Leggett Announces Acquisition of RHC Spacemaster

Diversified manufacturer Leggett & Platt announced the successful acquisition of the assets of RHC Spacemaster, a manufacturer of retail store fixtures that filed for bankruptcy on February 11, 2003. This acquisition further solidifies Leggett's position as the leader in design and manufacture of retail store fixtures and displays, and the only true "one stop shop" in the industry. Incremental annual revenue is expected to be $100-120 million, and earnings should be roughly break-even during the first twelve months. The purchase price is approximately $46 million; however, Leggett's initial total investment should decrease by an estimated $18 million as a result of reductions in excess working capital.

RHC is one of the five largest manufacturers in the industry, and produces a broad range of metal and wood store fixtures. Products include wall systems, showcase frames, garment racks, gondolas, brackets, checkout stands, display tables, and other fixtures. Customers include Wal-Mart, Gap, Lowe's, Sears, Kohl's, JCPenney, and Target, with the top 20 customers representing 73% of 2002 revenues. The company manufactures and distributes from eight primary production facilities and five warehouse and distribution facilities. Leggett expects to continue operating several of these facilities, but will consolidate some operations into existing Leggett facilities. Specific plans and details will be announced shortly.

RHC revenues have fallen steadily from a peak of $243 million in 2000 to $59 million for the first five months of 2003. RHC points to two significant events that impacted revenues: the company's top customer reduced store openings by 80%, and KMart, a major customer, declared bankruptcy. The company also cites the slowing retail environment, excess industry capacity, and increased steel tariffs as causes of their financial distress.

The bankruptcy of RHC provides further evidence of the store fixture industry's continuing financial struggles. Due to a lackluster economy and uncertain consumer sentiment, retailers have been postponing both new store openings and existing store refurbishments for almost three years. This depressed demand is taking its toll on the industry. In the past two years, four of the top ten manufacturers (Ontario Store Fixtures, Oklahoma Fixture Company, RHC Spacemaster, and HMG Worldwide) declared bankruptcy.

In contrast, Leggett's financial position is notably sound, and the company is well situated to benefit from the eventual increase in store fixture demand. Leggett expects that, once the economy turns, the recovery in fixture demand should be robust. Small, thinly capitalized, or inexperienced manufacturers may not be able to respond to the rapid rise in demand. Leggett's financial stability, breadth of operations, economies of scale, project management skills, and broad product offerings position the company to respond quickly to, and capitalize significantly on, the eventual economic recovery.