LEGGETT & PLATT, INCORPORATED
Page No.
• Highlights 31
• Introduction 32
• Results of Operation s 2021 vs 2020 37
• Results of Operations 2020 vs 2019 40
• Liquidity and Capitalization 43
• Critical Accounting Policies and Estimates 51
• Contingencies 55
• New Accounting Standards 57
HIGHLIGHTS
2021 2020 2019(Dollar amounts in millions, except for per share data)
Net trade sales$ 5,073 $
4,280
Earnings before interest and taxes (EBIT) 596 408 487 Cash from operations 271 603 668 Adjusted working capital 1 713 397 492 Total debt 2,090 1,900 2,118 Dividends per share$ 1.66 $ 1.60 $ 1.58
1 For non-GAAP reconciliation see page 44.
Trade sales increased 19% in 2021. Organic sales increased 18%, primarily from raw material-related selling price increases of 13%, volume recovery from pandemic-related sales declines in 2020 of 4%, and currency benefit of 1%. Acquisitions, net of divestitures, added 1% to sales growth. Trade sales grew 7% compared to pre-pandemic 2019 levels. Earnings in 2021 increased primarily from higher trade sales volume, metal margin expansion in our Steel Rod business, pricing discipline, a gain on the sale of real estate associated with our exited Fashion Bed business, and the non-recurrence of a goodwill impairment charge. Fixed cost reductions of approximately$90 million taken in 2020 partially offset some of the earnings decline from lower volume in that year. We maintained approximately$80 million of those fixed cost reductions in 2021, adding costs only to support higher volumes and future growth opportunities. In 2021, we generated$271 million in cash from operations compared to$603 million in 2020. This large decrease was primarily driven by inflationary impacts and planned working capital investments to rebuild inventory levels in our Rod, Wire, andU.S. Spring businesses following severe depletion in 2020. Total capital expenditures in 2021 were$107 million , reflecting a balance of investing for the future while controlling our spending. Cash from operations and adjusted working capital in 2020 benefited from a sharp focus on working capital management. We amended our revolving credit agreement inSeptember 2021 to change our financial covenant to a 3.5x net debt to trailing 12-month EBITDA metric (from what would have been 3.25x net debt at year end). This change created more financial flexibility under our revolving credit facility, which serves as back-up for our commercial paper program. We ended 2021 with full availability under the$1.2 billion credit facility. In November, we issued$500 million of 30-year, 3.5% notes. The net proceeds of these notes were used to repay commercial paper and may be used to repay a portion of the$300 million notes dueAugust 2022 . Our financial base remains strong. We increased the annual dividend in 2021 to$1.66 per share from$1.60 per share in 2020 and extended our record of consecutive annual increases to 50 years. Consistent with our deleveraging plan, share repurchases were limited in 2021. For the full year, we repurchased approximately .25 million shares of our stock, primarily surrendered for employee benefit plans. 31
--------------------------------------------------------------------------------
Table of Contents
Portfolio management remains a strategic priority. Over the past several years, we have enhanced our business portfolio and improved margins by growing our stronger businesses and exiting or restructuring businesses that consistently struggled to deliver acceptable returns. In 2021, we acquired three businesses: aUnited Kingdom manufacturer specializing in metallic ducting systems, flexible joints, and components for space, military, and commercial applications; a Polish manufacturer of bent metal tubing for furniture used in office, residential, and other settings; and a specialty foam and finished mattress manufacturer serving theUnited Kingdom and Irish market. We also divested a small specialty wire operation in our Drawn Wire business.
These topics are discussed in more detail in the sections that follow.
INTRODUCTION Total Shareholder Return
Total Shareholder Return (TSR) is the primary financial measure that we use to assess long-term performance. TSR = (Change in Stock Price + Dividends) ÷ Beginning Stock Price. We target average annual TSR of 11-14% through an approach that employs four TSR sources: revenue growth, margin expansion, dividends, and share repurchases.
We monitor our TSR performance on a rolling three-year basis. We believe our disciplined growth strategy, portfolio management, and prudent use of capital will support achievement of our target over time.
The table below shows the components of our TSR targets.
Current Targets
Revenue Growth 6-9%
Margin Increase 1%
Dividend Yield 3%
Stock Buyback 1%
Total Shareholder Return 11-14%
Senior executives participate in an incentive program with a three-year
performance period based on two equal measures: (i) our TSR performance compared
to the performance of a group of approximately 300 peers; and (ii) the Company
or segment Earnings Before Interest and Taxes (EBIT) Compound Annual Growth Rate
(CAGR).
Customers
We serve a broad suite of customers, with our largest customer representing approximately 6% of our sales in 2021. Many are companies whose names are widely recognized. They include bedding brands and manufacturers; residential and office furniture producers; automotive OEM and Tier 1 manufacturers; and a variety of other companies.
Organic Sales
We calculate organic sales as trade sales excluding sales attributable to acquisitions and divestitures consummated within the last twelve months. Management uses the metric, and it is useful to investors, as supplemental information to analyze our underlying sales performance from period to period in our legacy businesses.
Major Factors That Impact Our Business
Many factors impact our business, but those that generally have the greatest
impact are market demand, raw material cost trends, and competition. However, in
2020 COVID-19 had the largest impact on our business.
32--------------------------------------------------------------------------------
Table of Contents
PART II
COVID-19 Impacts on our Business
The impact of the COVID-19 pandemic began in January 2020 , directly affecting
our operations in China , as well as the global supply chain. The crisis
accelerated, impacting virtually all geographies by mid-March of 2020. We
quickly took action to align our variable cost structure to demand levels,
significantly reduce fixed costs, and cut capital expenditures, prioritize
accounts receivable and inventory management, and amend the financial covenant
in our revolving credit facility to provide additional liquidity. These efforts
helped to strengthen cash flow and protect our balance sheet.
In mid-second quarter 2020, consumers quickly moved from travel and
entertainment spending to purchasing home-related products and autos. This
benefited our Bedding, Home Furniture , Flooring & Textile, and Automotive
businesses. In 2021, most of our businesses recovered from the pandemic-related
impacts of 2020. Trade sales in 2021 were up 19% versus 2020, primarily from raw
material-related price increases and volume growth from recovery in most of our
businesses.
The pandemic had, and could further have, an adverse impact, in varying degrees,
to among other things (i) the demand for our products and our customers'
products, growth rates in the industries in which we participate, and
opportunities in those industries; (ii) our manufacturing operations' ability to
remain fully operational, obtain necessary raw materials and parts, maintain
appropriate labor levels, and ship finished products to customers from supply
chain disruptions or otherwise; (iii) the collection of trade and other notes
receivables in accordance with their terms due to customer bankruptcy, financial
difficulties, or insolvency; (iv) impairment of goodwill and long-lived assets;
and (v) our ability to borrow under our credit facility in compliance with
restrictive covenants; all of which, in the aggregate, had, and could further
have, a negative impact on our trade sales, earnings, cash flow, and financial
condition.
Below is a more in-depth discussion of the various impacts of COVID-19 on our business.
Demand for our Products. Various governments inNorth America ,Europe ,Asia , and elsewhere instituted, and some have reinstituted, quarantines, shelter-in-place or stay-at-home orders, or restrictions on public gatherings as well as limitations on social interactions, which have had, and could further have, an adverse effect on the demand for our products. Impact on our Manufacturing Operations. As ofDecember 31, 2021 , we had manufacturing facilities inthe United States and 17 other countries. All of these countries have been affected by the COVID-19 pandemic. Our facilities are open, but we have, from time to time, some capacity restrictions on our plants due to governmental orders in various parts of the world. We have been and could be further negatively affected by governmental action in any one or more of the countries in which we operate by the imposition, or re-imposition, of restrictive social measures, mandatory closures of retail establishments that sell our products or our customers' products, travel restrictions, and restrictions on the import or export of products. Depending on the length and severity of the COVID-19 pandemic, the percentage of the population vaccinated, and the effectiveness of the vaccines against new variants, our ability to keep our manufacturing operations fully operational, build and maintain appropriate labor levels, obtain necessary raw materials and parts, and ship finished products to customers may be partially or completely disrupted, either on a temporary or prolonged basis. The continued realization of these risks to our manufacturing operations, labor force, and supply chain could also increase labor, commodity, and transportation costs. When our employees have tested positive for COVID-19 or may have come in contact with someone who tested positive for COVID-19, we follow adopted protocols which include enhanced disinfecting in targeted areas, contact tracing, and mandating certain quarantine and self-isolation periods. A significant increase in COVID-19 cases among our employees may disrupt our ability to maintain necessary labor levels and produce and deliver products to our customers if we are unable to shift production to other manufacturing facilities. Certain governmental authorities, including state or foreign jurisdictions, may adopt laws mandating COVID-19 vaccination or periodic testing with masking requirements for unvaccinated employees. Because some of our employees may be hesitant to take a vaccine or be tested, the requirements, if adopted, may cause some employees to terminate employment with us which may challenge our ability to maintain appropriate labor levels in our facilities and keep our manufacturing locations fully operational. If these requirements are adopted, they may also create disruptions to our suppliers and customers.
Collection of Trade and Notes Receivables. Some of our customers have been adversely affected by the COVID-19 pandemic. If these parties suffer financial difficulty, they may be unable to pay their debts to us, they may reject their
33--------------------------------------------------------------------------------
Table of Contents
PART II
contractual obligations to us under bankruptcy laws or otherwise, or we may have
to negotiate significant discounts and/or extend financing terms to these
parties. If we are unable to collect receivables on a timely basis, larger
provisions for bad debt may be required. We are closely monitoring accounts
receivable and collections. Although we experienced increased bad debt expense
in the first quarter of 2020, we have had favorable customer payment trends and
applied a lower qualitative risk for improved macroeconomic conditions which
have allowed us to reduce our bad debt reserves in the last half of 2020 through
2021.
Impairment of Goodwill and Long-Lived Assets. A significant portion of our
assets consists of goodwill and other long-lived assets, the carrying value of
which may be reduced if we determine that those assets are impaired. At
December 31, 2021 , goodwill and other intangible assets represented $2.2
billion , or 41% of our total assets. In addition, net property, plant and
equipment, operating lease right-of-use assets, and sundry assets totaled $1.1
billion , or 20% of total assets.
Our annual goodwill impairment testing performed in the second quarter of 2021
indicated no goodwill impairments. However, fair value exceeded carrying value
by less than 100% for two reporting units as summarized in the table below:
Fair value in excess of carrying value Goodwill
Goodwill impairment Goodwill impairment
testing as performed testing as performed
in the second quarter in the second quarter
2021 2020 AsofDecember 31, 2021 Aerospace 28 % 51 %$68 million Work Furniture 85 % 25 %$101 million The decrease in fair value for Aerospace, as compared to 2020, is reflective of industry trends. Demand for fabricated duct assemblies in 2021 was near 2019 levels, but demand for welded and seamless tube products is still well below pre-pandemic levels. With the lingering impact from pandemic-related disruption in air travel and resulting buildup of aircraft and supply chain inventories, the industry is not anticipated to return to 2019 demand levels until 2024. While there is also a lag in recovery in theWork Furniture reporting unit, we continue to see steady demand for products sold for residential use, and the contract market continues to gradually improve as employees return to the office. We are continuing to monitor all factors impacting these industries. If the adverse economic impact from the COVID-19 pandemic is longer than expected, we may not be able to achieve projected performance levels. If actual results of any of our reporting units materially differ from the assumptions and estimates used in the goodwill and long-lived asset valuation calculations, we could incur future impairment charges. These non-cash charges could have a material negative impact on our earnings. The annual goodwill impairment testing performed in the second quarter of 2020 resulted in a$25 million non-cash goodwill impairment charge with respect to our Hydraulic Cylinders reporting unit (which is a part of the Specialized Products segment) and reflected the complete write-off of the goodwill associated with this reporting unit. Our Ability to Borrow under our Credit Facility. In response to the COVID-19 pandemic, inMay 2020 , we amended our five-year multi-currency$1.2 billion credit facility to change, among other things, the restrictive financial covenants. Prior to the pandemic, the leverage ratio of debt to trailing 12-month EBITDA was 4.25 to 1.00 with a single step-down to 3.50 to 1.00 onMarch 31, 2020 . The ratio was changed in two ways: (i) the calculation of debt was changed to net debt (debt minus unrestricted cash); and (ii) the ratio was increased to 4.75 to 1.00 throughMarch 31, 2021 , with a 50 basis point step down each quarter until the ratio reached 3.25 to 1.00 at year end 2021. The credit facility, including the leverage ratio, was amended again inSeptember 2021 . For details on the current terms of the credit facility, please see
Credit Facility on page 50.
Relief under the CARES Act and Foreign Governmental Subsidies. We deferred$19 million of our 2020 payment of employer'sSocial Security match as provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Approximately half was paid inJanuary 2022 in accordance with the holiday schedule for theDecember 31, 2021 deferral date. The remaining deferral is anticipated to be paid inJanuary 2023 . We also received$4 million and$21 million in 2021 and 2020, respectively, of government subsidies in our international locations. These deferrals and subsidies are not expected to have a material impact on our short- or long-term financial condition, results of operations, liquidity, or capital resources and do not contain material restrictions on our operations, sources of funding, or otherwise. In addition, in 2021 we received$5 million of insurance proceeds from a business interruption claim due to COVID-19 pandemic disruptions. 34
--------------------------------------------------------------------------------
Table of Contents
PART II
Market Demand
Market demand (including product mix) is impacted by several economic factors,
with consumer confidence being the most significant. Other important factors
include disposable income levels, employment levels, housing turnover, and
interest rates. All of these factors influence consumer spending on durable
goods, and therefore affect demand for our products and components. Some of
these factors also influence business spending on facilities and equipment,
which impacts approximately 20% of our sales.
Raw Material and Labor Costs
Our costs can vary significantly as market prices for raw materials (many of which are commodities) fluctuate. We typically have short-term commitments from our suppliers; accordingly, our raw material costs generally move with the market. Our ability to recover higher costs (through selling price increases) is crucial. When we experience significant increases in raw material costs, we typically implement price increases to recover the higher costs. Conversely, when costs decrease significantly, we generally pass those lower costs through to our customers. The timing of our price increases or decreases is important; we typically experience a lag in recovering higher costs, and we also realize a lag as costs decline. Steel is our principal raw material. At various times in past years, we have experienced significant cost fluctuations in this commodity. In most cases, the major changes (both increases and decreases) were passed through to customers with selling price adjustments. Over the past few years, we have seen varying degrees of inflation and deflation inU.S. steel pricing. In 2020, steel costs deflated modestly through the majority of the year followed by significant inflation late in the year. Steel costs inflated even further throughout 2021. As a producer of steel rod, we are also impacted by changes in metal margins (the difference in the cost of steel scrap and the market price for steel rod). Throughout 2021, steel rod price increases outpaced steel scrap price increases resulting in significantly expanded metal margins within the steel industry. If these expanded metal margins are sustained, our steel rod mill should continue to experience enhanced profitability. We have exposure to the cost of chemicals, including TDI, MDI, and polyol. The cost of these chemicals has fluctuated at times, but we have generally passed the changes through to our customers. Chemical prices deflated in the first half of 2020. Inflation began in the second half of the year and continued throughout 2021 as a result of several factors, including robust demand, shortages from severe weather, supplier production disruptions, port delays, and logistics challenges. The supply shortages resulted in significant restrictions by producers, however, supply availability improved in late fourth quarter 2021. Currently there is a shortage of semiconductors in the automotive industry. Automotive OEMs and other suppliers have not been able to secure an adequate supply of semiconductors, and as a result have reduced or completely shut down their production of some automobiles or parts, which in turn has reduced our sale of products. Consumer demand remains strong, but the semiconductor shortage has pushed vehicle inventory to very low levels. OurAutomotive Group uses the semiconductors in seat comfort products, and to a lesser extent in motors and actuators. Although ourAutomotive Group has been able to obtain an adequate supply of semiconductors, we are dependent on our suppliers to deliver these semiconductors in accordance with our production schedule. A shortage of the semiconductors, either to us, the automotive OEMs or our suppliers, can disrupt our operations and our ability to deliver products to our customers. Shortages in the labor markets in several industries in which we operate have created challenges in hiring and maintaining adequate workforce levels. Because of these shortages, we have experienced increased labor costs. Some facilities have experienced disruptions in logistics necessary to import, export, or transfer raw materials or finished goods, which has generally resulted in increased transportation costs that are typically passed through to our customers. Our supply chains have also been hampered by congested ports and trucking constraints. Our other raw materials include woven and nonwoven fabrics and foam scrap. We have experienced changes in the cost of these materials and generally have been able to pass them through to our customers. When we raise our prices to recover higher raw material costs, this sometimes causes customers to modify their product designs and replace higher cost components with lower cost components. We must continue providing product options to our customers that enable them to improve the functionality of their products and manage their costs, while providing higher profits for our operations. 35
--------------------------------------------------------------------------------
Table of Contents
PART II
Competition
Many of our markets are highly competitive, with the number of competitors
varying by product line. In general, our competitors tend to be smaller, private
companies. Many of our competitors, both domestic and foreign, compete primarily
on the basis of price. Our success has stemmed from the ability to remain price
competitive, while delivering innovation, better product quality, and customer
service.
We continue to face pressure from foreign competitors, as some of our customers
source a portion of their components and finished products offshore. In addition
to lower labor rates, foreign competitors benefit (at times) from lower raw
material costs. They may also benefit from currency factors and more lenient
regulatory climates. We typically compete in market segments that value product
differentiation. However, when we do compete on cost, we typically remain price
competitive in most of our business units, even versus many foreign
manufacturers, as a result of our highly efficient operations, automation,
vertical integration in steel rod and wire, logistics and distribution
efficiencies, and large-scale purchasing of raw materials and commodities. We
have also reacted to foreign competition in certain cases by selectively
adjusting prices, developing new proprietary products that help our customers
reduce total costs, and shifting production offshore to take advantage of lower
input costs.
Since 2009, there have been antidumping duty orders on innerspring imports from
China , South Africa , and Vietnam , ranging from 116% to 234%. In September 2019 ,
the Department of Commerce (DOC) and the International Trade Commission (ITC)
concluded a second sunset review extending the orders for an additional five
years, through October 2024 , at which time the DOC and ITC will conduct a third
sunset review to determine whether to extend the orders for an additional five
years.
Antidumping and countervailing duty cases filed by major U.S. steel wire rod
producers have resulted in the imposition of antidumping duties on imports of
steel wire rod from Brazil , China , Belarus , Indonesia , Italy , Korea , Mexico ,
Moldova , Russia , South Africa , Spain , Trinidad & Tobago , Turkey , Ukraine , United
Arab Emirates , and the United Kingdom , ranging from 1% to 757%, and
countervailing duties on imports of steel wire rod from Brazil , China , Italy ,
and Turkey , ranging from 3% to 193%. In June 2020 , the ITC and DOC concluded a
first sunset review, extending the orders on China through June 2025 , and in
July 2020 , the ITC and DOC concluded a third sunset review, determining to
extend the orders on Brazil , Indonesia , Mexico , Moldova , and Trinidad & Tobago
through August 2025 . Duties will continue through December 2022 for Belarus ,
Italy , Korea , Russia , South Africa , Spain , Turkey , Ukraine , United Arab
Emirates , and the United Kingdom . At those times, the DOC and the ITC will
conduct sunset reviews to determine whether to extend those orders for an
additional five years.
In September 2018 , the Company, along with other domestic mattress producers,
filed petitions with the DOC and the ITC alleging that manufacturers of
mattresses in China were unfairly selling their products in the United States at
less than fair value (dumping) and seeking the imposition of duties on
mattresses imported from China . In October 2019 , the DOC made a final
determination assigning duty rates from 57% to 1,732%. In November 2019 , the ITC
made a unanimous final determination that domestic mattress producers were
materially injured by reason of the unfairly priced imported mattresses. An
antidumping order on imports of Chinese mattresses will remain in effect through
December 2024 , at which time the DOC and ITC will conduct a sunset review to
determine whether to extend the order for an additional five years.
In March 2020 , the Company, along with other domestic mattress producers and two
labor unions representing workers at other mattress producers, filed antidumping
petitions with the DOC and the ITC alleging that manufacturers of mattresses in
Cambodia , Indonesia , Malaysia , Serbia , Thailand , Turkey , and Vietnam were
unfairly selling their products in the United States at less than fair value
(dumping) and a countervailing duty petition alleging manufacturers of
mattresses in China were benefiting from subsidies. In March 2021 , the DOC made
final determinations, assigning China a countervailing duty rate of 97.78% and
antidumping duty rates on the other seven countries from 2.22% - 763.28%. In
April 2021 , the ITC made a unanimous affirmative final determination that
domestic mattress producers were materially injured by reason of the unfairly
priced or subsidized imported mattresses. Accordingly, the agencies instructed
that final antidumping and countervailing duty orders will remain in effect for
five years, through May 2026 , at which time the DOC and ITC will conduct a
sunset review to determine whether to extend the order for an additional five
years. Appeals have been filed with the U.S. Court of International Trade as to
the DOC's final determinations of margins for Cambodia , Indonesia , Thailand , and
Vietnam and the ITC's final determination of injury. See Item 3 Legal
Proceedings on page 27 for more information.
36--------------------------------------------------------------------------------
Table of Contents
PART II
Sale of Real Estate
In the second quarter 2021, we sold certain real estate associated with our
exited Fashion Bed business in the Bedding Products segment and recognized a
gain of approximately
Change in Method for Valuing Inventories from Last-In, First-Out (LIFO) Cost Method
As ofJanuary 1, 2021 , we changed our method for valuing certain inventories (primarily domestic steel-related inventories) to the First-in, First-out (FIFO) cost method from the LIFO cost method. The effects of this change have been retrospectively applied to all periods presented. With the change from LIFO to FIFO, we expect to make tax payments of$21 million , in the aggregate, during the years 2021-2023 based on current tax rates. The cash outlay in 2021 was approximately$11 million . See Note A to the Consolidated Financial Statements beginning on page 75 for additional information.
RESULTS OF OPERATIONS-2021 vs. 2020
Consolidated Results
The following table shows the changes in sales and earnings during 2021, and identifies the major factors contributing to the changes from prior year. (Dollar amounts in millions, except per share data)
Amount % 1
Net trade sales:
Year ended December 31, 2020 $ 4,280
Divestitures (32) (1) % 2020 sales excluding divestitures
4,248
Approximate volume gains 172 4 Approximate raw material-related inflation and currency impact 597 14 Organic sales 769 18 Acquisition sales growth 56 2 Year ended December 31, 2021$ 5,073 19 %
Earnings:
(Dollar amounts, net of tax) Year endedDecember 31, 2020 $
253
Gain on sale of real estate
21
2020 goodwill impairment
25
2020 restructuring-related charges 6 2020 note impairment 6 2020 stock write-off from a prior year divestiture
3
Other items, primarily including higher volume, metal margin expansion in our Steel Rod business, and pricing discipline
88
Year endedDecember 31, 2021 $
402
2020 Earnings Per Diluted Share $
1.86
2021 Earnings Per Diluted Share$ 2.94 1 Calculations impacted by rounding 37
--------------------------------------------------------------------------------
Table of Contents
Full-year trade sales increased 19%, to$5,073 million . Organic sales increased 18%, primarily from raw material-related selling price increases of 13%, volume recovery from pandemic-related sales declines in the first half of 2020 of 4%, and currency benefit of 1%. Acquisitions, net of divestitures, contributed 1% to sales growth. Earnings increased primarily from the impact of higher sales volume, metal margin expansion in our Steel Rod business, and pricing discipline. As indicated in the table above, earnings also increased from a gain on the sale of real estate and the non-recurrence of the goodwill impairment charge, restructuring-related charges, the impairment charge related to a note receivable, and the stock write-off associated with a prior year divestiture that filed bankruptcy in 2020.
Interest and Income Taxes
Net interest expense in 2021 was lower by
Our worldwide effective income tax rate was 23% in both 2021 and 2020. The following table reflects how our effective income tax rate differs from the statutory federal income tax rate. See Note N on page 109 of the Notes to Consolidated Financial Statements for additional details.
Year Ended
2021 2020
Statutory federal income tax rate 21.0 % 21.0 %
Increases (decreases) in rate resulting from:
State taxes, net of federal benefit 1.5 .8
Tax effect of foreign operations (.9) (2.2)
Global intangible low-taxed income .5 (.3)
Current and deferred foreign withholding taxes 2.3 2.7
Stock-based compensation (.5) (.6)
Change in valuation allowance - .8
Change in uncertain tax positions, net - .6
Goodwill impairment - 1.6
Other permanent differences, net (.8) (1.3)
Other, net (.2) (.3)
Effective tax rate 22.9 % 22.8 %
38--------------------------------------------------------------------------------
Table of Contents
PART II
Segment Results
In the following section we discuss 2021 sales and EBIT (earnings before
interest and taxes) for each of our segments. We provide additional detail about
segment results and a reconciliation of segment EBIT to consolidated EBIT in
Note F on page 87 of the Notes to Consolidated Financial Statements.
% Change
Change in Sales Organic
(Dollar amounts in millions) 2021 2020 $ % Sales 1
Trade sales
Bedding Products $ 2,455.9 $ 2,039.3 $ 416.6 20.4 % 20.3 %
Specialized Products 998.9 891.2 107.7 12.1 10.7
Furniture, Flooring & Textile
Products 1,617.8 1,349.7 268.1 19.9 19.7
Total trade sales $ 5,072.6 $ 4,280.2 $ 792.4 18.5 % 18.1 %
Change in EBIT EBIT Margins
2021 2020 $ % 2021 2020
EBIT
Bedding Products $ 321.3 $ 192.4 $ 128.9 67.0 % 13.1 % 9.4 %
Specialized Products 115.9 92.0 23.9 26.0 11.6 10.3
Furniture, Flooring & Textile
Products 159.5 126.5 33.0 26.1 9.9 9.4
Intersegment eliminations & other (.7) (3.4) 2.7
Total EBIT $ 596.0 $ 407.5 $ 188.5 46.3 % 11.7 % 9.5 %
2021 2020
Depreciation and amortization
Bedding Products $ 106.8 $ 106.7
Specialized Products 44.8 44.3
Furniture, Flooring & Textile
Products 24.0 25.5
Unallocated 2 11.7 12.9
Total depreciation and
amortization $ 187.3 $ 189.4
1 This is the change in sales not attributable to acquisitions or divestitures
in the last 12 months. Refer to the Bedding Products, Specialized Products, and
Furniture, Flooring & Textile Products discussions below for a reconciliation of
the change in total segment sales to organic sales.
2 Unallocated consists primarily of depreciation and amortization on non-operating assets.
Bedding Products
Trade sales increased 20%. Organic sales were up 20%, entirely from raw material-related selling price increases. Volume was flat. Acquisitions and divestitures offset.
EBIT increased$129 million , primarily from higher metal margin in our Steel Rod business, pricing discipline, the$28 million gain from sale of real estate associated with our exited Fashion Bed business, and the non-recurrence of the prior year$8 million impairment related to a note receivable and$3 million restructuring-related charges, partially offset by production inefficiencies driven by supply chain constraints and higher transportation costs. 39
--------------------------------------------------------------------------------
Table of Contents Specialized Products
Trade sales increased 12%. Organic sales were up 11%, from a 7% increase in volume and currency benefit of 4%. Acquisitions contributed 1% to sale growth.
EBIT increased$24 million , primarily from higher volume and the non-recurrence of prior year$25 million goodwill impairment charge in Hydraulic Cylinders and$4 million restructuring-related charges, partially offset by higher raw material and transportation costs.
Furniture, Flooring & Textile Products
Trade sales increased 20%. Organic sales were up 20%, from raw material-related selling price increases of 10%, increased volume of 9%, and currency benefit of 1%.
EBIT increased
RESULTS OF OPERATIONS-2020 vs. 2019
As ofJanuary 1, 2021 , we changed our method for valuing certain inventories (primarily domestic steel-related inventories) to the FIFO cost method from the LIFO cost method. The effects of this change have been retrospectively applied to all periods presented. See INVENTORIES under Note A beginning on page 75 of the Notes to Consolidated Financial Statements for additional information. Consolidated Results The following table shows the changes in sales and earnings during 2020, and identifies the major factors contributing to the changes from prior year. (Dollar amounts in millions, except per share data) Amount % 1 Net trade sales: Year ended December 31, 2019$ 4,753 Divestitures (14) - % 2019 sales excluding divestitures
4,739
Approximate volume losses (483) (10) Approximate raw material-related inflation and currency impact (32) (1) Organic sales (515) (11) Acquisition sales growth 56 1 Year ended December 31, 2020$ 4,280 (10) %
Earnings:
(Dollar amounts, net of tax) Year ended December 31, 2019$ 314 Lower restructuring-related charges ($9 in 2019;$6 in 2020) 3 Goodwill impairment (25) Note impairment (6) Stock write-off from a prior year divestiture
(3)
Other items, including COVID-related economic declines, partially offset by fixed cost reductions, lower interest expense, and lower taxes
(30)
Year ended December 31, 2020$ 253 2019 Earnings Per Diluted Share$ 2.32 2020 Earnings Per Diluted Share
1 Calculations impacted by rounding
40--------------------------------------------------------------------------------
Table of Contents
PART II
Full-year trade sales decreased 10%, to$4,280 million , and organic sales decreased 11%. Volume declined 10%, primarily due to pandemic-related economic declines and the planned exit of business in Fashion Bed and Drawn Wire which reduced sales 2%. Raw material-related selling price deflation early in the year reduced sales by 1%. Acquisitions, net of divestitures, contributed 1% to sales growth. As indicated in the table above, earnings decreased from the goodwill impairment charge, the impairment charge related to a note receivable, and the stock write-off associated with a prior year divestiture that filed bankruptcy in 2020, partially offset by lower restructuring-related charges. Operationally, earnings decreased primarily from the impact of lower sales, partially offset by fixed cost reductions. Interest and Income Taxes
Net interest expense in 2020 was lower by
Our worldwide effective income tax rate was 23% in 2020, compared to 22% in
2019. The following table reflects how our effective income tax rate differs
from the statutory federal income tax rate. See Note N on page 109 of the
Notes to Consolidated Financial Statements for additional details.
Year Ended
2020 2019
Statutory federal income tax rate 21.0 % 21.0 %
Increases (decreases) in rate resulting from:
State taxes, net of federal benefit .8 1.3
Tax effect of foreign operations (2.2) (1.7)
Global intangible low-taxed income (.3) 2.3
Current and deferred foreign withholding taxes 2.7 1.3
Stock-based compensation (.6) (1.1)
Change in valuation allowance .8 .4
Change in uncertain tax positions, net .6 (.3)
Goodwill impairment 1.6 -
Other permanent differences, net (1.3) (.3)
Other, net (.3) (.7)
Effective tax rate 22.8 % 22.2 %
41--------------------------------------------------------------------------------
Table of Contents Segment Results
In the following section we discuss 2020 sales and EBIT for each of our segments. We provide additional detail about segment results and a reconciliation of segment EBIT to consolidated EBIT in Note F on page 87 of the Notes to Consolidated Financial Statements.
% Change
Change in Sales Organic
(Dollar amounts in millions) 2020 2019 $ % Sales 1
Trade sales
Bedding Products $ 2,039.3 $ 2,254.3 $ (215.0) (9.5) % (10.0) %
Specialized Products 891.2 1,066.8 (175.6) (16.5) (16.5)
Furniture, Flooring & Textile
Products 1,349.7 1,431.4 (81.7) (5.7) (8.1)
Total trade sales $ 4,280.2 $ 4,752.5 $ (472.3) (9.9) % (10.9) %
Change in EBIT EBIT Margins
2020 2019 $ % 2020 2019
EBIT
Bedding Products $ 192.4 $ 214.9 $ (22.5) (10.5) % 9.4 % 9.5 %
Specialized Products 92.0 169.9 (77.9) (45.9) 10.3 15.9
Furniture, Flooring & Textile
Products 126.5 102.3 24.2 23.7 9.4 7.1
Intersegment eliminations & other (3.4) (.3) (3.1) Total EBIT$ 407.5 $ 486.8 $ (79.3) (16.3) % 9.5 % 10.2 % 2020 2019 Depreciation and amortization Bedding Products$ 106.7 $ 107.3 Specialized Products 44.3 41.8 Furniture, Flooring & Textile Products 25.5 25.7 Unallocated 2 12.9 17.1
Total depreciation and amortization
1 This is the change in sales not attributable to acquisitions or divestitures in the last 12 months. Refer to the Bedding Products and Furniture, Flooring & Textile Products discussions below for a reconciliation of the change in total segment sales to organic sales.
2 Unallocated consists primarily of depreciation and amortization on non-operating assets.
Bedding Products
Trade sales decreased 9.5%. Acquisitions, net of divestitures, increased sales .5%. Organic sales were down 10%. Volume decreased 9%, with raw material-related selling price decreases and negative currency impact reducing sales 1%. EBIT decreased$23 million , primarily from pandemic-related economic declines, lower metal margin in our rod mill, and the$8 million impairment related to a note receivable, partially offset by fixed cost reductions.
Specialized Products
Trade sales were down 16%. Organic sales were down 16%, with volume down 17%. Currency benefit increased sales 1%.
42--------------------------------------------------------------------------------
Table of Contents
PART II
EBIT decreased$78 million , primarily from pandemic-related economic declines and a$25 million goodwill impairment charge in Hydraulic Cylinders, partially offset by fixed cost reductions.
Furniture, Flooring & Textile Products
Trade sales decreased 6%. Organic sales were down 8% and volume decreased 8%, with raw material-related selling price decreases offset by a currency benefit. A small Geo Components acquisition completed inDecember 2019 added 2% to trade sales.
EBIT increased
LIQUIDITY AND CAPITALIZATION Liquidity With cash on hand, operating cash flow, our commercial paper program and/or our credit facility, and our ability to obtain debt financing, we believe we have sufficient funds available to repay maturing debt, as well as support our ongoing operations, both on a short-term and long-term basis.
Sources of Cash
Cash on Hand
AtDecember 31, 2021 , we had cash and cash equivalents of$362 million primarily invested in interest-bearing bank accounts and in bank time deposits with original maturities of three months or less. Substantially all of these funds are held in the international accounts of our foreign operations. During 2021, 2020, and 2019 we brought back$247 million ,$188 million , and$279 million of foreign cash, respectively. If we were to immediately bring back all our foreign cash to theU.S. in the form of dividends, we would pay foreign withholding taxes of approximately$19 million . Due to capital requirements in various jurisdictions, approximately$39 million of this cash was inaccessible for repatriation at year end.
Cash from Operations
The primary source of funds for our short-term cash requirements is our cash
generated from operating activities. Earnings and changes in working capital
levels are the two factors that generally have the greatest impact on our cash
from operations.
[[Image Removed: leg-20211231_g1.jpg]]
Cash from operation2019
43--------------------------------------------------------------------------------
Table of Contents
PART II
Cash from operations decreased approximately$331 million in 2021, primarily driven by inflationary impacts and planned working capital investments to rebuild inventory levels in our Rod, Wire, andU.S. Spring businesses following severe depletion in 2020. As ofJanuary 1, 2021 , we changed our method for valuing certain inventories (primarily domestic steel-related inventories) to the FIFO cost method from the LIFO cost method. The effects of this change have been retrospectively applied to all periods presented. See INVENTORIES under Note A beginning on page 75 of the Notes to Consolidated Financial Statements for additional information. We closely monitor our working capital levels and we ended 2021 with working capital at 13.7% and adjusted working capital at 13.4% of annualized sales.1 The table below explains this non-GAAP calculation. We eliminate cash and current debt maturities from working capital to monitor our operating efficiency and performance related to trade receivables, inventories, and accounts payable. We believe this provides a more useful measurement to investors since cash and current maturities can fluctuate significantly from period to period. (Dollar amounts in millions) 2021 2020 Current assets$ 2,065.3 $ 1,658.1 Current liabilities 1,335.7 1,006.0 Working capital 729.6 652.1 Cash and cash equivalents 361.7 348.9 Current debt maturities and current portion of operating lease liabilities 345.1 93.3 Adjusted working capital$ 713.0 $ 396.5 Annualized sales 1$ 5,331.6 $ 4,728.0 Working capital as a percent of annualized sales 13.7 % 13.8 % Adjusted working capital as a percent of annualized sales 13.4 % 8.4 % 1 Annualized sales equal fourth quarter sales ($1,332.9 million in 2021 and$1,182.0 million in 2020) multiplied by 4. We believe measuring our working capital against this sales metric is more useful, since efficient management of working capital includes adjusting those net asset levels to reflect current business volume. Three Primary Components of our Working Capital Amount (in millions) Days 2021 2020 2019 2021 2020 2019 Trade Receivables$ 620 $ 535 $ 564 DSO 1 42 47 43 Inventories 993 692 676 DIO 2 76 74 67 Accounts Payable 614 552 463 DPO 3 53 55 45 1Days sales outstanding: ((beginning of year trade receivables + end of year trade receivables) ÷ 2) ÷ (net trade sales ÷ number of days in the period) 2Days inventory on hand: ((beginning of year inventory + end of year inventory) ÷ 2) ÷ (cost of goods sold ÷ number of days in the period) 3Days payables outstanding: ((beginning of year accounts payable + end of year accounts payable) ÷ 2) ÷ (cost of goods sold ÷ number of days in the period) Trade Receivables - Our trade receivables increased$85 million atDecember 31, 2021 compared to the prior year and our DSO decreased during 2021. The increase in accounts receivable was primarily due to raw material-related selling price increases, and acquisitions represented$18 million of the increase. The DSO in 2020 was higher than both 2021 and 2019 as COVID-19 notably increased DSO in the first half of 2020, but strong credit discipline drove steady DSO improvement in the latter half of the year to a more normal level. We reduced our allowance for doubtful accounts by$3 million during 2021, reflecting lower qualitative risk compared to 2020 due to improved macroeconomic conditions and continued strong customer payment trends. We recognized$17 million of bad debt 44
--------------------------------------------------------------------------------
Table of Contents
PART II
expense in 2020; approximately half was associated with elevated
pandemic-related risk across the entire portfolio, and the remaining expense was
related to one Bedding Products segment customer (fully reserving the balances
for this customer, primarily a note receivable). We closely monitor accounts
receivable and collections, including accounts for possible loss. We also
monitor general macroeconomic conditions and other items that could impact the
expected collectability of all customers, or pools of customers with similar
risk. We obtain credit applications, credit reports, bank and trade references,
and periodic financial statements from our customers to establish credit limits
and terms as appropriate. In cases where a customer's payment performance or
financial condition begins to deteriorate or in the event of a customer
bankruptcy, we tighten our credit limits and terms and make appropriate reserves
based upon the facts and circumstances for each individual customer, as well as
pools of similar customers.
Inventories - Our inventories and DIO have both increased notably in the last
two years. Increased inventories were primarily driven by inflationary impacts
(including higher freight costs), stock build to ensure consistent supply to our
customers, and planned investments to rebuild inventory levels in our Rod, Wire,
and U.S. Spring businesses. Softening demand in the bedding market in the fourth
quarter, along with our decision to postpone the reheat furnace replacement at
our steel rod mill until late first quarter of 2022, also contributed to higher
year-end inventories. Acquisitions also added a small amount of inventory. This
resulted in higher levels of inventory at year end and affected our normal
seasonal cash flow cycle. DIO in 2020 increased primarily as a result of lower
cost of goods sold due to lower volumes associated with pandemic-related
economic declines in the first half of the year. Our recent increased inventory
levels are not indicative of slow-moving or potential inventory obsolescence. We
continuously monitor our slower-moving and potentially obsolete inventory
through reports on inventory quantities compared to usage within the previous 12
months. We also utilize cycle counting programs and complete physical counts of
our inventory. When potential inventory obsolescence is indicated by these
controls, we will take charges for write-downs to maintain an adequate level of
reserves.
Accounts Payable - Our accounts payable increased $62 million at December 31,
2021 compared to the prior year and our DPO decreased during 2021. The increase
in accounts payable was primarily related to raw material cost inflation. Our
payment terms did not change meaningfully since last year, and we have continued
to focus on optimizing payment terms with our vendors. We continue to look for
ways to establish and maintain favorable payment terms through our significant
purchasing power and also utilize third-party services that offer flexibility to
our vendors, which in turn helps us manage our DPO as discussed below.
Accounts Receivable and Accounts Payable Programs - We participate in trade
receivables sales programs in combination with third-party banking institutions
and certain customers. Under each of these programs, we sell our entire interest
in the trade receivable for 100% of face value, less a discount. Because control
of the sold receivable is transferred to the buyer at the time of sale, accounts
receivable balances sold are removed from the Consolidated Balance Sheets, and
the related proceeds are reported as cash provided by operating activities in
the Consolidated Statements of Cash Flows. We had approximately $35 million and
$45 million of trade receivables that were sold and removed from our
Consolidated Balance Sheets at December 31, 2021 and 2020, respectively. These
sales reduced our quarterly DSO by roughly three days, and the impact to
operating cash flow was approximately ($10) million and $5 million at
December 31, 2021 and 2020, respectively.
For accounts payable, we have historically looked for ways to optimize payment
terms through utilizing third-party programs that allow our suppliers to be paid
earlier at a discount. While these programs assist us in negotiating payment
terms with our suppliers, we continue to make payments based on our customary
terms. A vendor can elect to take payment from a third party earlier with a
discount, and in that case, we pay the third party on the original due date of
the invoice. Contracts with our suppliers are negotiated independently of
supplier participation in the programs, and we cannot increase payment terms
pursuant to the programs. As such, there is no direct impact on our DPO,
accounts payable, operating cash flows or liquidity. The accounts payable
settled through the third-party programs, which remain on our Consolidated
Balance Sheets, were approximately $130 million and $105 million at December 31,
2021 and 2020, respectively.
While we utilize the above items as tools in our cash flow management, and offer
them as options to facilitate customer and vendor operating cycles, if there
were to be a cessation of these programs, we do not expect it would materially
impact our operating cash flows or liquidity.
45--------------------------------------------------------------------------------
Table of Contents
PART II
Commercial Paper Program
Another source of funds for our short-term cash requirements is our $1.2 billion
commercial paper program. As of December 31, 2021 , we had $1.2 billion available
under the program. For more information on our commercial paper program, see
Commercial Paper Program on page 49.
Credit Facility
Our credit facility is a five-year multi-currency facility providing us the ability, from time to time, to borrow, repay and re-borrow up to$1.2 billion until the maturity date, at which time our ability to borrow under the facility will terminate. The credit facility matures inSeptember 2026 . Currently, there are no borrowings under the credit facility. For more information on our credit facility, see Credit Facility on page 50, and Note J on page 94 of the Notes to Consolidated Financial Statements.
Capital Markets
We also believe that we have the ability to raise debt in the capital markets which acts as a source of funding of long-term cash requirements. Currently, we have$2.1 billion of total debt outstanding with maturity dates ranging from 2022 to 2051. For more information, please see Long-Term Debt on page 50, and Note J on page 94 of the Notes to Consolidated Financial Statements. Uses of Cash
Our long-term priorities for use of cash are: fund organic growth including capital expenditures, pay dividends, fund strategic acquisitions, and repurchase stock with available cash.
Capital Expenditures
[[Image Removed: leg-20211231_g2.jpg]]
Capital expenditures-2019
Total capital expenditures in 2021 were$107 million , reflecting a balance of investing for the future while controlling our spending. We intend to make investments to support expansion in businesses and product lines where sales are profitably growing, for efficiency improvement and maintenance, and for system enhancements. We expect capital expenditures to approximate$150 million in 2022. Our employee incentive plans emphasize returns on capital, which include net fixed assets and working capital. This emphasis focuses our management on asset utilization and helps ensure that we are investing additional capital dollars where attractive return potential exists. 46
--------------------------------------------------------------------------------
Table of Contents
PART II
Dividends
[[Image Removed: leg-20211231_g3.jpg]] [[Image Removed: leg-20211231_g4.jpg]]
Dividends Paid-2019 $205 million , 2020 $212 million , 2021 $218 million ;
Dividends Declared-2019 $1.58 , 2020 $1.60 , 2021 $1.66
Dividends are the primary means by which we return cash to shareholders. The
cash usage for dividends in 2022 should approximate $230 million .
Our long-term targeted dividend payout ratio is approximately 50% of adjusted
EPS (which excludes special items such as significant tax law impacts,
impairment charges, restructuring-related charges, divestiture gains, and
litigation accruals/settlements). Continuing our long track record of increasing
the dividend remains a high priority. In 2021, we increased the annual dividend
by $.06 from $1.60 to $1.66 per share. 2021 marked our 50th consecutive annual
dividend increase. We are proud of our dividend record and plan to extend it.
Acquisitions
Our long-term, 6-9% annual revenue growth objective envisions periodic acquisitions. We are seeking strategic acquisitions that complement our current products and capabilities.
In 2019, we acquired two businesses for total consideration of$1.27 billion . InJanuary 2019 , we acquired ECS, a leader in the production of proprietary specialized foam used primarily for the bedding and furniture industries, for total consideration of approximately$1.25 billion . InDecember 2019 , we acquired a small manufacturer and distributor of geosynthetic fabrics, grids and erosion control products in our Geo Components business unit.
In 2020, we acquired no businesses.
In 2021, we acquired three businesses for total consideration of$153 million . InJanuary 2021 , we acquired aUnited Kingdom (UK ) manufacturer specializing in metallic ducting systems, flexible joints, and components for the space, military, and commercial applications for a cash purchase price of$28 million . InMay 2021 , we acquired a Polish manufacturer of bent metal tubing for furniture used in office, residential, and other settings for a cash purchase price of$5 million . InJune 2021 , we acquired a specialty foam and finished mattress manufacturer serving theUK and Irish markets, for a cash purchase price of$120 million .
Additional details about acquisitions can be found in Note R on page 116 of the Notes to Consolidated Financial Statements.
Stock Repurchases
Stock repurchases are the other means by which we return cash to shareholders. During the last three years, we repurchased a total of 1 million shares of our stock and issued 4 million shares (through employee benefit plans and stock option exercises). Our net stock repurchases were$7 million ,$9 million , and$6 million in 2019, 2020, and 2021, respectively. In 2021, we repurchased .25 million shares (at an average price of$46.59 ) and issued 1 million shares.
We have been authorized by the Board to repurchase up to 10 million shares each year, but we have established no specific repurchase commitment or timetable.
47--------------------------------------------------------------------------------
Table of Contents
PART II
Short-Term and Long-Term Cash Requirements
In addition to the expected uses of cash discussed above, we have various material short-term (12 months or less) and long-term (more than 12 months) cash requirements as listed below.
Cash Requirements Short-Term Long-Term
(Dollar amounts in millions)
Current and long-term debt, excluding finance leases 1 $ 300 $ 1,786
Operating and finance leases 2 51 174
Purchase obligations 3 581 3
Interest payments 4 76 754
Deemed repatriation tax payable 5 - 28
Liability for pension benefits 6 3 42
1The long-term debt presented above could be accelerated if we were not able to
make the principal and interest payments when due. See Note J on page 94
in the Notes to Consolidated Financial Statements for more information regarding
scheduled maturities of our long-term debt.
2See Note K on page 96 in the Notes to Consolidated Financial Statements for additional information on leases.
3Purchase obligations primarily include open short-term (30-120 days) purchase orders that arise in the normal course of operating our facilities.
4Interest payments assume debt outstanding remains constant with amounts at
5In addition to the deemed repatriation tax payable we also have deferred income taxes and other reserves for tax contingencies included in our Consolidated Balance Sheets. The resolution or settlement of these tax positions with the taxing authorities is subject to significant uncertainty. We are therefore unable to make a reliable estimate of the amount or timing of cash that may be required to settle these matters, or whether the matters will require cash to settle or resolve.
6See Note M on page 106 in the Notes to Consolidated Financial Statements for additional information on pension benefit plans.
See Note I on page 93 of the Notes to Consolidated Financial Statements for
details regarding the accrued expenses and other liabilities reflected on our
Consolidated Balance Sheets.
48--------------------------------------------------------------------------------
Table of Contents
PART II
Capitalization
Capitalization Table
This table presents key debt and capitalization statistics at the end of the
three most recent years.
(Dollar amounts in millions) 2021 2020 2019
Total debt excluding credit facility/commercial paper
$ 1,900.2 $ 2,056.1 Less: Current maturities of long-term debt 300.6 50.9 51.1 Scheduled maturities of long-term debt 1,789.7 1,849.3 2,005.0 Average interest rates 1 3.7 % 3.7 % 3.6 % Average maturities in years 1 10.8 5.3 6.0 Credit facility/commercial paper 2 - - 61.5 Weighted average interest rate on year-end balance - % - % 2.0 % Average interest rate during the year .2 % 2.0 % 2.6 % Total long-term debt 1,789.7 1,849.3 2,066.5 Deferred income taxes and other liabilities 533.3 519.6 518.9 Equity 1,648.6 1,425.1 1,341.9 Total capitalization$ 3,971.6 $ 3,794.0 $ 3,927.3 Unused committed credit: 2 Long-term$ 1,200.0 $ 1,200.0 $ 1,138.5 Short-term - - - Total unused committed credit$ 1,200.0
Cash and cash equivalents$ 361.7
1 These rates include current maturities, but exclude commercial paper to reflect the averages of outstanding debt with scheduled maturities.
2 The unused committed credit amount is based on our revolving credit facility and commercial paper program which, during all periods presented, had a total authorized program amount of$1.2 billion . However, our borrowing capacity may be limited by covenants in our credit facility.
Commercial Paper Program
Amounts outstanding related to our commercial paper program were: (Dollar amounts in millions)
2021 2020 2019
Total program authorized $ 1,200.0 Commercial paper outstanding (classified as long-term debt)
$ - $ - $ 61.5
Letters of credit issued under the credit facility - - -
Total program usage $ - $ - $ 61.5
The average and maximum amounts of commercial paper outstanding during 2021 were
$218 million and $545 million , respectively. During the fourth quarter, the
average and maximum amounts outstanding were $268 million and $545 million ,
respectively. At quarter end, we had no letters of credit outstanding under the
credit facility, but we had issued $48 million of stand-by letters of credit
under other bank agreements to take advantage of better pricing. Over the
long-term, and subject to our capital needs, market conditions, and alternative
capital market opportunities, we expect to maintain the indebtedness under the
commercial paper program by continuously repaying and reissuing the commercial
paper notes. We view the notes as a source of long-term funds and have
classified the borrowings under the commercial
49--------------------------------------------------------------------------------
Table of Contents
PART II
paper program as long-term borrowings on our balance sheet. We have the intent
to roll over such obligations on a long-term basis and have the ability to
refinance these borrowings on a long-term basis as evidenced by our $1.2 billion
revolving credit facility maturing in 2026 discussed below.
Credit Facility
Our multi-currency credit facility was amendedSeptember 30, 2021 to create more financial flexibility and matures inSeptember 2026 . It provides us the ability, from time to time subject to certain restrictive covenants and customary conditions, to borrow, repay, and re-borrow up to$1.2 billion . Our credit facility contains restrictive covenants which (a) require us to maintain as of the last day of each fiscal quarter (i) Consolidated Funded Indebtedness minus the lesser of: (A) Unrestricted Cash, or (B)$750 million to (ii) Consolidated EBITDA for the four consecutive trailing quarters, such ratio not being greater than 3.50 to 1.00, provided, however, subject to certain limitations, if we have made a material acquisition in any fiscal quarter, at our election, the maximum leverage ratio shall be 4.00 to 1.00 for the fiscal quarter during which such material acquisition is consummated and the next three consecutive fiscal quarters; (b) limit the amount of total secured debt to 15% of our total consolidated assets, and (c) limit our ability to sell, lease, transfer, or dispose of all or substantially all of our assets and the assets of our subsidiaries, taken as a whole (other than accounts receivable sold in a permitted securitization transaction, products sold in the ordinary course of business and our ability to sell, lease, transfer, or dispose of any of our assets or the assets of one of our subsidiaries to us or one of our subsidiaries, as applicable) at any given point in time; each (a), (b), and (c) above as determined by the terms of our credit agreement, filed with theSEC on October 1, 2021 as Exhibit 10.1 to our Current Report on Form 8-K. We were in compliance with all of our debt covenants at the end of 2021, and expect to maintain compliance with the debt covenant requirements. For more information about long-term debt, please see Note J on page 94 of the Notes to Consolidated Financial Statements. Our credit facility serves as back-up for our commercial paper program. AtDecember 31, 2021 , we had no commercial paper outstanding and had no borrowing under the credit facility. As our trailing 12-month consolidated EBITDA, unrestricted cash, and debt levels change, our borrowing capacity increases or decreases. Based on our trailing 12-month consolidated EBITDA, unrestricted cash, and debt levels atDecember 31, 2021 , our borrowing capacity under the credit facility was$1.2 billion . However, this may not be indicative of the actual borrowing capacity moving forward, which may be materially different depending on our consolidated EBITDA, unrestricted cash, debt levels, and leverage ratio requirements at that time. Prior to theSeptember 2021 amendment, we had additional borrowing capacity under the credit facility in the form of a five-year term loan facility in the amount of$500 million , which matured inJanuary 2024 . We fully borrowed under the Term Loan A inJanuary 2019 to finance, in part, the acquisition of ECS. We paid quarterly principal installments of$12.5 million under the Term Loan A. Additional principal payments, including a complete early payoff, were allowed without penalty. OnAugust 31, 2021 , we pre-paid the remaining$280 million outstanding principal under the Term Loan A utilizing borrowings under our commercial paper program.
Long-Term Debt
We have total debt of$2,090 million of which$300 million is dueAugust 2022 . The maturities of the long-term debt range from 2024 through 2051. For more details on long-term debt see Note J on page 94 of the Notes to Consolidated Financial Statements. InMarch 2019 , we issued$500 million aggregate principal amount of notes that mature in 2029. The notes bear interest at a rate of 4.4% per year, with interest payable semi-annually in March and September each year. The net proceeds of these notes were used to repay a portion of the commercial paper indebtedness incurred to finance the ECS acquisition. InNovember 2021 , we issued$500 million aggregate principal amount of notes that mature in 2051. The notes bear interest at a rate of 3.5% per year, with interest payable semi-annually beginningMay 15, 2022 . As part of this issuance, we also unwound$300 million of treasury lock agreements we had entered into during 2021 at a gain of approximately$10 million , which will be amortized over the life of the notes. The net proceeds of these notes were used to repay commercial paper and may be used to repay a portion of the 3.4% Senior Notes dueAugust 2022 . 50
--------------------------------------------------------------------------------
Table of Contents
PART II
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America . To do so, we must
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, expenses, and disclosures. If we used different estimates
or judgments our financial statements would change, and some of those changes
could be significant. Our estimates are frequently based upon historical
experience and are considered by management, at the time they are made, to be
reasonable and appropriate. Estimates are adjusted for actual events, as they
occur.
"Critical accounting estimates" are those that are: (a) subject to uncertainty
and change and (b) of material impact to our financial statements. Listed below
are the estimates and judgments which we believe could have the most significant
effect on our financial statements.
We provide additional details regarding our significant accounting policies in
Note A on page 75 of the Notes to Consolidated Financial Statements.
Changes in Estimate and Effect if
Description Judgments and Uncertainty Actual Results Differ from Assumptions
Goodwill
Goodwill is assessed for Goodwill is evaluated annually for We had no goodwill impairments in 2021
impairment annually as of impairment as of June 30 using a
or 2019.
reporting unit level, which is one The June 2020 review resulted in a
level below our operating segments. non-cash goodwill impairment charge of
$25 million with respect to our
Judgment is required in the Hydraulic Cylinders reporting unit,
quantitative analysis. We estimate which is part of the Specialized
fair value using a combination of: Products segment. This impairment
charge reflects the complete write-off
(a) A discounted cash flow model of the goodwill associated with the
that contains uncertainties related Hydraulic Cylinders reporting unit.
to the forecast of future results,
as many outside economic and Two reporting units had fair values in
competitive factors can influence excess of carrying value of less than
future performance. Revenue growth, 100% in 2021 as discussed in
cost of sales, and appropriate Note C on page 83 of the
discount rates are the most Notes to Consolidated Financial
critical estimates in determining Statements. At December 31, 2021, we
enterprise values using the cash had $1.4 billion of goodwill.
flow model.
Information regarding material
(b) The market approach, using assumptions used to determine if a
price to earnings ratios for goodwill impairment exists can be
comparable publicly traded found in Note A on page 75 and
companies that operate in the same Note C on page 83 of the
or similar industry and with Notes to Consolidated Financial
characteristics similar to the Statements.
reporting unit. Judgment is
required to determine the Our assumptions are based on our
appropriate price to earnings current business strategy in light of
ratio. present industry and economic
conditions, as well as future
expectations. If we are not able to
achieve projected performance levels,
future impairments could be possible.
51--------------------------------------------------------------------------------
Table of Contents
Changes in Estimate and Effect if
Actual Results Differ fromDescription Judgments and Uncertainty Assumptions Other Long-Lived Assets Other long-lived assets are Impairments of other long-lived These impairments are tested for recoverability at year assets usually occur when major unpredictable. Impairments did not end and whenever events or restructuring activities take exceed$8 million per year in any circumstances indicate the place, or we decide to discontinue of the last three years. carrying value may not be selected products. recoverable.
At
Our impairment assessments have plant and equipment was $782
For other long-lived assets we uncertainties because they require million, net intangible assets
estimate fair value at the lowest estimates of future cash flows to (other than goodwill) was $708
level where cash flows can be determine if undiscounted cash million, and operating right-of-use
measured (usually at a branch flows are sufficient to recover assets was $193 million .
level). carrying values of these assets.
For assets where future cash flows
are not expected to recover
carrying value, fair value is
estimated which requires an
estimate of market value based
upon asset appraisals for like
assets.
Inventory Reserves
We reduce the carrying value of Our inventory reserve contains At December 31, 2021, the reserve
inventories to reflect an uncertainties because the for obsolete and slow-moving
estimate of net realizable value calculation requires management to inventory was $44 million
for slow-moving (i.e., not make assumptions about the value (approximately 4% of inventories).
selling very quickly) and of products that are obsolete or This is slightly lower than the
obsolete inventory. slow-moving.
reserves at
2019, representing approximately 6%
Generally, a reserve is required Changes in customer behavior and of inventories. There has been no
when we have more than a 12-month requirements can cause inventory change to our policies for
supply of the product. to become obsolete or slow-moving. establishing reserves, and we do
Restructuring activity and not expect significant changes to
The calculation also uses an decisions to narrow product our historical obsolescence levels.
estimate of the ultimate offerings also impact the 2021 inventories increased due to
recoverability of items estimated net realizable value of inflation in steel-related raw
identified as slow-moving, based inventories. material prices, higher freight
upon historical experience. costs, and stock build to ensure
consistent supply to our customers.
If we have had no sales of a Our recent increased inventory
given product for 12 months, levels are not indicative of
those items are generally deemed slow-moving or potential inventory
to be obsolete with no value and obsolescence.
are written down completely.
Additions to inventory reserves in
2021 were $14 million , which is
equal to our $14 million three-year
average.
52--------------------------------------------------------------------------------
Table of Contents
PART II
Changes in Estimate and Effect if
Actual Results Differ from
Description Judgments and Uncertainty Assumptions
Credit Losses For accounts and notes Our bad debt reserve contains A significant change in the receivable, we estimate a bad uncertainties because it requires financial status of a large customer debt reserve for the amount that management to estimate the amount could impact our estimates. However, will ultimately be uncollectible. uncollectible based upon an
we believe we have established
evaluation of several factors such adequate reserves on our customer
When we become aware of a as the length of time that accounts.
specific customer's potential receivables are past due, the Our bad debt expense has fluctuated inability to pay, we record a bad financial health of the customer, over the last three years: ($3 ) debt reserve for the amount we industry and macroeconomic million in 2021,$17 million in believe may not be collectible. considerations, and historical loss 2020, and$3 million in 2019. The We also monitor general experience. 2021 expense decrease reflects lower macroeconomic conditions and qualitative risk compared to 2020 other items that could impact the Our customers are diverse and many due to improved macroeconomic expected collectibility of all are small-to-medium sized conditions and continued strong customers or pools of customers companies, with some being highly customer payment trends. with similar risk. leveraged. Bankruptcy can occur The expense for 2020 was impacted by with some of these customers one account that is now fully relatively quickly and with little reserved at$23 million , including warning.$22 million of a note receivable and$1 million for a trade account In cases where a customer's payment receivable ($9 million in 2020), as performance or financial condition discussed in Note H on page 92 begins to deteriorate, we tighten of the Notes to Consolidated our credit limits and terms and Financial Statements. make appropriate reserves when 2020's expense was also impacted by deemed necessary. Certain of our pandemic-related economic declines. customers have from time to time Although we have not experienced experienced bankruptcy, insolvency, significant issues with customer and/or an inability to pay their payment performance during this debts to us as they come due. If time, the effects of the pandemic our customers suffer significant have adversely impacted the financial difficulty, they may be operations of many of our customers, unable to pay their debts to us which have and could further impact timely or at all, they may reject their ability to pay their debts to their contractual obligations to us us. As a result, we increased the under bankruptcy laws or otherwise, reserves on trade accounts or we may have to negotiate receivable in 2020 to reflect this significant discounts and/or extend increased risk but decreased this financing terms with these reserve in 2021 as conditions customers. improved. Excluding the note receivable discussed above, the average annual amount of bad debt expense associated with trade accounts receivable was less than$4 million (significantly less than 1% of annual net trade sales) over the last three years. At December 31, 2021, our allowances for doubtful trade accounts receivable were$15 million (less than 3% of our trade receivables of$635 million ). 53
--------------------------------------------------------------------------------
Table of Contents
Changes in Estimate and Effect if
Actual Results Differ from
Description Judgments and Uncertainty Assumptions
Pension Accounting
For our pension plans, we must The pension liability calculation Our US plans represent
estimate the cost of benefits to contains uncertainties because it approximately 84% of our pension
be provided (well into the future) requires management's judgment. benefit obligations.
and the current value of those Assumptions used to measure our
benefit obligations. pension liabilities and pension Each 25 basis point decrease in the
expense annually include: discount rate for our U.S. plans
increases pension expense by $.6
- the discount rate used to million and increases the plans'
calculate the present value of benefit obligations by
future benefits $8.6 million .
- an estimate of expected return
on pension assets based upon the Each 25 basis point reduction in
mix of investments held (bonds and the expected return on assets for
equities) our U.S. plans would increase
- certain employee-related pension expense by $.4 million , but
factors, such as turnover, have no effect on the plans' funded
retirement age, and mortality. status.
Mortality assumptions represent our
best estimate of the duration of
future benefit payments at the
measurement date. These estimates
are based on each plan's
demographics and other relevant
facts and circumstances
- the rate of salary increases
where benefits are based on
earnings.
Contingencies
We evaluate various legal, Our disclosure and accrual of loss We have recorded a litigation
environmental, and other potential contingencies (i.e., losses that contingency accrual of $1 million
claims against us to determine if may or may not occur) contain or less at the end of each year for
an accrual or disclosure of the uncertainties because they are the last three years. There were no
contingency is appropriate. If it based on our assessment of the material adjustments to the
is probable that an ultimate loss probability that the expenses will accrual, including cash payments
will be incurred and reasonably actually occur and our reasonable and expense, for each of the years
estimable, we accrue a liability estimate of the likely cost. Our ended December 31, 2021, 2020, and
for the estimate of the loss. estimates and judgments are 2019, respectively. See Note T
subjective and can involve matters on page 119 of the Notes to
in litigation, the results of which Consolidated Financial Statements
are generally unpredictable. for additional information.
54--------------------------------------------------------------------------------
Table of Contents
PART II
Changes in Estimate and Effect if
Actual Results Differ from
Description Judgments and Uncertainty Assumptions
Income Taxes
In the ordinary course of business, Our tax liability for unrecognized Changes in
laws could impact assumptions
treatment of many transactions, even uncertainties because management related to the taxation and
though the ultimate tax outcome may is required to make assumptions repatriation of certain foreign
remain uncertain for some and to apply judgment to estimate earnings. time. These estimates become part of the exposures related to our the annual income tax expense
various filing positions. Audits by various taxing
reported in our financial authorities continue as governments
statements. Subsequent to year end, Our effective tax rate is also look for ways to raise additional
we finalize our tax analysis and impacted by changes in tax laws, revenue. Based upon past audit
file income tax returns. Tax the current mix of earnings by experience, we do not expect any
authorities periodically audit these taxing jurisdiction, and the material changes to our tax
income tax returns and examine our results of current tax audits and liability as a result of this audit
tax filing positions, including assessments. activity; however, we could incur
(among other things) the timing and additional tax expense if we have
amounts of deductions, and the At December 31, 2021 and 2020, we audit adjustments higher than
allocation of income among tax had $13 million and $14 million , recent historical experience.
jurisdictions. If necessary, we respectively, of net deferred tax
adjust income tax expense in our assets on our balance sheet, The likelihood of recovery of net
financial statements in the periods primarily related to net operating operating losses and other tax
in which the actual outcome becomes losses and other tax carryforwards has been closely
more certain. carryforwards. The ultimate evaluated and is based upon such
realization of these deferred tax factors as the time remaining
assets is dependent upon the before expiration, viable tax
amount, source, and timing of planning strategies, and future
future taxable income. In cases taxable earnings expectations. We
where we believe it is more likely believe that appropriate valuation
than not that we may not realize allowances have been recorded as
the future potential tax benefits, necessary. However, if earnings
we establish a valuation allowance expectations or other assumptions
against them. change such that additional
valuation allowances are required,
we could incur additional tax
expense. Likewise, if fewer
valuation allowances are needed, we
could incur reduced tax expense.
CONTINGENCIES
For contingencies related to the impact of the COVID-19 pandemic on our business, please see "COVID-19 Impacts on our Business" on page 33.
Litigation
Accruals for Probable Losses
We are exposed to litigation contingencies that, if realized, could have a material negative impact on our financial condition, results of operations, and cash flows. Although we deny liability in all currently threatened or pending litigation proceedings in which we are or may be a party, and believe we have valid bases to contest all claims made against us, we have recorded a litigation contingency accrual for our reasonable estimate of probable loss for pending and threatened litigation proceedings, in aggregate, of$1.0 million ,$.5 million , and$.7 million atDecember 31, 2021 , 2020, and 2019, respectively. There were no material adjustments to the accrual, including cash payments and expense, for each of the years endedDecember 31, 2021 , 2020, and 2019, respectively. The accruals do not include accrued expenses related to workers' compensation, vehicle-related personal injury, product and general liability claims, taxation issues, and environmental matters, some of which may contain a portion of litigation expense. However, any litigation expense associated with these categories is not anticipated to have a material effect on our financial condition, results of operations, or cash flows. For 55
--------------------------------------------------------------------------------
Table of Contents
more information regarding accrued expenses, see Note I under "Accrued expenses" on page 93 of the Notes to Consolidated Financial Statements.
Reasonably Possible Losses in Excess of Accruals
Although there are a number of uncertainties and potential outcomes associated with all of our pending or threatened litigation proceedings, we believe, based on current known facts, that additional losses, if any, are not expected to materially affect our consolidated financial position, results of operations, or cash flows. However, based upon current known facts, as ofDecember 31, 2021 , aggregate reasonably possible (but not probable, and therefore not accrued) losses in excess of the accruals noted above are estimated to be$10 million . If our assumptions or analyses regarding these contingencies are incorrect, or if facts change, we could realize losses in excess of the recorded accruals (and in excess of the$10 million referenced above), which could have a material negative impact on our financial condition, results of operations, and cash flows.
For more information regarding litigation contingencies, please refer to Note T on page 119 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference.
Climate Change
Change in Laws, Policies, and Regulations
Many scientists, legislators, and others attribute global warming to increased levels of greenhouse gas emissions, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit such emissions. AtDecember 31, 2021 , we had 131 production facilities worldwide. Some of our facilities are engaged in manufacturing processes that produce greenhouse gas emissions, including carbon dioxide. We also maintain a fleet of over-the-road tractor trailers that emit greenhouse gases. Our manufacturing facilities are primarily located inNorth America ,Europe , andAsia . There continues to be a lack of consistent climate legislation in the jurisdictions in which we operate, which creates economic and regulatory uncertainty. To the extent our customers are subject to any of these or other similar proposed or newly enacted laws and regulations, additional costs by customers to comply with such laws and regulations could impact their ability to operate at similar levels in certain jurisdictions, which could adversely impact their demand for our products and services. Also, if these laws or regulations impose significant operational restrictions and compliance requirements on us, they could increase costs associated with our operations, including costs for raw materials and transportation. Non-compliance with climate change legislative and regulatory requirements could also negatively impact our reputation. To date, however, we have not experienced a material impact from climate change legislative and regulatory efforts.
Indirect Consequences of Climate-Related Business Trends
We have experienced (due to severe weather impacts) supply shortages in chemicals which have restricted foam supply. The restriction of foam supply has constrained overall mattress production in the bedding industry and has reduced our production levels. The cost of chemicals and foam has also increased due to the shortages. Also, severe weather impacts could have a negative effect on our customers' payments which could result in increased bad debt expense.
Physical Effects of Climate Change
We have experienced increased property insurance premiums, in part, due to enhanced weather-related risks, but this increase in premiums has not had a material impact on our results of operations or financial condition.
Compliance Costs Related to Climate Change
To date, we have not experienced a material increase in climate-related
compliance costs. However, evaluating opportunities to reduce our carbon
footprint, setting goals for carbon reduction, and measuring performance in
achieving those goals will be part of our environmental, sustainability, and
governance strategy moving forward. We are currently working on completing our
first greenhouse gas emissions inventory. Once complete, this baseline
measurement will inform a long-term greenhouse gas (GHG) reduction strategy,
including setting reduction targets and other key areas of
56--------------------------------------------------------------------------------
Table of Contents
PART II
performance. This inventory, with a base year of 2019, will cover three years of
data and include Scope 1 and Scope 2 carbon dioxide equivalent emissions. The
inventory will be prepared consistent with the GHG Protocol Corporate Accounting
and Reporting Standard. We currently do not have an estimate of the capital
expenditures or operating costs that may be required to implement our GHG
reduction strategies.
Cybersecurity Risks
We rely on information systems to obtain, process, analyze, and manage data, as well as to facilitate the manufacture and distribution of inventory to and from our facilities. We receive, process, and ship orders, manage the billing of and collections from our customers, and manage the accounting for and payment to our vendors. We have a formal process in place for both incident response and cybersecurity continuous improvement that includes a cross-functionalCybersecurity Oversight Committee . Members of theCybersecurity Oversight Committee update the Board quarterly on cyber activity, with procedures in place for interim reporting if necessary. Although we have not experienced any material cybersecurity incidents, we have enhanced our cybersecurity protection efforts over the last few years. We use a third party to periodically benchmark our information security program against theNational Institute of Standards and Technology's Cybersecurity Framework. We provide quarterly cybersecurity training for employees with access to our email and data systems, and we have purchased broad form cyber insurance coverage. However, because of risk due to the COVID-19 pandemic regarding increased remote access, remote work conditions, and associated strain on employees, technology failures or cybersecurity breaches could still create system disruptions or unauthorized disclosure of confidential information. We cannot be certain that the attacker's capabilities will not compromise our technology protecting information systems. If these systems are interrupted or damaged by any incident or fail for any extended period of time, then our results of operations could be adversely affected. We may incur remediation costs, increased cybersecurity protection costs, lost revenues resulting from unauthorized use of proprietary information, litigation and legal costs, reputational damage, damage to our competitiveness, and negative impact on stock price and long-term shareholder value. NEW ACCOUNTING STANDARDS
The FASB has issued accounting guidance effective for current and future periods. See Note A on page 75 of the Notes to Consolidated Financial Statements for a more complete discussion.
57--------------------------------------------------------------------------------
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
(Unaudited) (Dollar amounts in millions) Interest Rates The table below provides information about the Company's debt obligations sensitive to changes in interest rates. Substantially all of the debt shown in the table below is denominated inUnited States dollars. The fair value of fixed rate debt was approximately$130 million greater than carrying value atDecember 31, 2021 and approximately$170 million greater than carrying value atDecember 31, 2020 . The fair value of the fixed rate debt was based on quoted prices in an active market. The fair value of variable rate debt is not significantly different from its recorded amount. Long-term debt as of Scheduled Maturity Date December 31, 2022 2023 2024 2025 2026 Thereafter 2021 2020 Principal fixed rate debt$ 300.0 $ -$ 300.0 $ - $ -$ 1,500.0 $ 2,100.0 $ 1,600.0 Average stated interest rate 3.40 % - 3.80 % - - 3.80 % 3.74 % 3.82 % Principal variable rate - - - - - 3.8 3.8 308.8 debt Unamortized discounts and deferred loan costs (17.7) (12.7) Commercial Paper 1 - - Miscellaneous debt, primarily finance leases 4.2 4.1 Total debt 2,090.3 1,900.2 Less: current maturities 300.6 50.9 Total long-term debt$ 1,789.7 $ 1,849.3
1The weighted average interest rate for the average net commercial paper
outstanding activity during the years ended
Derivative Financial Instruments
The Company is subject to market and financial risks related to interest rates
and foreign currency. In the normal course of business, the Company utilizes
derivative instruments (individually or in combinations) to reduce or eliminate
these risks. The Company seeks to use derivative contracts that qualify for
hedge accounting treatment; however, some instruments may not qualify for hedge
accounting treatment. It is the Company's policy not to speculate using
derivative instruments. Information regarding cash flow hedges (including
interest rate hedges) and fair value hedges is provided in Note S beginning
on page 117 of the Notes to Consolidated Financial Statements and is
incorporated by reference into this section.
58--------------------------------------------------------------------------------
Table of Contents
PART II
Investment in Foreign Subsidiaries
We view our investment in foreign subsidiaries as a long-term commitment. This
investment may take the form of either permanent capital or notes. Our net
investment (i.e., total assets less total liabilities subject to translation
exposure) in foreign operations with functional currencies other than the U.S.
dollar at December 31 is as follows:
Functional Currency (amounts in millions) 2021 2020
European Currencies 1 $ 528.4 $ 382.1
Chinese Yuan 269.9 260.9
Canadian Dollar 218.6 210.5
Mexican Peso 47.1 38.6
Other 67.8 59.9
Total $ 1,131.8 $ 952.0
1 We acquired three European companies in 2021. Information regarding these
acquisitions is provided in Note R beginning on page 116 of the Notes to
Consolidated Financial Statements and is incorporated by reference into this
section.
© Edgar Online, source
