Leggett & Platt Posts Third Quarter EPS of $.31

Oct 21, 2010, 16:07 ET from Leggett & Platt

CARTHAGE, Mo., Oct. 21 /PRNewswire-FirstCall/ --

  • 3Q EPS of $.31
  • 3Q sales of $867 million, 7% higher than in prior year
  • Updated 2010 EPS guidance to $1.10 - 1.20 on sales of $3.30 - 3.35 billion

Diversified manufacturer Leggett & Platt reported third quarter earnings per diluted share of $.31 (including a $.02 per share net LIFO expense).  In the third quarter of 2009, earnings were $.34 per share (including a $.05 per share net LIFO benefit).  Compared to third quarter 2009, third quarter 2010 earnings benefited from higher unit volumes and lower effective tax rates; these factors were more than offset by an increase in net LIFO expense (of $.07 per share) and higher-cost raw materials.

Sales from Continuing Operations were $867 million, 7% (or $57 million) higher than 2009 third quarter sales, primarily due to unit volume growth in the Specialized Products segment.  

Markets Soften

President and CEO David S. Haffner commented, "Certain of our key markets, primarily related to residential furnishings, weakened noticeably in the third quarter.  As a result, our third quarter sales were lower than those of second quarter, which rarely occurs.  Though aggregate unit volume increased 6% in the third quarter (compared to 3Q 2009), this was a much slower pace than the 15% unit growth experienced during the first half of 2010.  We believe the stronger consumer demand during the first half of the year was driven, in part, by larger income tax refunds and house purchase incentives.  In addition, raw material costs temporarily increased beyond the amounts anticipated when we implemented price increases during the second quarter; however, we are seeing costs begin to retreat to expected levels.  As a result, we are revising our full year EPS guidance to the lower half of our prior range.  

"Strategically, during the quarter we completed the sale of the seventh, and last, of the businesses we planned to divest as part of the company's strategic realignment.  The seven divestitures collectively generated $433 million of after tax cash proceeds, exceeding the original $400 million goal.  Cash flow remains strong and net debt declined during the quarter.  

"We remain well positioned as the economy recovers.  Given our unused production capacity, sales can rebound to at least $4 billion before we need to invest much capital.  We continue to expect an incremental EBIT margin of 25-35% as unit volumes increase; as a result, EBIT margin should improve as sales grow.

"Since 2008, when we implemented our new strategy, we have exceeded our goal of providing Total Shareholder Return (TSR(1)) that ranks within the top 1/3 of the S&P 500.  Longer term, we believe that modest sales growth, continued margin improvement, our dividend yield, and stock buybacks will enable us to continue to attain that goal."

Dividend and Stock Repurchases

In August, Leggett & Platt's Board of Directors declared a $.27 third quarter dividend, a 3.8% increase versus the second quarter dividend.  Leggett & Platt has increased annual dividends for 39 consecutive years, at a compound annual growth rate of 14%.  At yesterday's closing share price of $22.88, the indicated annual dividend of $1.08 per share generates a dividend yield of 4.7%.

During the third quarter, the company repurchased 0.5 million shares of its stock at an average price of $21.15 per share, and issued 0.4 million shares.  Year to date, the company repurchased 4.7 million shares and issued 2.4 million shares; as a result, shares outstanding decreased to 146.5 million (14% lower than it was three years ago).  

For the full year, the company anticipates repurchasing a total of 6 to 8 million shares of its stock and issuing approximately 3 million shares (primarily for employee purchases of stock).  The company has standing authorization from the Board of Directors to repurchase up to 10 million shares each year, but has established no specific repurchase commitment or timetable.

2010 Outlook

Leggett anticipates full year 2010 sales of approximately $3.30 - 3.35 billion, and EPS of $1.10 - 1.20.  Cash from operations should exceed $300 million for the full year, which is more than sufficient to provide the cash needed for capital expenditures and dividends.

LIFO

All of Leggett's segments use the FIFO (first-in, first-out) method for valuing inventories.  An adjustment is made at the corporate level to convert about 60% of the inventories to the LIFO (last-in, first-out) method.  

LIFO accounting created significant variability in 2009 quarterly earnings.  Steel deflation negatively impacted segment earnings for the first half of 2009.  This impact was offset by a LIFO benefit at the corporate level, but that benefit was spread across all four quarters in 2009.  As a result, earnings for the third quarter 2009 included a LIFO benefit of $16.0 million; in contrast, third quarter 2010 earnings reflect a LIFO expense of $5.3 million.  

SEGMENT RESULTS – Third Quarter 2010 (versus 3Q 2009)

Residential Furnishings – Total sales were unchanged; unit volume decreases were offset by inflation.  EBIT (earnings before interest and income taxes) decreased $1 million due to reduced unit volume.  

Commercial Fixturing & Components – Total sales increased $6 million, or 4%, primarily due to new programs with office furniture manufacturers.  EBIT decreased $1 million; gains due to higher sales were more than offset by higher raw material costs and a less favorable sales mix.

Industrial Materials – Total sales increased $11 million, or 6%; unit volume was 2% higher, inflation increased sales by 10%, and a small divestiture reduced sales by 6%.  EBIT decreased $7 million, with the impact of higher volume more than offset by higher raw material costs and lost earnings contribution associated with the divestiture.  

Specialized Products – Total sales increased $35 million, or 28%, with all portions of the segment showing meaningful improvement.  EBIT increased $10 million due to higher volume.

Slides and Conference Call

A set of slides containing summary financial information is available from the Investor Relations section of Leggett's website at www.leggett.com.  Management will host a conference call at 8:00 a.m. Central (9:00 a.m. Eastern) on Friday, October 22 to discuss quarterly results, annual guidance, and related matters. The webcast can be accessed (live or replay) from Leggett's website. The dial-in number is (201) 689-8341; there is no passcode.

Fourth quarter results will be released after the market closes on February 1; a conference call will occur the next day.

FOR MORE INFORMATION: Visit Leggett's website at www.leggett.com.

COMPANY DESCRIPTION: Leggett & Platt (NYSE: LEG) is a diversified manufacturer (and member of the S&P 500) that conceives, designs and produces a broad variety of engineered components and products that can be found in most homes, offices, and automobiles. The company serves a broad suite of customers that comprise a "Who's Who" of U.S. manufacturers and retailers. The 127-year-old firm is comprised of 19 business units, 20,000 employee-partners, and more than 140 manufacturing facilities located in 18 countries.

Leggett & Platt is the leading U.S. manufacturer of: a) components for residential furniture and bedding; b) office furniture components; c) drawn steel wire; d) automotive seat support and lumbar systems; e) carpet underlay; f) power foundations; g) bedding industry machinery.

FORWARD-LOOKING STATEMENTS: Statements in this release that are not historical in nature are "forward-looking." These statements involve uncertainties and risks, including the company's ability to improve operations and realize cost savings, price and product competition from foreign and domestic competitors, changes in demand for the company's products, cost and availability of raw materials and labor, fuel and energy costs, future growth of acquired companies, general economic conditions, foreign currency fluctuation, litigation risks, and other factors described in the company's Form 10-K. Any forward-looking statement reflects only the company's beliefs when the statement is made. Actual results could differ materially from expectations, and the company undertakes no duty to update these statements.

CONTACT:   Investor Relations (417) 358-8131 or invest@leggett.com

David M. DeSonier Vice President of Strategy and Investor Relations

Susan R. McCoy Director of Investor Relations

(1)

TSR = (Change in Stock Price + Dividends Received) / Beginning Stock Price.

RESULTS OF OPERATIONS

THIRD QUARTER

YEAR TO DATE

(In millions, except per share data)

2010

2009

Change

2010

2009

Change

Net sales (from continuing operations)

$   866.5

$   809.9

7%

$ 2,557.2

$ 2,285.4

12%

Cost of goods sold  

697.8

622.6

2,043.3

1,825.9

  Gross profit

168.7

187.3

513.9

459.5

Selling & administrative expenses

87.6

84.8

3%

268.7

275.7

(3%)

Amortization

4.9

5.5

14.8

15.3

Other expense (income), net

0.6

2.0

(7.5)

14.8

  Earnings before interest and taxes

75.6

95.0

(20%)

237.9

153.7

55%

Net interest expense

7.6

8.0

23.8

24.0

  Earnings before income taxes

68.0

87.0

214.1

129.7

Income taxes

18.1

30.8

63.1

51.1

  Net earnings from continuing operations

49.9

56.2

151.0

78.6

Discontinued operations, net of tax (1)

(0.6)

(0.5)

(0.7)

(0.7)

  Net earnings

49.3

55.7

150.3

77.9

Less net income from non-controlling interest

(1.9)

(1.4)

(5.1)

(1.3)

  Net earnings attributable to L&P

$     47.4

$     54.3

(13%)

$    145.2

$      76.6

90%

Earnings per diluted share

From continuing operations

$0.31

$0.34

$0.95

$0.48

From discontinued operations

$0.00

$0.00

($0.01)

$0.00

Net earnings per diluted share

$0.31

$0.34

(8%)

$0.94

$0.48

99%

Shares outstanding

  Common stock (at end of period)

146.5

152.3

146.5

152.3

  Basic (average for period)

150.7

159.7

151.6

160.8

  Diluted (average for period)

152.9

160.5

153.7

161.2

(1) Primarily includes:  Coated Fabrics (formerly in Residential Furnishings); Storage Products (formerly in Commercial Fixturing & Components).

CASH FLOW

THIRD QUARTER

YEAR TO DATE

(In millions)

2010

2009

Change

2010

2009

Change

Net earnings

$     49.3

$     55.7

$    150.3

$      77.9

Depreciation and amortization

30.0

32.5

91.2

97.3

Working capital decrease (increase)

(20.6)

16.7

(90.9)

156.6

Asset Impairment

0.2

0.5

2.5

1.2

Other operating activity

31.6

36.6

55.3

97.4

  Net Cash from Operating Activity

$     90.5

$   142.0

(36%)

$    208.4

$    430.4

(52%)

Additions to PP&E

(18.6)

(13.9)

34%

(48.6)

(65.4)

(26%)

Purchase of companies, net of cash

0.0

(2.5)

(0.4)

(2.8)

Proceeds from asset sales

16.4

3.3

27.2

9.1

Dividends paid

(38.2)

(39.2)

(115.4)

(117.5)

Repurchase of common stock, net

(8.9)

(78.5)

(80.7)

(104.5)

Additions (payments) to debt, net

(13.2)

(9.1)

29.3

(101.8)

Other

5.2

(2.8)

(3.6)

9.3

  Increase (Decr.) in Cash & Equiv.

$     33.2

$      (0.7)

$      16.2

$      56.8

FINANCIAL POSITION

30-Sep

(In millions)

2010

2009

Change

Cash and equivalents

$   276.7

$   221.5

Receivables

546.6

548.7

Inventories

448.9

397.4

Held for sale

0.0

18.5

Other current assets

36.2

64.8

  Total current assets

1,308.4

1,250.9

5%

Net fixed assets

621.3

664.0

Held for sale

24.7

42.2

Goodwill and other assets

1,124.9

1,138.3

  TOTAL ASSETS

$3,079.3

$3,095.4

(1%)

Trade accounts payable

$   232.1

$   209.3

Current debt maturities

9.8

1.9

Held for sale

0.0

4.0

Other current liabilities

308.0

323.9

  Total current liabilities

549.9

539.1

2%

Long term debt

833.5

772.4

8%

Deferred taxes and other liabilities

180.4

155.0

Equity

1,515.5

1,628.9

(7%)

  Total Capitalization

2,529.4

2,556.3

  TOTAL LIABILITIES & EQUITY

$3,079.3

$3,095.4

SEGMENT RESULTS

THIRD QUARTER

YEAR TO DATE

(In millions)

2010

2009

Change

2010

2009

Change

External Sales

Residential Furnishings

$   442.1

$   441.1

0.2%

$ 1,329.8

$ 1,271.0

4.6%

Commercial Fixturing & Components

148.5

142.1

4.5%

429.9

387.1

11.1%

Industrial Materials

126.8

115.1

10.2%

374.4

322.3

16.2%

Specialized Products

149.1

111.6

33.6%

423.1

305.0

38.7%

    Total

$   866.5

$   809.9

7.0%

$ 2,557.2

$ 2,285.4

11.9%

Inter-Segment Sales

Residential Furnishings

$       1.6

$       2.2

$        5.7

$        6.6

Commercial Fixturing & Components

1.0

1.2

3.1

3.1

Industrial Materials

56.4

57.1

180.6

167.3

Specialized Products

10.8

13.1

29.2

44.0

    Total

$     69.8

$     73.6

$    218.6

$    221.0

Total Sales

Residential Furnishings

$   443.7

$   443.3

0.1%

$ 1,335.5

$ 1,277.6

4.5%

Commercial Fixturing & Components

149.5

143.3

4.3%

433.0

390.2

11.0%

Industrial Materials

183.2

172.2

6.4%

555.0

489.6

13.4%

Specialized Products

159.9

124.7

28.2%

452.3

349.0

29.6%

    Total

$   936.3

$   883.5

6.0%

$ 2,775.8

$ 2,506.4

10.7%

EBIT

Residential Furnishings

$     38.3

$     39.1

(2%)

$    132.3

$      56.1

136%

Commercial Fixturing & Components

10.0

11.0

(9%)

26.6

9.4

183%

Industrial Materials

14.6

21.8

(33%)

44.8

48.6

(8%)

Specialized Products

19.2

8.9

116%

46.4

2.1

2110%

Intersegment eliminations and other

(1.2)

(1.8)

(2.6)

(14.5)

Change in LIFO reserve

(5.3)

16.0

(9.6)

52.0

    Total

$     75.6

$     95.0

(20%)

$    237.9

$    153.7

55%

EBIT Margin (1)

Basis Pts

Basis Pts

Residential Furnishings

8.6%

8.8%

(20)

9.9%

4.4%

550

Commercial Fixturing & Components

6.7%

7.7%

(100)

6.1%

2.4%

370

Industrial Materials

8.0%

12.7%

(470)

8.1%

9.9%

(180)

Specialized Products

12.0%

7.1%

490

10.3%

0.6%

970

    Overall from Continuing Operations

8.7%

11.7%

(300)

9.3%

6.7%

260

(1) Segment margins calculated on Total Sales.   Overall company margin calculated on External Sales.

nm = not meaningful

LAST SIX QUARTERS

2009

2010

Selected Figures

2Q

3Q

4Q

1Q

2Q

3Q

Trade Sales ($ million)

757

810

770

816

874

867

Sales Growth (vs. prior year)

(28.8%)

(28.5%)

(12.8%)

13.7%

15.4%

7.0%

EBIT ($ million)

41

95

77

77

85

76

EBIT Margin

5.4%

11.7%

10.0%

9.5%

9.7%

8.7%

Net Earnings - excludes discontinued oper. ($m)

19

55

41

46

52

48

Net Margin - excludes discontinued operations

2.5%

6.8%

5.3%

5.6%

6.0%

5.5%

EPS - continuing operations (diluted)

$0.12

$0.34

$0.26

$0.30

$0.34

$0.31

Cash from Operations ($ million)

174

142

135

51

67

91

Net Debt to Net Capitalization

Long term debt

773

772

789

822

855

834

Current debt maturities

17

2

10

10

10

10

Less cash and equivalents

(222)

(221)

(260)

(247)

(244)

(277)

    Net Debt

568

553

539

585

621

567

Total capitalization

2567

2556

2526

2524

2508

2529

Current debt maturities

17

2

10

10

10

10

Less cash and equivalents

(222)

(221)

(260)

(247)

(244)

(277)

    Net Capitalization

2362

2337

2276

2287

2274

2263

Long Term Debt to Total Capitalization

30.1%

30.2%

31.2%

32.6%

34.1%

33.0%

Net Debt to Net Capital

24.0%

23.7%

23.7%

25.6%

27.3%

25.0%

  Management uses Net Debt to Net Capital to track leverage trends across time periods with variable levels of cash.

2009

2010

Same Location Sales (vs. prior year)

2Q

3Q

4Q

1Q

2Q

3Q

Residential Furnishings

(23%)

(23%)

(9%)

5%

9%

0%

Commercial Fixturing & Components

(29%)

(28%)

(25%)

23%

8%

4%

Industrial Materials

(38%)

(41%)

(26%)

8%

29%

13%

Specialized Products

(33%)

(27%)

(6%)

31%

30%

28%

    Overall from Continuing Operations

(28%)

(28%)

(13%)

14%

16%

8%

SOURCE Leggett & Platt



RELATED LINKS

http://www.leggett.com