Building on a Legacy.

Continue to Introduction

Pictured from left to right:
  • Mitch Dolloff, Senior Vice President – Specialized Products
  • Jack Crusa, Senior Vice President – Industrial Materials and Specialized Products
  • Karl Glassman, President and Chief Executive Officer
  • Matt Flanigan, Executive Vice President and Chief Financial Officer
  • Perry Davis, Senior Vice President – Residential Furnishings
  • Dennis Park, Senior Vice President – Commercial Products
Commissioned in 1987 and created by longtime employee-partner Everette Wyatt, the Partners in Progress sculpture reflects the spirit of partnership at Leggett & Platt and our strong belief in the value of people working together, as partners, to achieve common goals.

From our founding, we have been Leggett and Platt. Not a sole proprietorship, but a partnership. Each founder recognized his own limitations and respected what the other could bring to the company. It was their teamwork, not their individual brilliance, that turned a great idea into a real product, and ultimately a lasting business.

That same spirit of partnership drives Leggett & Platt’s much more diverse businesses today. As in the past, winning doesn’t depend on any one of us. It depends on all of us – our whole team of people across all of our businesses.

Building on a Legacy

Today, Leggett & Platt is in its strongest position in over 15 years, and our strategy is working well. The company is growing – we reported record sales from continuing operations in 2015. We are increasing profits – our 2015 earnings per share also hit record levels. Our margins are within reach of past records that we once believed would be difficult to attain in today’s global markets. Our discipline with capital deployment is unwavering. And importantly, we are creating significant value for our shareholders.

As we look toward 2020 and beyond, we aim to extend Leggett & Platt’s long track record of success. On the following pages, we discuss five consensus priorities – Succession Planning, Financial Strength, Profitable Growth, Improving Operations, and Customers First – that are in clear focus for senior management and integral to our long-term success.

Speaking with Karl Glassman, President and Chief Executive Officer

Leggett & Platt’s long-term success depends on the strength of its people, including those that will eventually lead the company. With your recent promotion to CEO, how are you planning for the next phase of succession in senior management?

[Karl] It’s a timely topic considering that several of our senior leaders are likely within five years of retirement. Identifying and developing the next generation of leaders is a top priority. Leggett & Platt is fortunate to have a deep bench of very capable people across our organization. We must make sure that we have the right team in place and that they are prepared so future transitions are seamless.

What are you doing to make sure the next generation of leaders is ready?

[Karl] It starts with talent screening and acquisition – recruiting and hiring the right people for the job. We have significantly improved that process in recent years, and our hiring success rate is very good. Once we have the right people in the right places, then we need to challenge them – and give them opportunities – to grow.

Succession planning goes far beyond the ranks of senior management. We need to continue identifying and developing high-potential individuals throughout the company to ensure our long-term success.

How are the company’s long-term succession needs being addressed by each of the operations?

[Karl] We conduct strategic talent reviews in each of our businesses every two to three years to identify high-potential candidates for future development, as well as talent gaps that need to be filled. The next step is to create development plans, including mentoring and targeted training, for critical position successors. We are doing this in some of our businesses, but there is an opportunity to expand development efforts across the company. Through this process, we are able to more clearly define career paths, resulting in greater engagement and retention of our strongest performing individuals.

“Identifying and developing the next generation of leaders is a top priority.”
– Karl Glassman
Speaking with Matt Flanigan, Executive Vice President and Chief Financial Officer

Leggett & Platt has delivered impressive results since refocusing its strategy in 2007. Do you envision any major changes in the company’s financial focus over the next few years?

[Matt] Our main financial goal is to deliver Total Shareholder Return1 in the top third of the S&P 500. That priority remains steadfast.

Since 2007, our cumulative TSR has ranked among the top 11% of the S&P 500. As we look forward, we will continue generating TSR from a combination of moderate revenue growth (including carefully selected strategic acquisitions), further EBIT margin improvement, above-market dividend yield, and reductions to share count through stock buybacks. We believe this balanced approach, along with our active portfolio management and prudent use of capital, will continue our strong TSR track record.

How does the company’s debt position fit into that equation?

[Matt] Financial strength has been a hallmark of Leggett & Platt for decades, and maintaining that position of strength remains critical today. While we would consider increasing debt levels temporarily for an attractive investment opportunity such as an acquisition, we will not dramatically increase our leverage to repurchase our stock. We will maintain our long-held conservative financial framework2, which enables us to navigate various economic cycles, capture attractive investment opportunities (both organic and acquisition), maintain our investment-grade status, and safeguard shareholder returns.

Do you expect the priority on dividend growth to continue?

[Matt] Our commitment to dividend growth is unwavering. For 44 years in a row, we have increased the dividend at a 13% compound annual growth rate. There are very few companies that can match that long-term track record. In recent years, our dividend has grown at a more modest 3% rate, but with continued earnings improvement, we now have greater flexibility to consider increasing that growth rate. We recognize the importance of the dividend to our long-term shareholders and its direct connection to our TSR goal. It is certainly our intent to continue the record of increases and maintain the prominence of the dividend for our current and future holders.

“Our main financial goal is to deliver Total Shareholder Return in the top third of the S&P 500.”
– Matt Flanigan

1 Total Shareholder Return, TSR = (Change in Stock Price + Dividends) / Beginning Stock Price.

2 We target net debt to net capital of 30-40%. Calculated as: (long-term debt + current debt maturities – cash) / (long-term debt + deferred taxes + other long-term liabilities + equity + current debt maturities – cash).

Speaking with Mitch Dolloff, Senior Vice President – Specialized Products and Dennis Park, Senior Vice President – Commercial Products

Since 2009, Leggett & Platt’s automotive business has consistently been one of the company’s leading sources of profitable growth. As you look toward 2020, what are you doing to ensure that growth continues?

[Mitch] We have confidence in our ability to sustain above-market growth rates for the next few years based upon awarded programs. Long-term growth will come from three sources.

  • First, as vehicle production grows around the world, we will benefit. We have a strong presence in each of the major developed markets, and we will continue to expand into emerging markets as local demand grows.
  • Second, comfort increasingly is a differentiator among vehicles, and auto manufacturers will continue to add higher-value comfort features. We will benefit from increased presence of lumbar, massage, side bolster, and other seat comfort systems in new vehicles.
  • Third, we will continue to expand our cable, motor, and actuator placements into other seating and non-seating applications within the vehicle.

Our success in this business comes from a combination of engineering and technical competence, program launch and production reliability, and our global footprint. These advantages will continue to support our long-term growth in the market.

What do you see as your greatest challenge?

[Mitch] It’s making sure that we have the resources in place to support rapid global growth. That includes finding and developing people with the skills required to develop highly engineered products and manage global customer programs. It also includes expanding plant capacity in targeted geographies and product categories.

The adjustable bed business has been another major contributor to the company’s recent growth. Where will future growth in this business come from?

[Dennis] For the next few years, the adjustable bed market should grow at a fast pace given the increased emphasis that our customers and consumers are placing on the products, and the relatively low penetration of the category. Currently, fewer than 10% of mattresses are purchased with an adjustable bed.

Product innovation is critical to our longer-term success. We are taking proven technologies and applying them to our product designs (for example, with the use of occupancy sensors and home environment controls) to provide functionality that consumers increasingly seek. In addition, we are utilizing R&D resources and product innovation from other Leggett businesses that are pursuing similar opportunities (including automotive and residential furniture) to create unique product enhancements for adjustable beds.

Leggett & Platt expanded its work furniture business unit in 2015 with the acquisition of Trio-Line. What is the primary focus of the business unit over the next few years?

[Dennis] We will continue building our global footprint to support our customers’ international growth. Our global strategy includes expanded capabilities in product design, component manufacturing, logistics, and private-label production. Poland-based Trio-Line complements our U.S.-based Genesis operation and broadens our geographic capabilities in highly skilled, private-label manufacturing (to our customers’ designs) of high-end finished furniture. As our work furniture customers seek to grow globally, we are well positioned to serve as a strategic partner supporting that growth.

“We are investing in resources, both people and plant capacity, to support rapid global growth.”
– Mitch Dolloff
Speaking with Perry Davis, Senior Vice President – Residential Furnishings and Jack Crusa, Senior Vice President – Industrial Materials and Specialized Products

The company’s TSR goal envisions profit growth from improved margins. What is being done to build on the margin progress that has been made over the past few years?

[Perry] Margin improvement has come from several sources, with improved product mix being one of those. We will sustain that momentum by continually developing new, proprietary, higher-value products with customer needs and consumer preferences in mind. We must also maintain our priority on continuous improvement to drive profit margins higher.

What does continuous improvement look like in Leggett & Platt’s operations?

[Perry] Continuous improvement is a decades-long pursuit for us. It includes measuring and optimizing performance in the critical areas of employee safety, customer service, quality, process efficiency, financial results, and environmental stewardship.

In recent years we have added a Best in Class program that challenges even our strongest-performing operations to achieve excellence across a wide range of performance criteria. We’re also implementing a system in several businesses to analyze and improve our profitability by understanding our actual cost of service at the customer level. Continuous improvement disciplines have played a major role in the company’s historical margin expansion and will contribute meaningfully to our ongoing margin growth.

Vertical integration into steel rod and wire is a competitive advantage with benefits across the company. What is being done to ensure that these operations fulfill their critical role in the company’s long-term success?

[Jack] We continue to optimize and focus production in our steel rod and wire operations to meet the changing needs of internal customers, including our bedding, residential furniture, and automotive businesses. We are unique in the steel industry, with about 70% of our steel rod and wire output sold to other Leggett operations. As a result, we focus our production on fewer types and sizes of rod and wire, thereby raising machine-utilization rates and maximizing efficiency of these operations. Because we control the quality and consistency of this crucial raw material, Leggett & Platt’s other operations that use our wire enjoy greater production efficiency and product development flexibility.

The company’s internal requirement for high-quality steel wire is a key consideration when we make investments in our steel rod and wire businesses. Equipment installed at our steel rod mill in the past few years provides greater consistency of chemistry and improved physical properties of our steel rod. This in turn helps meet increasing demand for finer-gauge wire from our bedding operations. It also enables us to upgrade our mix of external rod sales and supply higher-value, higher-margin products to a wider range of end markets.

“We will sustain that momentum by continually developing new, proprietary, higher-value products.”
– Perry Davis
Speaking with Karl Glassman, President and Chief Executive Officer and Matt Flanigan, Executive Vice President and Chief Financial Officer

A company’s culture plays a crucial role in its long-term success. As you look forward to 2020, many elements of Leggett & Platt’s culture might legitimately be called out as the most important factor, but what would you put at the top of the list?

[Karl] It’s the importance of being customer focused. We must always remember that we would not be in business without our customers.

We make it a priority to consistently exceed our customers’ expectations. We work to understand what drives consumption in our markets, where those markets are headed, and what challenges our customers are facing. We then use that insight to develop innovative, differentiated products that meet the end-consumers’ needs. When our customers grow and succeed, so do we.

How does the responsibility for being customer focused apply across the company?

[Matt] We all have customers, even those of us that don’t directly interact with the companies that buy our products. As corporate and internal support personnel, we must serve with the same customer focus when carrying out our responsibilities. That means understanding what our internal customers need and successfully meeting those needs in a very timely manner. We all play crucial roles in ensuring that the company’s long-term goals are met.

“We work to understand where our markets are headed and what challenges our customers are facing.”