Leggett& Platt, Inc.

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Leggett& Platt, Inc.

One Leggett Road
Carthage, Missouri 64836
U.S.A.
Telephone: (417) 358-8131
Fax: (417) 358-5840
Web site: http://www.leggett.com

Public Company
Incorporated: 1901 as Leggett& Platt Spring Bed&
Manufacturing Co.
Employees: 31,000
Sales: $4.1 billion (2001)
Stock Exchanges: New York
Ticker Symbol: LEG
NAIC: 337910 Mattress Manufacturing; 337215 Showcase, Partition, Shelving, and Locker Manufacturing

Credited with launching the U.S. bedspring industry, Leggett& Platt, Inc., one of the nation’s largest manufacturers of bedding and furnishing products, began operating in the late 19th century as the sole manufacturer of the coiled bedspring. From this single product, invented and patented by one of the company’s founders, Leggett& Platt slowly expanded its product line to embrace an assortment of products primarily related to the furnishings industry. As the company’s product line evolved, the company grew as a component supplier for other manufacturers rather than a marketer and distributor its own products at the retail level. Entering the new millennium, Leggett& Platt’s product line comprised five categories: residential furnishings, commercial furnishings, aluminum products, industrial materials, and specialized products. In North America, the company held a leading market position in the following product lines: components for residential furniture and bedding, retail store fixtures and point-of-purchase displays, components for office furniture, non-automotive aluminum die castings, drawn steel wire, automotive seat support and lumbar systems, and bedding industry machinery for wire forming, sewing, and quilting. Since its initial public offering in 1967, Leggett& Platt has recorded an average growth rate of 15 percent per year.

Early History: Late 1800s

In the late 19th century, two men living in Carthage, Missouri, joined their distinct skills to create a company that would outlive both them and their children and continue to flourish more than a century later. One of these men was J.P. Leggett, an inventor who had achieved modest success with several patented inventions, and the other was C.B. Platt, a businessman and manufacturer, whose family owned a factory in Carthage. By 1883, Leggett had developed an idea for a new product and turned to Platt, his brother-in-law, to solicit his manufacturing expertise and resources. Leggett’s idea was innovative and had already garnered him a patent for his invention—the coiled bedspring.

Platt agreed to assist Leggett in manufacturing this new product, and the two formed a partnership in 1883, using the Platt Plow Works in Carthage as the production site for the first Leggett bedsprings. Until Leggett had developed the coiled bedspring, bedding in the United States generally consisted of cotton, feather, or horsehair mattresses, with no added cushion beyond that provided by the mattress material itself. Leggett’s bedsprings were designed to be used as a foundation for these mattresses, with the coils fabricated separately, then sold to retail merchants and assembled in the backs of stores or on the walkways in front.

For 12 years, the Leggett and Platt partnership operated out of the Platt Plow Works, forming the coils with belt-driven machinery and selling them to retail merchants. By 1895, the partnership had its own factory and offices, a two-story building that housed both sides of the young company’s operations and contained its entire work force, which at that point totaled seven people, including the two founders. Before the decade was over, another manufacturing plant was added in Louisville, Kentucky. The partnership incorporated in 1901 under the name Leggett& Platt Spring Bed& Manufacturing Co., with Leggett serving as its first president.

Company Perspectives:

We pride ourselves on leadership in the areas of ethics and values. We have established, and seek to expand, our reputation for integrity and honesty. We believe that long-term relationships are strengthened, and the company’sperformance enhanced, by the following set of Leggett’s cultural characteristics. We value honesty. We care about people. We are customer service zealots. We strive to outwork the competition. We continuously seek improvement and are not content with the status quo. We value innovation, creativity, and an entrepreneurial spirit. We value candor and constructive dissent. We encourage all employee partners to become shareholders of Leggett stock. And finally, we like to laugh, have fun, and enjoy good times with one another.

The waning years of the century marked a rush of activity for Leggett and Platt. The construction of two factories in five years, after 12 years of production at Platt Plow Works, and the incorporation of the growing concern appeared to foreshadow further expansion; however, in the 60 years that followed, the company would barely exceed the pace of growth established between 1895 and 1900. Moreover, the first half century of Leggett’s and Platt’s business, from 1883 to 1933, would be almost entirely devoted to the production of a single product—Leggett’s coiled bedsprings. From 1901 forward, the Leggett& Platt Spring Bed& Manufacturing Co. seemed resigned to fulfilling one need with one product, with little effort made toward expanding the company’s scope. Leggett remained president until 1921, when Platt assumed the company’s leadership and oversaw the construction of a new factory in Carthage in 1925 to replace the now outdated original factory.

Finding New Opportunities: 1930s

Platt’s stewardship of Leggett& Platt devolved in 1929 to Leggett’s son, J.P. Leggett, Jr., who held the position for three years. In that time, he initiated the introduction of the company’s first new product in 50 years and its first diversification into another market. In 1933, Leggett& Platt began manufacturing springs for innerspring mattresses that year, a product that would become integral to the company’s operation. By this time, Leggett& Platt had effected an important and defining change in the way the company operated: it now sold its products to other manufacturers rather than to retailers, as the company had originally done. With a growing market for inner-spring mattresses, the company found greater success and greater profits selling springs to mattress manufacturers, who then assembled a finished innerspring mattress with the springs provided by Leggett& Platt. Perhaps equally important to the evolution of Leggett& Platt into a diversified component specialist was its expansion into peripheral markets, specifically the manufacturing of coiled springs for the producers of upholstered furniture.

With these important changes behind it, and a rapidly growing market for springs waiting ahead, Leggett& Platt steadily developed as a business throughout the 1930s and into the 1940s. A new factory, built in Winchester, Kentucky, was established in 1942 to replace the Louisville facility. Five years later, another new plant went into operation, this time in Ennis, Texas.

The addition of the Ennis plant concluded Leggett& Platt’s physical growth until 1960, a pivotal year that would inaugurate for the company a new era of expansion and diversification, a new corporate strategy, and new leadership, transforming the modestly sized company into a formidable force in the furnishings industry. Chiefly responsible for this dramatic change in course was Harry M. Cornell, Jr., J.P. Leggett’s grandson, who joined the company in 1950 and then became manager of the Ennis, Texas, plant in 1953. When he was appointed as the company’s president in 1960, Cornell inherited from his father, who was Leggett& Platt’s president from 1953 to 1960, a company with three production plants and $7 million in annual sales.

Expansion Begins: 1960s

The younger Cornell’s plans for Leggett& Platt were entirely different from those actualized by each of the company’s six previous presidents, who had limited Leggett& Platt to a regional business. What Cornell saw after an examination of the U.S. furnishings industry was the opportunity for a company such as Leggett& Platt to capitalize on a highly fragmented market for finished furnishings products. This could be done, he speculated, by broadening Leggett& Platt’s scope to a national level and by manufacturing and distributing components of furnishings products to manufacturers at a lower production cost than they could attain on their own. The first step in this direction was achieved in October 1960, when the company acquired a small wood-working plant in Springfield, Missouri. Though the acquisition was small, it represented a move toward diversification, enabling Leggett& Platt to fabricate wooden bed frames.

Additional acquisitions would follow, seven throughout the decade, as Leggett& Platt strategically added more facilities for manufacturing an increasing variety of bedding and furniture components. By the early 1970s, roughly a decade after the implementation of the company’s new business philosophy, Leggett& Platt’s growing network of manufacturing and distribution facilities comprised 17 manufacturing plants and five warehouses. Annual revenues hovered around $50 million, reflecting a sales volume more than seven times greater than that recorded less than 15 years earlier.

The company continued its growth and diversification. By bolstering its presence in the bedding and furnishings market, the firm increased its economies of scale, which proved to be Leggett& Platt’s point of leverage in a fragmented industry. The company had also begun to vertically integrate, establishing production facilities that would supply its raw material needs. Through a joint venture with Armco Steel Corporation, Leggett& Platt constructed a wire mill in Carthage in 1970, enabling the company to satisfy virtually all of its wire needs. Similarly, a wood saw mill was constructed in Naples, Texas, that same year, to assure a steady source of lumber for the company’s wood frame business.

Product Development and Continued Growth: 1970s–80s

Aside from Leggett& Platt’s physical growth, progress was also being achieved in other areas, such as in the development of the company’s products and in the machinery utilized to manufacture those products. At this point, in the early 1970s, the company had high hopes for a new and promising innerspring coil unit, the continuous coil spring, which required substantially less wire and less labor than the conventional coil assembly process. Also, new machinery for producing box-spring units was under development that would automate several manufacturing steps currently being performed by hand. All of these developments—the additional production facilities, the new products, the more sophisticated machinery—combined to increase and solidify Leggett& Platt’s presence in the home-furnishings market, which was valued at $11 billion at the retail level, was growing at a rate of 6 percent annually, and offered a potential $900 million worth of business for a company with Leggett& Platt’s interests.

Concurrent with this growth, Leggett& Platt became a more diversified company, a change evinced by the proportional representation of the company’s products in terms of the sales each product category generated. This shift was particularly evident in the early 1970s, when the production of bedding components began to contribute less to Leggett& Platt’s sales volume. In 1970, bedding components accounted for 70 percent of the company’s $40 million in sales; in 1974 the production of bedding components represented 43 percent of the company’s $94 million in sales. This decline indicated significant diversification engendered by a greater focus on the company’s finished furniture and upholstered furniture components product lines.

Entering the 1980s, Leggett& Platt’s annual sales exceeded $250 million, having increased 18 percent annually from 1975 to 1980 despite a lackluster 1979. The company now had 60 manufacturing plants throughout the United States that provided products for more than 10,000 large and small manufacturers. With 20 years of exponential growth behind it, the nation’s largest independent supplier of components in the bedding industry continued to grow, doubling its sales volume by the mid-1980s to reach $500 million. This sales growth was even more remarkable considering that the rest of the industry had suffered through three years of stagnant growth between 1980 and 1983. Leggett& Platt’s continuous coil innerspring unit was partly responsible for this growth. The product had inspired much confidence during the early 1970s but had remained in a developmental stage for ten years and was not put on the market until the mid-1980s.

Also contributing to the company’s growth was a series of acquisitions, ten in the period between 1983 and 1986, that, combined, had generated $164 million in sales before being acquired by Leggett& Platt. Two of these acquisitions in particular brought the company into the office furniture market, an arena in which the company wanted to increase its presence. Gordon Manufacturing Co., a Grand Rapids, Michigan, manufacturer of chair controls and steel bases for office furniture, was acquired in 1984, followed by the purchase a year later of Northfield Metal Products, a leading manufacturer of similar products.

Acquisition Strategy Continues: 1990s and Beyond

As part of a nationwide recession, Leggett& Platt experienced several years of less than robust growth in the early 1990s, posting a decline in sales between 1990 and 1991. Then the company began to show signs of recovery, recording a relatively small gain in 1992 of nearly $90 million to reach $1.17 billion in revenues. The company regained its momentum of prodigious sales growth in 1993, registering $1.52 billion in sales. That same year, it concluded two strategic acquisitions, adding to its network of 135 manufacturing facilities located throughout the United States and Canada. One of these was Hanes Holding Company, a converter and distributor of woven and non-woven industrial fabrics used in the construction of furniture and bedding. The other, Hickory, North Carolina-based VWR Textiles& Supplies, Inc., gave Leggett& Platt additional furniture and bedding fabric manufacturing resources, strengthening its position in another market related to the furnishings industry. In 1994, the firm made another significant purchased when it snatched up Fashion Bed Group, the largest metal bed manufacturer in the United States. By this time, Leggett& Platt held 22 percent of the furniture and bedding components market.

The company’s prosperity continued during the latter half of the decade. A large portion of the firm’s growth stemmed from its rigorous acquisition strategy. In fact, Leggett& Platt completed over 150 purchases during the 1990s alone. The company looked for certain characteristics in a firm before it set plans in motion to purchase it—a strategy that paid off handsomely for the manufacturer. Most of the acquired companies were small, with less than $20 million in annual revenues. The firms were private, had between one and five owners, and had management teams that were most often left intact. Nearly two-thirds of the companies that Leggett& Platt acquired were competitors. These distinct characteristics left the firm in a advantageous position as the deals involved little risk and gave the firm access to the acquired company’s facilities. Through acquisition, Leggett& Platt grew externally, which proved to be more cost effective than either internal growth or funding the construction of a new facility.

Key Dates:

1883:: J.P. Leggett and C.B. Platt form a partnership.
1901:: The two partners establish Leggett& Platt Spring Bed& Manufacturing Co.
1925:: A new factory is built in Carthage.
1933:: Leggett& Platt begins to manufacture springs for innerspring mattresses.
1942:: The company opens a plant in Kentucky.
1960:: Harry M. Cornell, Jr., is named president and begins expansion efforts.
1970:: The firm partners with Armco Steel Corp. to construct a wire mill in Carthage.
1984:: Michigan-based Gordon Manufacturing Co. is acquired.
1993:: The company purchases Hanes Holding Company and VWR Textiles& Supplies Inc.
1994:: Fashion Bed Group, the largest metal bed manufacturer in the United States, is acquired.
1999:: The company’s net earnings climb to $290.5 million.
2001:: Revenues decline for the second time in company history.

Some of the firm’s more notable purchases included Hoover Wire Products Inc., a wire and steel component manufacturer; WBSCO, a bedding machinery concern; Steadley Co.; Les Bois Blanchet Inc.; and Pace Industries Inc. In 1997, Leggett& Platt acquired a total of 29 companies, including Cambridge Tool& Mfg. Co., the most prominent die caster on the East Coast; Amco Corp. and Rodgers-Wade Manufacturing Co., both custom store fixture manufacturers; and Spuhl Holding AG, a Swiss machinery company. That year, sales reached $2.9 billion. In 1999, net profit grew by over 17 percent to a record $290.5 million while sales continued to climb to $3.78 billion.

Overall, Leggett& Platt acquired 79 companies that were integrated into the company’s residential furnishing segment by 2000. Thirty-seven firms had been purchased for the company’s commercial furnishings business line, nine were related to the company’s aluminum products segment, ten were part of the industrial materials line, and 21 purchases were made in the specialized products division, which manufactured automotive seating support and lumbar systems and control and power train cables systems.

With nearly 120 years of business experience under its belt, Leggett& Platt continued to experience success in the early years of the new millennium while battling a faltering economy. In response to weakening demand in several of its product segments, the company made a series of job cuts, restructured and sold off 20 of its manufacturing facilities, and reduced capital spending. For only the second time in its history as a public entity, the firm recorded a drop in sales—3.8 percent—during 2001. Cash flow from operations, however, increased by 21 percent to $534.5 million in 2001.

Under the leadership of Cornell—named chairman emeritus in May 2002—Leggett& Platt had evolved from a small, regional manufacturer into an international Fortune 500 company that operated as a leader in many of its market segments. A company executive commented on Leggett& Platt’s 30-year history with customer Sears, Roebuck and Co. and its broad product reach in a May 2000 Chain Store Age article, stating that “retailers know us for our fixturing, display merchandising, and backroom storage systems. But our products are used everyday by people sleeping, driving, sitting, working, and shopping in practically any defined space of human activity. We’re a behind-the-scene foundation for Sears, manufacturers, and ultimately consumers.” With its long-standing record of success and a February 2002 five-star rating by Standard& Poor’s, Leggett& Platt promised to remain a prosperous business entity for years to come.

Principal Subsidiaries

ARC Specialties; IncAdvantage Technologies, Inc.; Beeline Group, Inc.; Cambridge Tool& Mfg. Co., Inc.; Collier-Key worth, Inc.; Crest-Foam Corp.; Davidson Plyforms, Inc.; Design Fabricators, Inc.; Genesis Fixtures, Inc.; Genesis Seating, Inc.; Hanes CNC Services Co.; Hanes Companies-New Jersey, Inc.; Hanes Companies, Inc.; Hanes Fabrics, Inc.; KLM Industries, Inc.; KelMax Equipment Co.; L&P Central Asia Trading Company; L&P Financial Services Co.; L&P International Holdings Company; L&P Manufacturing, Inc.; L&P Products Company, Inc.; MPI (A Leggett& Platt Company), Inc.; Met Displays, Inc.; Metal Bed Rail Company, Inc.; Pace Industries, Inc.; Pace Industries of Mexico, LLC (51%); Product Technologies, Inc.; Shaped Wire, Inc.; Tallbot Industries, Inc.