hdr_leadership

Over the past several years, in the face of a difficult and uncertain economy, our company has gone through some major changes. We believe the transformation has made us a stronger company, and while it wasn't easy, we're better situated because of it. If you've followed Leggett & Platt over the years, you've heard us recount the strategic changes and watched us measure our progress against our stated goals.

Today, we are extremely well-positioned and expect to continue our progress. So how do we do that? I wholeheartedly believe that our future success will come through the continued effort of our outstanding team of employees, working in unison to execute well-defined goals. Our success has always relied upon our dedicated team of individuals.

As Leggett & Platt's Board Chair and CEO, I'm often asked about my main strategic priorities over the next five years. I'll highlight several on the following pages: developing talent, enhancing our portfolio of businesses, leveraging our company culture, and achieving our financial goals. Recognize that these priorities have been influenced by many conversations with the senior members of our team. Each of them is crucial in moving the company in The Right Direction – to higher levels of capability, value, and performance.

David S. Haffner
Board Chair & Chief Executive Officer

hdr_talent

It all starts with people. We recognize that Leggett & Platt is only as strong as the combined capability of the people who embody it. To fully leverage our people capabilities, we will focus on:

Attracting and retaining the most capable people practical. We continue to invest in systems and processes that allow us to successfully recruit the best candidates for each position, and then help them develop their full potential.

Connecting employees to the company's culture and strategy. Communication is vital to help our people understand the company's core values, goals, and strategic direction. We want all of our employees to fundamentally understand the breadth of the company's activities beyond just the businesses or functions in which they are currently engaged.

Expanding our view. Collaborative, collegial discussion, exchange of ideas, and thoughtful dissent are part of our culture. We recognize the value of different perspectives and are doing more to ensure the diversity (at all levels of the company) that brings varied viewpoints to the conversation.

Developing the next generation of leaders. Over the next 5 to 10 years, we expect changes in several of the company's leadership positions, due to retirements.

Succession planning, supported by active development of bench strength, is crucial to ensure seamless transitions as leadership changes occur.

Our businesses thrive on the efforts of thousands of dedicated people. Nowhere is the concept of "sustainability" more critical than in how we manage this most important resource. It is our responsibility to cultivate the potential of each individual, lead engaged teams, and ensure the ongoing vitality of the company.

hdr_portfolio

Leggett & Platt is a diverse company participating in a wide range of markets. While our residential bedding businesses have been important to us for over 130 years, we've also branched out into home furniture, automotive, office furniture, aerospace components, and many other areas over the decades. It is crucial that we actively manage this collection, or portfolio, of businesses to consistently achieve our long-term goals.

This requires, first, that we smartly invest in businesses where we have clear competitive advantage. Sometimes that leads to expansion in our current markets, but it also involves making carefully vetted and fairly priced acquisitions in industries that are new to us, that have higher growth rates and profit margins, and that enable us to extend our core competencies. Second, and equally important, we must hold our businesses accountable for acceptable performance, and be disciplined enough to exit businesses that are chronically unable to meet minimum performance thresholds.

Portfolio enhancement occurs at the product level as we continuously develop and commercialize new, innovative, and differentiated products. At our research and development centers throughout the world, specialists in particular fields strive to develop products with unique qualities that correlate to specific customer needs. These capabilities enable us to be a solutions provider – someone our customers trust to assist them in achieving their goals – rather than a generic product source. The result is stronger performance for our business units, especially when coupled with intellectual property protection.

Not only is product innovation a strategic imperative today, we believe the ability to competitively differentiate ourselves will be increasingly critical in the next five years.

That said, we certainly don't plan to abandon the basic materials businesses in which we have significant integrated positions, since these units perform so well and generate extraordinarily good returns on invested capital.

hdr_businessculture

Preserving and building upon Leggett & Platt's unique culture is a high priority for all of us. Some changes to our culture are predictable and desirable. But we want to preserve the bedrock elements – our core values – that help define who we are.

Do the right thing. At Leggett & Platt, "doing the right thing" is more than just a nice idea. It goes well beyond compliance with laws and rules, and shows up in countless decisions our people make every day. Like going above and beyond to serve a customer well, taking extra measures to ensure the safety of our people, finding new ways to better preserve our natural resources, and creating a positive workplace. That's how we've done business for more than 130 years.

Take ownership. The success we enjoy today stems from a legacy of individuals who are deeply invested in the company's future. We continue that tradition when we act as though our individual reputation is on the line with every product we ship. We don't wait for someone else to solve problems or pick up the slack. We advance the company's interests as if they were our own, because they are.

Continuously improve. Harry Cornell, Jr., who led the company for nearly 40 years and was a mentor to many of us, had a favorite saying: "Success is founded on a constant state of discontentment interrupted by brief periods of satisfaction on the completion of a job particularly well done."

That mindset still runs strong at Leggett – we are relentless about continuous improvement, always seeking a better way to do things.

These three qualities are part of our company DNA. They have enabled us to lead through many challenging eras in our past, and they will be just as relevant 5 and 10 years from now.

hdr_financialperformance

Our overarching financial goal is to deliver Total Shareholder Return (TSR) in the top third of the S&P 500 over rolling three-year periods. Achieving that goal requires 4-5% revenue growth per year, on average, and consistent improvement of our margins.

Most of our businesses grow in line with the United States' gross domestic product. Thus, in typical years, normal GDP growth provides roughly half of our annual revenue growth target. The remainder of our growth will need to come from other initiatives, such as gaining market share with existing customers, developing new products, or entering new markets. As earlier discussed, we place a priority on portfolio enhancement because we recognize the importance of adding higher-growth, higher-margined activities in order to consistently achieve our long-term goals.

Growth must be profitable. We are not interested in incremental sales that don't provide an adequate margin or return. Appropriate disciplines to weed out unprofitable sales, at both the customer and product levels, help ensure acceptable profitability of our business units. With this foundation, as growth occurs our profit margins should move higher.

While we haven't issued a formal forecast that looks beyond one year, if we deliver on our long-term growth goals over the next three to five years, our EBIT margin should approach and potentially exceed 11% (based upon our current mix of businesses).

The combination of growth and margin expansion should powerfully impact our overall financial performance. As shareholders ourselves, we are acutely aware of the benefit and importance of consistently achieving Leggett & Platt's TSR goal.