not have a major effect on the Company's financial statements since the Company has not engaged in significant hedging or other activities involving derivative instruments in the past. Forward-Looking Statements This report and other public reports or statements made from time to time by the Company or its management may contain "forward-looking" statements concerning possible future events, objectives, strategies, trends or results. Such statements are identified either by the context in which they appear or by use of words such as "anticipate," "believe," "estimate," "expect," or the like. Readers are cautioned that any forward-looking statement reflects only the beliefs of the Company or its management at the time the statement is made. In addition, readers should keep in mind that, because all forward-looking statements deal with the future, they are subject to risks, uncertainties and developments which might cause actual events or results to differ materially from those envisioned or reflected in any forward-looking statement. Moreover, the Company does not have and does not undertake any duty to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement was made. For all of these reasons, forward- looking statements should not be relied upon as a prediction of actual future events, objectives, strategies, trends or results. It is not possible to anticipate and list all of the risks, uncertainties and developments which may affect the future operations or performance of the Company, or which otherwise may cause actual events or results to differ from forward-looking statements. However, some of these risks and uncertainties include the following: the Company's ability to improve operations and realize cost savings, future growth of acquired companies, competitive and general economic and market conditions and risks, such as the rate of economic growth in the United States, inflation, government regulation, interest rates, taxation, and the like; risks and uncertainties which could affect industries or markets in which the Company participates, such as growth rates and opportunities in those industries, or changes in demand for certain products, etc.; and factors which could impact costs, including but not limited to the availability and pricing of raw materials, the availability of labor and wage rates, and fuel and energy costs. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. (Unaudited) (Dollar amounts in millions) Interest Rate The table below provides information about the Company's debt obligations sensitive to changes in interest rates. The Company has no other significant financial instruments sensitive to changes in interest rates. The Company has not typically in the past used derivative financial instruments to hedge its exposure to interest rate changes. However, during 2000, $350 of 7.65% fixed rate debt maturing in February 2005 and, in 1999, $14 of 13
6.90% fixed rate debt maturing in June 2004 were issued and converted to variable rate debt by use of interest rate swap agreements. These swap agreements, which contain the same payment dates as the original issues, are used primarily by the Company to manage the fixed/variable interest rate mix of its debt portfolio, and are included as variable rate debt in the table below. Substantially all of the debt shown in the table below is denominated in United States dollars (U.S.$). The fair value of fixed rate debt was not significantly different from its carrying value as of December 31, 2000, and was less than its carrying value by $11.2 at December 31, 1999. The fair value of the fixed rate debt was calculated using the U.S. Treasury Bond rate as of December 31, 2000 and 1999 for similar remaining maturities, plus an estimated "spread" over such Treasury securities representing the Company's interest costs under its medium-term note program. The fair value of variable rate debt is not significantly different from its recorded amount. <TABLE> <CAPTION> Scheduled Maturity Date ----------------------------------------------- Long-term debt as of December 31 2001 2002 2003 2004 2005 Thereafter 2000 1999 - -------------------- ----- ----- ------ ------ ----- ---------- ------ ------ <S> <C> <C> <C> <C> <C> <C> <C> <C> Principal fixed rate debt................... $50.0* $75.0 $114.5 $100.0 $25.0 $191.7 $556.2 $571.2 Average interest rate. 7.22% 7.18% 6.27% 6.98% 7.00% 6.67% 6.78% 6.75% Principal variable rate debt................... .5 3.4 2.3 14.5 350.5 31.5 402.7 193.4 Average interest rate. 4.09% 4.82% 4.76% 6.98% 6.85% 4.93% 6.67% 5.85% Miscellaneous debt...... 35.4 26.6 ------ ------ Total debt.......... 994.3 791.2 Less: current maturities*.......... (5.9) (3.8) ------ ------ Total long-term debt.. $988.4 $787.4 ====== ====== </TABLE> - -------- *The 2001 scheduled maturity is not included in current maturities, as the Company intends to refinance this note on a long-term basis either through reissuance or unused credit available under its revolving credit agreements. Exchange Rate The Company has not typically hedged foreign currency exposures related to transactions denominated in other than its functional currencies, although such transactions have not been material in the past. The Company may occasionally hedge firm commitments for certain machinery purchases, other fixed expenses or amounts due in foreign currencies related to its acquisition program. The decision by management to hedge any transactions is made on a case-by-case basis. The amount of forward contracts outstanding at December 31, 2000 was approximately $8.3 (pay U.S. $/receive Mexican Pesos) and the highest amount during 2000 was approximately $65.8 (pay U.S. $/receive Canadian Dollars). The Company views its investment in foreign subsidiaries as a long-term commitment, and does not hedge any translation exposures. The investment in a foreign subsidiary may take the form of either permanent capital or notes. The Company's net investment in foreign subsidiaries subject to translation exposure at December 31 is as follows: <TABLE> <CAPTION> Functional Currency 2000 1999 ------------------- ------ ------ <S> <C> <C> Canadian Dollar............................................. $186.7 $154.7 European Currencies......................................... 131.7 99.0 Mexican Peso................................................ 44.4 38.1 Other....................................................... 12.7 10.0 ------ ------ $375.5 $301.8 ====== ====== </TABLE> 14
Commodity Price The Company does not generally use derivative commodity instruments to hedge its exposures to changes in commodity prices. The principal commodity price exposure is aluminum, of which the Company had an estimated $50 and $73 (at cost) in inventory at December 31, 2000 and 1999, respectively. The Company has purchasing procedures and arrangements with customers to mitigate its exposure to aluminum price changes. No other commodity exposures are significant to the Company. Item 8. Financial Statements and Supplementary Data. The Consolidated Financial Statements and supplementary data included in this Report are listed in Item 14 and begin immediately after Item 14. 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" in the Company's definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 9, 2001, said sections being incorporated by reference, for a description of the directors of the Company. The following table sets forth the names, ages and positions of all executive officers of the Company. Executive officers are normally elected annually by the Board of Directors at the Meeting of Shareholders. <TABLE> <CAPTION> Name Age Position ---- --- ------------------------------------------------ <C> <C> <S> Harry M. Cornell, 72 Chairman of the Board Jr. Felix E. Wright 65 Vice Chairman of the Board, President and Chief Executive Officer David S. Haffner 48 Executive Vice President and Chief Operating Officer-- President, Commercial Furnishings and Specialized Products Segments Jack D. Crusa 46 Senior Vice President--President, Industrial Materials Segment/President, Automotive Group Bob L. Gaddy 60 Senior Vice President--Chairman and Chief Executive Officer, Aluminum Products Segment Karl G. Glassman 42 Senior Vice President--President, Residential Furnishings Segment Michael A. Glauber 57 Senior Vice President--Finance and Administration (Principal Financial Officer) Robert G. Griffin 49 Senior Vice President--President, Fixture and Display Group Robert A. 59 Senior Vice President--Mergers, Acquisitions and Jefferies, Jr. Strategic Planning Ernest C. Jett 55 Vice President--General Counsel and Secretary Allan J. Ross 54 Vice President, Accounting (Principal Accounting Officer) Robert A. Wagner 50 Vice President--Mergers, Acquisitions and Strategic Planning </TABLE> 15
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 Chairman of the Company's Board of Directors since 1982. He has served the Company in various capacities since 1950, including service as Chief Executive Officer from 1960 until 1999 and as President from 1960 to 1982. Felix E. Wright is the Company's President and Chief Executive Officer. He also serves as Vice Chairman of the Company's Board of Directors. Mr. Wright has served the Company since 1959 including service as Chief Operating Officer from 1979 to 1999. David S. Haffner was elected Chief Operating Officer of the Company in 1999. He has served as the Company's Executive Vice President since 1995. He previously served the Company as Senior Vice President from 1992 to 1995. Mr. Haffner joined the Company in 1983. Mr. Haffner is also President of the Commercial Furnishings and Specialized Products segments. Jack D. Crusa has served the Company in various capacities since 1986, including service as Vice President and President--Automotive Components for the last five years. Mr. Crusa became Senior Vice President and President-- Industrial Materials in 1999. Bob L. Gaddy was elected Senior Vice President of the Company in 1996. Since that time, he has also served as Chairman and Chief Executive Officer of the Aluminum Products segment. Since 1993, Mr. Gaddy has served as Chairman of the Board and Chief Executive Officer of Pace Industries, Inc., a wholly owned subsidiary of the Company. Karl G. Glassman has been employed by the Company in various capacities since 1982. Mr. Glassman became Vice President and President--Bedding Components in 1995 and became a Senior Vice President and President, Residential Furnishings in 1999. Michael A. Glauber has served the Company since 1969. Mr. Glauber was named Senior Vice President, Finance and Administration in 1990. Robert G. Griffin has been employed by the Company since 1992. Mr. Griffin was named Vice President and Director of Mergers, Acquisitions and Strategic Planning in 1995, President--Commercial Fixtures and Display Group in 1998 and Senior Vice President in 1999. Robert A. Jefferies, Jr. has served as Senior Vice President, Mergers, Acquisitions and Strategic Planning of the Company since 1990. He previously served the Company as Vice President, General Counsel and Secretary from 1977- 1990. Ernest C. Jett was appointed General Counsel in 1997, and 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 from 1991 to 1997. Allan J. Ross has served the Company as Vice President, Accounting since 1993. In May 1996, Mr. Ross was designated by the Board of Directors as the Company's Principal Accounting Officer. Robert A. Wagner has served as Vice President, Mergers, Acquisitions and Strategic Planning since 1998. Prior to joining the Company, Mr. Wagner was Vice President of Graco Inc., Minneapolis, Minnesota from 1991-1997, most recently serving as Vice President Asia Pacific and President Graco KK in Yokohama, Japan from 1995-1997. 16
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 9, 2001, 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 9, 2001, 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 9, 2001 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, 2000 . Consolidated Balance Sheets at December 31, 2000 and 1999 . Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2000 . Consolidated Statements of Changes in Shareholders' Equity for each of the years in the three year period ended December 31, 2000 . Notes to Consolidated Financial Statements . Schedule for each of the years in the three year period ended December 31, 2000 Schedule 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 2000--A Form 8-K was filed December 13, 2000, Item 5 "Other Events" reported. 17
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS <TABLE> <CAPTION> Year ended December 31 --------------------------- 2000 1999 1998 -------- -------- -------- (Dollar amounts in millions, except per share data) <S> <C> <C> <C> Net sales.......................................... $4,276.3 $3,779.0 $3,370.4 Cost of goods sold................................. 3,188.5 2,758.7 2,498.9 -------- -------- -------- Gross profit................................... 1,087.8 1,020.3 871.5 Distribution and handling expenses................. 175.5 150.7 134.3 Selling and administrative expenses................ 391.6 340.5 288.5 Amortization of excess cost of purchased companies and other intangibles............................. 34.1 28.8 21.8 Other income (deductions), net..................... (5.8) 2.2 2.2 -------- -------- -------- Earnings before interest and income taxes...... 480.8 502.5 429.1 Interest expense................................... 66.3 43.0 38.5 Interest income.................................... 4.1 3.1 5.0 -------- -------- -------- Earnings before income taxes................... 418.6 462.6 395.6 Income taxes....................................... 154.5 172.1 147.6 -------- -------- -------- Net earnings................................... $ 264.1 $ 290.5 $ 248.0 ======== ======== ======== Earnings per share Basic.......................................... $ 1.33 $ 1.46 $ 1.25 ======== ======== ======== Diluted........................................ $ 1.32 $ 1.45 $ 1.24 ======== ======== ======== </TABLE> The accompanying notes are an integral part of these financial statements. 18
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> December 31 ------------------ ASSETS 2000 1999 ------ -------- -------- (Dollar amounts in millions, except per share data) <S> <C> <C> Current Assets Cash and cash equivalents................................ $ 37.3 $ 20.6 Accounts and notes receivable, less allowance of $16.3 in 2000 and $13.3 in 1999.................................. 634.2 559.4 Inventories Finished goods......................................... 336.8 309.9 Work in process........................................ 89.2 63.2 Raw materials and supplies............................. 255.5 238.2 LIFO reserve........................................... (9.7) (5.5) -------- -------- Total inventories.................................... 671.8 605.8 Other current assets..................................... 62.0 70.4 -------- -------- Total current assets................................. 1,405.3 1,256.2 Property, Plant and Equipment--at cost Machinery and equipment.................................. 1,176.7 1,050.9 Buildings and other...................................... 584.4 524.3 Land..................................................... 61.7 53.5 -------- -------- Total property, plant and equipment.................. 1,822.8 1,628.7 Less accumulated depreciation............................ 804.4 713.7 -------- -------- Net property, plant and equipment.................... 1,018.4 915.0 Other Assets Excess cost of purchased companies over net assets acquired, less accumulated amortization of $88.8 in 2000 and $67.3 in 1999....................................... 846.0 714.3 Other intangibles, less accumulated amortization of $38.1 in 2000 and $32.6 in 1999............................... 49.3 45.2 Sundry................................................... 54.2 46.8 -------- -------- Total other assets................................... 949.5 806.3 -------- -------- Total Assets......................................... $3,373.2 $2,977.5 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities Accounts payable......................................... $ 179.4 $ 146.1 Accrued expenses......................................... 201.5 194.2 Other current liabilities................................ 95.7 91.2 -------- -------- Total current liabilities............................ 476.6 431.5 Long-Term Debt............................................. 988.4 787.4 Other Liabilities.......................................... 42.5 43.9 Deferred Income Taxes...................................... 71.9 68.5 Shareholders' Equity Capital stock Preferred stock--authorized, 100,000,000 shares; none issued Common stock--authorized, 600,000,000 shares of $.01 par value; issued 198,777,750 and 198,727,750 shares in 2000 and 1999, respectively........................ 2.0 2.0 Additional contributed capital........................... 423.5 424.8 Retained earnings........................................ 1,460.0 1,278.1 Accumulated other comprehensive income................... (45.4) (18.9) Less treasury stock--at cost (2,680,551 and 1,847,456 shares in 2000 and 1999, respectively).................. (46.3) (39.8) -------- -------- Total shareholders' equity........................... 1,793.8 1,646.2 -------- -------- Total Liabilities and Shareholders' Equity........... $3,373.2 $2,977.5 ======== ======== </TABLE> The accompanying notes are an integral part of these financial statements. 19
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> Year ended December 31 ------------------------- 2000 1999 1998 ------- ------- ------- (Dollar amounts in millions) <S> <C> <C> <C> Operating Activities Net earnings...................................... $ 264.1 $ 290.5 $ 248.0 Adjustments to reconcile net earnings to net cash provided by operating activties Depreciation.................................... 139.2 120.5 106.1 Amortization.................................... 34.1 28.8 21.8 Deferred income tax expense (benefit)........... 13.1 (6.7) 17.3 Other........................................... (1.8) (4.3) 7.2 Other changes, excluding effects from purchases of companies (Increase) decrease in accounts receivable, net.......................................... (2.7) 5.0 (31.5) (Increase) in inventories..................... (8.7) (74.0) (6.6) (Increase) in other current assets............ (1.7) (4.7) (7.2) (Decrease) increase in current liabilities.... 5.2 15.7 (.2) ------- ------- ------- Net Cash Provided by Operating Activities... 440.8 370.8 354.9 Investing Activities Additions to property, plant and equipment........ (169.7) (159.1) (147.6) Purchases of companies, net of cash acquired...... (252.3) (290.1) (117.1) Other............................................. (15.2) 8.2 6.7 ------- ------- ------- Net Cash Used for Investing Activities...... (437.2) (441.0) (258.0) Financing Activities Additions to debt................................. 398.4 255.6 269.7 Payments on debt.................................. (252.9) (98.6) (216.9) Dividends paid.................................... (78.6) (69.1) (59.9) Issuances of common stock......................... 4.7 4.0 5.0 Purchases of common stock......................... (53.9) (81.5) (13.5) Other............................................. (4.6) (3.1) (5.5) ------- ------- ------- Net Cash Provided by (Used for) Financing Activities................................. 13.1 7.3 (21.1) ------- ------- ------- Increase (Decrease) in Cash and Cash Equivalents.... 16.7 (62.9) 75.8 Cash and Cash Equivalents--Beginning of Year........ 20.6 83.5 7.7 ------- ------- ------- Cash and Cash Equivalents--End of Year.............. $ 37.3 $ 20.6 $ 83.5 ======= ======= ======= Supplemental Information Interest paid..................................... $ 59.5 $ 42.6 $ 36.5 Income taxes paid................................. 136.8 170.5 142.6 Liabilities assumed of acquired companies......... 123.4 106.7 118.9 Common stock issued for acquired companies........ 5.3 26.9 66.8 Common stock issued for employee stock plans...... 30.6 29.6 26.4 ======= ======= ======= </TABLE> The accompanying notes are an integral part of these financial statements. 20
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY <TABLE> <CAPTION> Year ended December 31 ---------------------------- 2000 1999 1998 -------- -------- -------- (Dollar amounts in millions, except per share data) <S> <C> <C> <C> Common Stock Balance, beginning of period................... $ 2.0 $ 2.0 $ 1.0 Two-for-one stock split........................ -- -- 1.0 -------- -------- -------- Balance, end of period....................... $ 2.0 $ 2.0 $ 2.0 ======== ======== ======== Additional Contributed Capital Balance, beginning of period................... $ 424.8 $ 396.1 $ 311.9 Common stock issued............................ 14.3 37.8 87.3 Treasury stock issued.......................... (16.9) (11.9) (6.2) Tax benefit related to stock options........... 1.3 2.8 4.1 Two-for-one stock split........................ -- -- (1.0) -------- -------- -------- Balance, end of period....................... $ 423.5 $ 424.8 $ 396.1 ======== ======== ======== Retained Earnings Balance, beginning of period................... $1,278.1 $1,058.7 $ 871.3 Net earnings for the year...................... 264.1 290.5 248.0 Retained earnings of pooled companies at date of acquisition................................ -- -- 1.7 Cash dividends declared (per share: 2000--$.42; 1999--$.36; 1998--$.315)...................... (82.2) (71.1) (62.3) -------- -------- -------- Balance, end of period....................... $1,460.0 $1,278.1 $1,058.7 ======== ======== ======== Treasury Stock Balance, beginning of period................... $ (39.8) $ (1.8) $ (.1) Treasury stock purchased....................... (59.0) (88.5) (19.7) Treasury stock issued.......................... 52.5 50.5 18.0 -------- -------- -------- Balance, end of period....................... $ (46.3) $ (39.8) $ (1.8) ======== ======== ======== Accumulated Other Comprehensive Income Balance, beginning of period................... $ (18.9) $ (18.2) $ (10.1) Foreign currency translation adjustment........ (26.5) (.7) (8.1) -------- -------- -------- Balance, end of period....................... $ (45.4) $ (18.9) $ (18.2) ======== ======== ======== Total Shareholders' Equity................... $1,793.8 $1,646.2 $1,436.8 ======== ======== ======== Comprehensive Income Net earnings................................... $ 264.1 $ 290.5 $ 248.0 Foreign currency translation adjustment (net of income tax expense (benefit): 2000--($3.3); 1999--($.8); 1998--$2.2)...................... (26.5) (.7) (8.1) -------- -------- -------- Total Comprehensive Income................... $ 237.6 $ 289.8 $ 239.9 ======== ======== ======== </TABLE> The accompanying notes are an integral part of these financial statements. 21
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in millions, except per share data) December 31, 2000, 1999 and 1998 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 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. Sales Recognition: The Company primarily recognizes sales upon the shipment of its products. Exceptions to this policy are not significant and conform to industry practices. The Company generally bills customers for amounts to cover shipping and handling costs. These amounts are recognized as revenues and the related costs are included in operating expenses. 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 50% of the inventories at December 31, 2000 and 1999. The first-in, first-out (FIFO) method is principally used for the remainder. The FIFO cost of inventories at December 31, 2000 and 1999 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 7% to 25% for machinery and equipment, 3% to 7% for buildings and 12% 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. The rates of amortization range from 5% to 33%. In accordance with FASB Statement No. 121, long-lived assets, including intangibles, are evaluated for probable recovery of their carrying amount. Appropriate adjustment, using current market values, estimates of discounted future cash flows and other methods, is made when recovery of the carrying amount is not reasonably assured. Concentration of Credit Risks, Exposures And Financial Instruments: The Company engages in manufacturing, marketing, and distributing engineered products for markets served by the Company as described in Note J. The Company's operations are principally in the United States, although the Company also has manufacturing subsidiaries in Canada, Europe, Mexico, China, Brazil and Australia 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 transactions in foreign currencies and interest rate swaps related to fixed rate debt. The amounts outstanding under the forward contracts and interest rate swaps 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 fair value of long-term debt is not significantly different than its carrying value. 22
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 carriers. 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 distributions would be significantly offset by available foreign tax credits. 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 comprehensive income. Foreign entities whose functional currency is the U.S. dollar are not significant. B--Acquisitions During 2000, the Company acquired 21 businesses in transactions accounted for as purchases. Purchase acquisitions required the use of $252.3 in cash, net of cash acquired, and 268,791 shares or share equivalents of common stock valued at $5.3. These amounts include additional consideration of $9.4 paid for prior year acquisitions. The excess of the purchase price over the fair value of the net assets acquired increased goodwill by $166.6. These acquired businesses manufacture and distribute products primarily to the commercial furnishings and specialized products markets, as well as the other markets the Company serves. The unaudited pro forma consolidated net sales for the years ended December 31, 2000 and 1999 as though the 2000 acquisitions had occurred on January 1 of each year presented were $4,455.7 and $4,204.4, respectively. The unaudited 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 1999, the Company acquired 29 businesses in transactions accounted for as purchases. Purchase acquisitions required the use of $290.1 in cash, net of cash acquired, and 1,227,500 shares of common stock valued at $25.8. Options to purchase an additional 39,568 shares of common stock valued at $1.1 were also extended by the Company in substitution for previously existing options. These amounts include additional consideration of $19.3 paid for prior year acquisitions. The excess of the purchase price over the fair value of the net assets acquired increased goodwill by $233.4. These acquired businesses manufacture and distribute products primarily to the commercial furnishings and residential furnishings markets, as well as the other markets the Company serves. During 1998, the Company acquired 16 businesses in transactions accounted for as purchases. These transactions required the use of $117.1 in cash, net of cash acquired, and 2,741,480 shares of common stock valued at $59.8. The excess of the purchase price over the fair value of the net assets acquired increased goodwill by $121.8. The Company also issued 183,892 shares to acquire one 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 primarily to the commercial furnishings and residential furnishings markets, as well as the other markets the Company serves. 23
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The results of operations of the above acquired companies have been included in the consolidated financial statements since the dates of acquisition. The terms of certain of the Company's acquisition agreements provide for additional consideration to be paid if the acquired company's results of operations exceed certain targeted levels. Such additional consideration may be paid in cash or shares of the Company's common stock, and is recorded when earned as additional purchase price. The maximum amount of additional consideration remaining at December 31, 2000 is approximately $110 and will be payable, if earned, through 2004. C--Earnings Per Share Basic and diluted earnings per share were calculated as follows: <TABLE> <CAPTION> 2000 1999 1998 ------------ ------------ ------------ <S> <C> <C> <C> Basic Weighted average shares outstanding, including shares issuable for little or no cash......................... 198,986,619 198,492,506 197,682,147 ============ ============ ============ Net earnings.................... $ 264.1 $ 290.5 $ 248.0 ============ ============ ============ Earnings per share.............. $ 1.33 $ 1.46 $ 1.25 ============ ============ ============ Diluted Weighted average shares outstanding, including shares issuable for little or no cash......................... 198,986,619 198,492,506 197,682,147 Additional dilutive shares principally from the assumed exercise of outstanding stock options...................... 1,401,516 2,445,498 2,987,686 ------------ ------------ ------------ 200,388,135 200,938,004 200,669,833 ============ ============ ============ Net earnings.................... $ 264.1 $ 290.5 $ 248.0 ============ ============ ============ Earnings per share.............. $ 1.32 $ 1.45 $ 1.24 ============ ============ ============ </TABLE> D--Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities at December 31 consist of the following: <TABLE> <CAPTION> 2000 1999 ------ ------ <S> <C> <C> Accrued expenses Wages and commissions payable............................ $ 52.0 $ 48.5 Workers' compensation, medical, auto and product liability insurance..................................... 38.9 42.9 Income taxes............................................. 13.8 11.2 Other.................................................... 96.8 91.6 ------ ------ $201.5 $194.2 ====== ====== Other current liabilities Outstanding checks in excess of book balances............ $ 42.0 $ 47.4 Current maturities of long-term debt..................... 5.9 3.8 Other.................................................... 47.8 40.0 ------ ------ $ 95.7 $ 91.2 ====== ====== </TABLE> 24
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) E--Long-Term Debt Long-term debt, weighted average interest rates and due dates at December 31 are as follows: <TABLE> <CAPTION> 2000 1999 ------ ------ <S> <C> <C> Medium-term notes, fixed interest rates of 7.2% for 2000 and 6.8% for 1999, due dates through 2009................. $895.0 $560.0 Commercial paper, variable interest rate of 5.9% for 1999.. -- 144.7 Industrial development bonds, principally variable interest rates of 5.1% and 5.7% for 2000 and 1999, respectively, due dates through 2030.................................... 47.3 39.9 Other, partially secured................................... 52.0 46.6 ------ ------ 994.3 791.2 Less current maturities.................................... 5.9 3.8 ------ ------ $988.4 $787.4 ====== ====== </TABLE> The Company had interest rate swap agreements on $364 and $14 of its fixed- rate medium-term notes at December 31, 2000 and 1999, respectively. These swap agreements, which convert fixed rate debt to variable rate debt, contain the same payment dates as the original issues, and are used by the Company to manage the fixed/variable interest rate mix of its debt portfolio. At December 31, 2000, the revolving credit agreements provided for a maximum line of credit of $327.5. 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 credit agreements. Agreement amounts of $112.5 and $215.0 will terminate August 27, 2001 and July 31, 2004, respectively, at which time all outstanding balances will become due. Medium-term notes and commercial paper 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. The revolving credit agreements and certain other long-term debt contain restrictive covenants which, among other restrictions, limit the amount of additional debt and require net earnings to meet or exceed specified levels of funded debt. Maturities of long-term debt for each of the five years following 2000 are: <TABLE> <S> <C> Year ended December 31 2001............................ $ 5.9 2002............................ 87.5 2003............................ 124.2 2004............................ 166.7 2005............................ 375.9 </TABLE> F--Lease Obligations The Company conducts certain 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. 25
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Total rental expense entering into the determination of results of operations was $42.8, $36.4 and $29.6 for the years ended December 31, 2000, 1999 and 1998, respectively. Future minimum rental commitments for all long-term noncancelable operating leases are as follows: <TABLE> <S> <C> Year ended December 31 2001............................. $23.2 2002............................. 18.0 2003............................. 12.2 2004............................. 8.4 2005............................. 4.6 Later years...................... 3.2 ----- $69.6 ===== </TABLE> The above lease obligations expire at various dates through 2010. Certain leases contain renewal and/or purchase options. Aggregate rental commitments above include renewal amounts where it is the intention of the Company to renew the lease. G--Capital Stock Stock Activity Activity in the Company's stock accounts for each of the three years ended December 31 is as follows: <TABLE> <CAPTION> Common Treasury Stock Stock ----------- ---------- <S> <C> <C> Balance, January 1, 1998.......................... 192,759,120 (4,774) Shares issued................................... 5,006,971 779,695 Treasury stock purchased........................ -- (857,501) ----------- ---------- Balance, December 31, 1998........................ 197,766,091 (82,580) Shares issued................................... 961,659 2,342,411 Treasury stock purchased........................ -- (4,107,287) ----------- ---------- Balance, December 31, 1999........................ 198,727,750 (1,847,456) Shares issued................................... 50,000 2,722,437 Treasury stock purchased........................ -- (3,555,532) ----------- ---------- Balance, December 31, 2000........................ 198,777,750 (2,680,551) =========== ========== </TABLE> The Company issues shares for employee stock plans and acquisitions. The Company purchases its common stock to meet the requirements of the employee stock purchase and incentive plans, to replace shares issued in purchase acquisitions and to satisfy contractual obligations. The Company will also receive shares in stock option exercises. Stock Options At December 31, 2000, the Company had 13,770,412 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, have a maximum term of 5-10 years, and are issued with exercise prices at market. However, the Company grants below market options under a deferred compensation program. This program allows senior 26
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) managers to receive stock options in lieu of cash salary and bonuses. These options include a discount feature which does not exceed 15% and have a term of fifteen years. In October 2000, the Company extended the term from 5 to 10 years for approximately 35% of the outstanding common stock options. At the time of the extension, the exercise price exceeded the fair market value of the Company's stock. A summary of the Company's stock option plans as of December 31, 2000, 1999 and 1998, and changes during the years ending on those dates is presented below: <TABLE> <CAPTION> Weighted Average Exercise Price Shares per Share ---------- ---------------- <S> <C> <C> Outstanding at January 1, 1998............... 7,992,594 $ 8.72 Granted.................................... 966,798 14.38 Exercised.................................. (1,218,447) 9.05 Forfeited.................................. (36,760) 16.85 ---------- ------ Outstanding at December 31, 1998............. 7,704,185 9.34 Granted.................................... 4,998,591 16.33 Exercised.................................. (1,279,755) 6.29 Forfeited.................................. (104,340) 19.99 ---------- ------ Outstanding at December 31, 1999............. 11,318,681 12.67 Granted.................................... 1,196,574 8.13 Exercised.................................. (947,773) 8.78 Forfeited.................................. (302,173) 17.77 ---------- ------ Outstanding at December 31, 2000............. 11,265,309 $12.38 ========== ====== Options exercisable at December 31, 2000.......................... 6,999,358 $10.50 December 31, 1999.......................... 5,605,669 8.43 December 31, 1998.......................... 4,646,155 6.67 </TABLE> The following table summarizes information about stock options outstanding at December 31, 2000: <TABLE> <CAPTION> Options Outstanding Options Exercisable -------------------------------------- --------------------- Weighted-Average Weighted- Weighted- Remaining Average Average Range of Number Contractual Life Exercise Number Exercise Exercise Prices Outstanding In Years Price Exercisable Price - --------------- ----------- ---------------- --------- ----------- --------- <S> <C> <C> <C> <C> <C> $ .01-$ 5.00 3,307,592 11.6 $ 1.84 2,225,401 $ 1.67 5.00- 12.00 2,471,938 .5 10.30 2,471,938 10.30 12.00- 18.00 814,490 6.3 14.76 524,561 13.93 18.00- 26.00 4,671,289 7.6 20.53 1,777,458 20.82 - ------------- ---------- ---- ------ --------- ------ $ .01-$26.00 11,265,309 7.2 $12.38 6,999,358 $10.50 ============= ========== ==== ====== ========= ====== </TABLE> 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. Compensation cost charged against income related to the Company's stock option grants for each of the years ending December 31, 2000, 1999 and 1998 was $11.2, $11.5 and $8.9, respectively. Compensation cost includes amounts for options granted under the deferred compensation plan for senior managers, which allows the manager to elect stock options in lieu of salary and bonuses. 27
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company's proforma net income and proforma earnings per share, with related assumptions, are disclosed in the following table. This information is presented as if compensation cost for the Company's stock-based compensation plans had been determined based on the estimated fair value of the options at the grant dates, consistent with the method prescribed by FASB Statement No. 123. Also disclosed are the weighted-average fair value and exercise price of options granted during the last three years. <TABLE> <CAPTION> 2000 1999 1998 ------ ------ ------ <S> <C> <C> <C> Proforma net earnings............................. $257.0 $285.2 $245.2 Proforma earnings per share Basic........................................... 1.29 1.44 1.24 Diluted......................................... 1.28 1.42 1.22 Weighted-average fair value of options Granted at market price......................... 6.19 4.59 5.66 Granted below market price...................... 11.82 17.67 16.52 Weighted-average exercise price of options Granted at market price......................... 17.56 20.09 23.20 Granted below market price...................... 3.22 2.50 3.17 Principal assumptions Risk-free interest rate......................... 5.4% 5.2% 5.1% Expected life in years.......................... 6.6 4.8 5.1 Expected volatility............................. 28.4% 23.0% 20.0% Expected dividend yield......................... 1.7% 1.5% 1.5% </TABLE> The Company also has authorized shares for issuance in connection with certain employee stock benefit plans discussed in Note H. Par Value Amendment 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. Shareholder Protection Rights Plan In 1989, the Company declared a dividend distribution of one preferred stock purchase right (a Right) for each share of common stock. The Rights were attached to and traded with the Company's common stock. The Rights became exercisable only under certain circumstances involving actual or potential acquisitions of the Company's common stock. The Rights expired in February 1999. The Company simultaneously issued substantially identical rights, which remain in existence until February 2009, unless they are exercised, exchanged or redeemed at an earlier date. Depending upon the circumstances, if these 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. 28
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) H--Employee Benefit Plans The following table provides information at December 31 as to the Company sponsored defined benefit pension plans: <TABLE> <CAPTION> 2000 1999 1998 ------ ------ ------ <S> <C> <C> <C> Change in Benefit Obligation Benefit obligation, beginning of period.............. $102.1 $100.1 $ 89.5 Service cost....................................... 3.3 3.2 2.2 Interest cost...................................... 5.9 5.3 5.1 Plan participants' contributions................... 4.8 4.3 4.0 Actuarial (gains) losses........................... (6.6) (4.9) 4.4 Benefits paid...................................... (6.6) (5.9) (5.1) Acquisitions and transfers......................... 7.4 -- -- ------ ------ ------ Benefit obligation, end of period.................... 110.3 102.1 100.1 Change in Plan Assets Fair value of plan assets, beginning of period....... 154.6 132.1 127.6 Actual return on plan assets....................... 23.8 24.1 5.6 Plan participants' contributions................... 4.8 4.3 4.0 Benefits paid...................................... (6.6) (5.9) (5.1) Acquisitions and transfers......................... 4.4 -- -- ------ ------ ------ Fair value of plan assets, end of period............. 181.0 154.6 132.1 Plan Assets in Excess of Benefit Obligations........... 70.7 52.5 32.0 Unrecognized net actuarial gains..................... (40.2) (24.3) (5.6) Unrecognized net transition asset.................... (.3) (.7) (1.0) Unrecognized prior service cost...................... (.2) (.2) (.3) ------ ------ ------ Prepaid pension cost................................. $ 30.0 $ 27.3 $ 25.1 ====== ====== ====== Components of Net Pension Income Service cost......................................... $ (3.3) $ (3.2) $ (2.2) Interest cost........................................ (5.8) (5.3) (5.1) Expected return on plan assets....................... 12.2 10.3 10.0 Amortization of net transition asset................. .3 .4 .7 Recognized net actuarial gain........................ .9 -- .4 ------ ------ ------ Net pension income................................... $ 4.3 $ 2.2 $ 3.8 ====== ====== ====== Weighted Average Assumptions Discount rate........................................ 6.00% 6.00% 5.50% Expected return on plan assets....................... 8.00% 8.00% 8.00% Rate of compensation increase........................ 4.50% 4.40% 4.40% </TABLE> Plan assets are invested in a diversified portfolio of equity, debt and government securities, including 1,176,000 shares of the Company's common stock at December 31, 2000. Contributions to union sponsored, defined benefit, multiemployer pension plans were $.8, $.7, and $.2 in 2000, 1999 and 1998, respectively. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts. As of 2000, 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, the Company has no present intention of 29
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) withdrawing from any of these plans, nor has the Company been informed that there is any intention to terminate such plans. Net pension expense, including Company sponsored defined benefit plans, multiemployer plans and other plans, was $2.2, $4.3 and $2.1 in 2000, 1999 and 1998, respectively. The Company has a contributory stock purchase/stock bonus plan (SPSB Plan), a nonqualified 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 $9.7, $8.5 and $6.9 for 2000, 1999 and 1998, respectively. Under the DSP, eligible employees may purchase a maximum of 19,000,000 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 1,287,437 in 2000, 1,026,479 in 1999, and 894,445 in 1998. Purchase prices ranged from $13 to $24 per share. Since inception of the DSP in 1982, a total of 15,414,659 shares have been purchased by employees. I--Income Taxes The components of earnings before income taxes are as follows: <TABLE> <CAPTION> Year ended December 31 -------------------- 2000 1999 1998 ------ ------ ------ <S> <C> <C> <C> Domestic............................................. $342.3 $397.2 $340.8 Foreign.............................................. 76.3 65.4 54.8 ------ ------ ------ $418.6 $462.6 $395.6 ====== ====== ====== </TABLE> Income tax expense is comprised of the following components: <TABLE> <CAPTION> Year ended December 31 ---------------------- 2000 1999 1998 ------ ------ ------ <S> <C> <C> <C> Current Federal.......................................... $106.7 $141.1 $108.1 State and local.................................. 5.6 11.8 4.2 Foreign.......................................... 29.1 25.9 18.0 ------ ------ ------ 141.4 178.8 130.3 Deferred Federal.......................................... 12.0 (5.1) 4.1 State and local.................................. 6.3 3.3 11.0 Foreign.......................................... (5.2) (4.9) 2.2 ------ ------ ------ 13.1 (6.7) 17.3 ------ ------ ------ $154.5 $172.1 $147.6 ====== ====== ====== </TABLE> 30
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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 are as follows: <TABLE> <CAPTION> December 31 -------------- 2000 1999 ------ ------ <S> <C> <C> Property, plant and equipment............................ $(74.4) $(67.8) Accrued expenses......................................... 54.3 55.0 Prepaid pension cost..................................... (12.4) (10.7) Other, net............................................... (26.2) (19.2) ------ ------ $(58.7) $(42.7) ====== ====== </TABLE> Deferred tax assets and liabilities included in the consolidated balance sheet are as follows: <TABLE> <CAPTION> December 31 -------------- 2000 1999 ------ ------ <S> <C> <C> Other current assets...................................... $ 13.2 $ 25.8 Deferred income taxes..................................... (71.9) (68.5) ------ ------ $(58.7) $(42.7) ====== ====== </TABLE> Income tax expense, as a percentage of earnings before income taxes, differs from the statutory federal income tax rate as follows: <TABLE> <CAPTION> Year ended December 31 ------------------------- 2000 1999 1998 ------- ------- ------- <S> <C> <C> <C> Statutory federal income tax rate............. 35.0% 35.0% 35.0% Effect of nondeductible goodwill amortization on federal statutory rate.................... 1.1 .9 .8 Increases in rate resulting primarily from state and other jurisdictions................ .8 1.3 1.5 ------- ------- ------- Effective tax rate............................ 36.9% 37.2% 37.3% ======= ======= ======= </TABLE> J--Segment Information Reportable segments are primarily based upon the Company's management organizational structure. This structure is generally focused on broad end- user markets for the Company's diversified products. Residential Furnishings derives its revenues from components for bedding, furniture and other furnishings, as well as related consumer products. Commercial Furnishings derives its revenues from retail store fixtures, displays, storage, material handling systems, components for office and institutional furnishings, and plastic components. The Aluminum Products revenues are derived from die castings, custom tooling, secondary machining and coating, and smelting of aluminum ingot. Industrial Materials derives its revenues from drawn steel wire, specialty wire products and welded steel tubing sold to trade customers as well as other Leggett segments. Specialized Products is a combination of non-reportable segments which derive their revenues from machinery, manufacturing equipment, automotive seating suspensions, control cable systems and lumbar supports for automotive, office and residential applications. The accounting principles used in the preparation of the segment information are the same as used for the consolidated financial statements, except that the segment assets and income reflect the FIFO basis of accounting 31
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) for inventory. Certain inventories are accounted for using the LIFO basis in the consolidated financial statements. The Company evaluates performance based on earnings from operations before interest and income taxes (EBIT). Intersegment sales are made primarily at prices that approximate market-based selling prices. Centrally incurred costs are allocated to the segments based on estimates of services used by the segment. Certain general and administrative costs of the Company are allocated to the segments based on sales. Asset information for the segments includes only inventory, trade receivables, net property, plant and equipment and unamortized purchased intangibles. These segment assets are reflected in the segment information at their estimated average for the year. Long-lived assets as disclosed include property, plant and equipment, goodwill and other intangibles, and long-term assets. Centrally incurred costs and allocated general and administrative costs include depreciation and other costs related to assets that are not allocated or otherwise included in the segment assets. Summarized financial information concerning the Company's reportable segments is shown in the following tables: <TABLE> <CAPTION> Inter- External Segment Total Year ended December 31 Sales Sales Sales EBIT ---------------------- -------- ------- -------- ------ <S> <C> <C> <C> <C> 2000 Residential Furnishings............... $2,126.0 $ 9.7 $2,135.7 $224.0 Commercial Furnishings................ 983.5 6.2 989.7 110.4 Aluminum Products..................... 529.0 16.5 545.5 36.5 Industrial Materials.................. 317.9 207.5 525.4 72.7 Specialized Products.................. 319.9 51.4 371.3 46.4 Intersegment eliminations............. (5.0) Adjustment to LIFO method............. (4.2) -------- ------ -------- ------ $4,276.3 $291.3 $4,567.6 $480.8 ======== ====== ======== ====== 1999 Residential Furnishings............... $1,946.6 $ 9.5 $1,956.1 $219.7 Commercial Furnishings................ 778.1 2.9 781.0 126.9 Aluminum Products..................... 532.8 15.6 548.4 52.6 Industrial Materials.................. 282.6 202.1 484.7 70.1 Specialized Products.................. 238.9 41.9 280.8 34.1 Intersegment eliminations............. (2.6) Adjustment to LIFO method............. 1.7 -------- ------ -------- ------ $3,779.0 $272.0 $4,051.0 $502.5 ======== ====== ======== ====== 1998 Residential Furnishings............... $1,777.2 $ 6.8 $1,784.0 $198.3 Commercial Furnishings................ 623.3 1.7 625.0 111.1 Aluminum Products..................... 501.1 16.8 517.9 32.6 Industrial Materials.................. 269.6 193.5 463.1 51.9 Specialized Products.................. 199.2 46.4 245.6 28.6 Intersegment eliminations............. (1.3) Adjustment to LIFO method............. 7.9 -------- ------ -------- ------ $3,370.4 $265.2 $3,635.6 $429.1 ======== ====== ======== ====== </TABLE> 32
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) <TABLE> <CAPTION> Additions Acquired to Property, Companies' Depreciation Plant and Long-Lived and Assets Equiptment Assets Amortization -------- ------------ ---------- ------------ <S> <C> <C> <C> <C> 2000 Residential Furnishings. $1,223.2 $ 73.3 $ 34.4 $ 67.0 Commercial Furnishings.. 896.5 31.2 108.8 41.9 Aluminum Products....... 478.7 29.2 4.1 24.2 Industrial Materials.... 264.9 9.1 27.1 14.5 Specialized Products.... 336.4 12.4 78.8 15.8 Unallocated assets...... 242.6 14.5 -- 9.9 Adjustment to year-end vs. average assets..... (69.1) -------- ------ ------ ------ $3,373.2 $169.7 $253.2 $173.3 ======== ====== ====== ====== 1999 Residential Furnishings. $1,173.4 $ 60.7 $128.3 $ 61.7 Commercial Furnishings.. 721.4 21.8 163.2 28.4 Aluminum Products....... 441.1 30.5 -- 22.2 Industrial Materials.... 204.8 17.6 5.3 13.9 Specialized Products.... 216.8 15.0 16.2 12.4 Unallocated assets...... 204.0 13.5 -- 10.7 Adjustment to year-end vs. average assets..... 16.0 -------- ------ ------ ------ $2,977.5 $159.1 $313.0 $149.3 ======== ====== ====== ====== 1998 Residential Furnishings. $ 971.0 $ 54.4 $ 64.7 $ 58.0 Commercial Furnishings.. 469.8 9.7 116.1 21.4 Aluminum Products....... 404.4 42.6 24.5 17.9 Industrial Materials.... 204.5 7.3 10.4 12.7 Specialized Products.... 188.8 28.1 4.6 8.9 Unallocated assets...... 285.9 5.5 -- 9.0 Adjustment to year-end vs. average assets..... 10.9 -------- ------ ------ ------ $2,535.3 $147.6 $220.3 $127.9 ======== ====== ====== ====== </TABLE> 33
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Revenues from external customers, by product line, are as follows: <TABLE> <CAPTION> Year ended December 31 -------------------------- 2000 1999 1998 -------- -------- -------- <S> <C> <C> <C> Residential Furnishings Bedding components.......................... $ 814.7 $ 742.8 $ 663.2 Residential furniture components............ 479.1 444.4 412.0 Finished & consumer products................ 540.0 510.5 463.3 Other residential furnishings products...... 292.2 248.9 238.7 -------- -------- -------- 2,126.0 1,946.6 1,777.2 Commercial Furnishings Store displays, fixtures & storage products. 688.8 502.1 369.7 Office furnishings & plastic components..... 294.7 276.0 253.6 -------- -------- -------- 983.5 778.1 623.3 Aluminum Products Die cast products........................... 446.3 457.7 423.3 Smelter, tool & die operations.............. 82.7 75.1 77.8 -------- -------- -------- 529.0 532.8 501.1 Industrial Materials Wire, wire products & steel tubing.......... 317.9 282.6 269.6 Specialized Products Automotive products & specialized machinery. 319.9 238.9 199.2 -------- -------- -------- $4,276.3 $3,779.0 $3,370.4 ======== ======== ======== </TABLE> The Company's operations outside of the United States are principally in Canada, Europe and Mexico, none of which are individually material to its consolidated operations. The geographic information that follows regarding sales is based on the area of manufacture. <TABLE> <CAPTION> Year ended December 31 -------------------------- 2000 1999 1998 -------- -------- -------- <S> <C> <C> <C> External sales United States................................ $3,675.6 $3,345.8 $3,025.9 Foreign...................................... 600.7 433.2 344.5 -------- -------- -------- $4,276.3 $3,779.0 $3,370.4 ======== ======== ======== Long-lived assets United States................................ $1,593.3 $1,421.4 $1,183.8 Foreign...................................... 374.6 299.9 214.4 -------- -------- -------- $1,967.9 $1,721.3 $1,398.2 ======== ======== ======== </TABLE> 34
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded) K--Contingencies The Company is involved in various legal proceedings including matters which involve claims against the Company under employment, intellectual property, environmental and other laws. When it appears probable in management's judgement that the Company will incur monetary damages or other costs in connection with claims and proceedings, and the costs can be reasonably estimated, appropriate liabilities are recorded in the financial statements and charges are made against earnings. No claim or proceeding has resulted in a material charge against earnings, nor are the total liabilities recorded material to the Company's financial position. While the results of any ultimate resolution cannot be predicted, management believes the possibility of a material adverse effect on the Company's consolidated financial position, results of operations and cash flows from claims and proceedings is remote. 35
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Leggett & Platt, Incorporated: In our opinion, the accompanying financial statements listed in the index appearing under Item 14(1) present fairly, in all material respects, the financial position of Leggett & Platt, Incorporated and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America, 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 our opinion. /s/ PricewaterhouseCoopers, LLP St. Louis, Missouri January 31, 2001 36
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES QUARTERLY SUMMARY OF EARNINGS (Unaudited) (Dollar amounts in millions, except per share data) <TABLE> <CAPTION> Year ended December 31, 2000 First Second Third Fourth Total - ---------------------------- -------- -------- -------- -------- -------- <S> <C> <C> <C> <C> <C> Net sales.......................... $1,043.6 $1,095.6 $1,129.6 $1,007.5 $4,276.3 Gross profit....................... 271.5 288.5 284.1 243.7 1,087.8 Earnings before income taxes....... 117.3 120.6 109.2 71.5 418.6 Net earnings....................... 73.8 76.3 68.9 45.1 264.1 Earnings per share Basic............................ $ .37 $ .38 $ .35 $ .23 $ 1.33 Diluted.......................... $ .37 $ .38 $ .34 $ .23 $ 1.32 <CAPTION> Year ended December 31, 1999 - ---------------------------- <S> <C> <C> <C> <C> <C> Net sales.......................... $ 887.6 $ 935.2 $ 991.1 $ 965.1 $3,779.0 Gross profit....................... 232.4 253.4 269.9 264.6 1,020.3 Earnings before income taxes....... 105.1 115.1 124.0 118.4 462.6 Net earnings....................... 66.1 72.4 77.7 74.3 290.5 Earnings per share Basic............................ $ .33 $ .37 $ .39 $ .37 $ 1.46 Diluted.......................... $ .33 $ .36 $ .39 $ .37 $ 1.45 </TABLE> 37
LEGGETT & PLATT, INCORPORATED AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Amounts in millions) <TABLE> <CAPTION> 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 ----------- ------------ --------- ---------- ---------- <S> <C> <C> <C> <C> Year ended December 31, 2000 Allowance for doubtful receivables...................... $13.3 $6.7 $3.7(A) $16.3 ===== ==== ======= ===== Year ended December 31, 1999 Allowance for doubtful receivables...................... $13.5 $5.5 $5.7(A) $13.3 ===== ==== ======= ===== Year ended December 31, 1998 Allowance for doubtful receivables...................... $11.5 $5.2 $3.2(A) $13.5 ===== ==== ======= ===== </TABLE> - -------- (A) Uncollectible accounts charged off, net of recoveries 38
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 By: /s/ Felix E. Wrigh___________t Felix E. Wright President and Chief Executive Officer Dated: March 29, 2001 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. <TABLE> <CAPTION> Signature Title Date --------- ----- ---- (a) Principal Executive Officer: <S> <C> <C> /s/ Felix E. Wright Vice Chairman of the Board, March 29, 2001 ____________________________________ President & Chief Executive Felix E. Wright Officer (b) Principal Financial Officer: /s/ Michael A. Glauber Senior Vice President, March 29, 2001 ____________________________________ Finance & Administration Michael A. Glauber (c) Principal Accounting Officer: /s/ Allan J. Ross Vice President--Accounting March 29, 2001 ____________________________________ Allan J. Ross (d) Directors: Harry M. Cornell, Jr.* Chairman ____________________________________ Harry M. Cornell, Jr. Raymond F. Bentele* Director ____________________________________ Raymond F. Bentele Ralph W. Clark* Director ____________________________________ Ralph W. Clark Robert Ted Enloe, III* Director ____________________________________ Robert Ted Enloe, III </TABLE> 39
<TABLE> <CAPTION> Signature Title Date --------- ----- ---- <S> <C> <C> Richard T. Fisher* Director ____________________________________ Richard T. Fisher 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 Duane W. Potter* Director ____________________________________ Duane W. Potter Maurice E. Purnell, Jr.* Director ____________________________________ Maurice E. Purnell, Jr. Alice L. Walton* Director ____________________________________ Alice L. Walton </TABLE> <TABLE> <S> <C> <C> Felix E. Wright* Vice-Chairman and Director ____________________________________ Felix E. Wright /s/ Ernest C. Jett March 29, 2001 *By: _______________________________ Ernest C. Jett Attorney-in-Fact Under Power-of-Attorney dated February 14, 2001 </TABLE> 40
EXHIBIT INDEX <TABLE> <CAPTION> Sequential Exhibit No. Document Description Page No. ----------- -------------------- ---------- <C> <S> <C> 3.1 Restated Articles of Incorporation of the Company as of May 13, 1987, filed as Exhibit 3.1 to Registrant's Form 10-K for the year ended December 31, 1998, is incorporated by reference. 3.2 Amendment to Restated Articles of Incorporation of the Company dated May 12, 1993, filed as Exhibit 3.2 to Registrant's Form 10-K for the year ended December 31, 1998, is incorporated by reference. 3.3 Amendment to Restated Articles of Incorporation of the Company dated May 12, 1999; filed as Exhibit 3.3 to Registrant's Form 10-K for the year ended December 31, 1999, is incorporated by reference. 3.4 Restated By-Laws of the Company as of August 11, 1993, with all amendments through March 15, 1999, filed as Exhibit 3.3 to Registrant's Form 10-K for the year ended December 31, 1998, is incorporated by reference. 4.1 Article III of Registrant's Restated Articles of Incorporation, filed as Exhibit 3.1 above, is incorporated by reference. 4.2 Rights Agreement effective February 15, 1999 between Registrant and ChaseMellon Shareholder Services, LLC, pertaining to preferred stock rights distributed by Registrant, filed as Exhibit 1 to Registrant's Form 8-K filed December 1, 1998, is incorporated by reference. 4.3 Indenture, dated as of November 24, 1999 between Registrant and The Chase Manhattan Bank, as Trustee, filed as Exhibit 4.1 to Registration Statement No. 333-90443, on Form S-3, effective as of November 15, 1999, is incorporated by reference. 10.1(1) Restated and Amended Employment Agreement between Harry M. Cornell, Jr. and Leggett & Platt, Incorporated dated as of August 14, 1996, filed as Exhibit 10.1 to Registrant's Form 10-K for the year ended December 31, 1996, is incorporated by reference, and Amendment No. 1 to Employment Agreement dated January 1, 1999, filed as Exhibit 10.1 to Registrant's Form 10-K for the year ended December 31, 1999, is incorporated by reference, and Letter Agreement dated April 24, 2000 extending term of Employment Agreement and Letter Agreement dated March 1, 2001 extending term of Employment Agreement. 10.2(1) Restated and Amended Employment Agreement between the Company and Felix E. Wright dated March 1, 1999, filed as Exhibit 10.2 to Registrant's Form 10-K for the year ended December 31, 1998, is incorporated by reference. 10.3(1) Employment Agreement between the Company and Robert A. Jefferies, Jr. dated November 7, 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 December 31, 1999, is incorporated by reference. 10.4(1) Severance Benefit Agreement between the Company and Harry M. Cornell, Jr. dated May 9, 1984. 10.5(1) Severance Benefit Agreement between the Company and Felix E. Wright dated May 9, 1984. </TABLE> 41
<TABLE> <CAPTION> Sequential Exhibit No. Document Description Page No. ----------- -------------------- ---------- <C> <S> <C> 10.6(1) Severance Benefit Agreement between the Company and Robert A. Jefferies, Jr. dated May 9, 1984. 10.7(1) Reference is made to Appendix B to Registrant's definitive Proxy Statement dated March 27, 1997, used in connection with Registrant's Annual Meeting of Shareholders held on May 14, 1997, for a copy of the Company's 1989 Flexible Stock Plan, as amended, which is incorporated by reference. 10.8(1) Reference is made to Appendix A to Registrant's definitive Proxy Statement dated March 30, 2001, to be used in connection with Registrant's Annual Meeting of Shareholders to be held on May 9, 2001, for a copy of the Company's proposed amended and restated 1989 Flexible Stock Plan, which is incorporated by reference. 10.9(1) Summary description of the Company's Key Management Incentive Compensation Plan; filed as Exhibit 10.8 to Registrant's Form 10-K for the year ended December 31, 1999, is incorporated by reference. 10.10(1) Reference is made to Appendix B to Registrant's definitive Proxy Statement dated March 31, 1999, used in connection with Registrant's Annual Meeting of Shareholders held on May 12, 1999, for a copy of the Company's 1999 Key Officer's Incentive Plan, which is incorporated by reference. 10.11(1) Description of certain long-term disability arrangements between Registrant and its salaried employees; filed as Exhibit 10.10 to Registrant's Form 10- K for the year ended December 31, 1999, is incorporated by reference. 10.12(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 Registrant's Form 10-K for the year ended December 31, 1995, is incorporated by reference. 10.13(1) Reference is made to Appendix A to Registrant's definitive Proxy Statement dated March 27, 1997, used in connection with Registrant's Annual Meeting of Shareholders held on May 14, 1997, for a copy of the Company's Director Stock Option Plan, as amended, which is incorporated by reference. 10.14(1) Leggett & Platt, Incorporated Executive Stock Purchase Program adopted June 6, 1989 under the Company's 1989 Flexible Stock Plan, and effective as of July 1, 1989, as amended; filed as Exhibit 10.13 to Registrant's Form 10-K for the year ended December 31, 1999, is incorporated by reference. 10.15(1) Revised Employment Agreement between Bob L. Gaddy, Pace Industries, Inc. and Leggett & Platt, Incorporated, filed as Exhibit 10.13 to Registrant's Form 10- K for the year ended December 31, 1996, is incorporated by reference. 10.16(1) Registrant's Stock Award Program, filed as Exhibit 10.20 of the Registrant's Form 10-K for the year ended December 31, 1997, is incorporated by reference. 10.17(1) The Company's Deferred Compensation Program, as amended and restated on November 9, 2000. 10.18(1) The Company's Executive Deferred Stock Program, filed as Exhibit 10.16 of the Registrant's Form 10-K for the year ended December 31, 1998, is incorporated by reference. </TABLE> 42
<TABLE> <CAPTION> Sequential Exhibit No. Document Description Page No. ----------- -------------------- ---------- <C> <S> <C> 10.19(1) Noncompetition Agreement, dated as of May 13, 1996 between Bob L. Gaddy and Leggett & Platt, Incorporated, filed as Exhibit 10.25 to Registrant's Form 10-K for the year ended December 31, 1996, is incorporated by reference. 10.20(1) Pace Industries, Inc., Revised and Restated Employee Incentive Compensation Plan, filed as Exhibit 10.27 to Registrant's Form 10-K for the year ended December 31, 1996, is incorporated by reference. 12 Computation of Ratio of Earnings to Fixed Charges. 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. 99 Power of Attorney executed by Robert A. Wagner appointing attorneys-in-fact for purposes of filing reports under Section 16(a) of the Securities and Exchange Act of 1934. </TABLE> - -------- (1) Denotes management contract or compensatory plan or arrangement. 43