Published:
Leggett & Platt Announces Second Quarter Earnings
CARTHAGE, Mo., July 17 /PRNewswire-FirstCall/ --
-- 2Q EPS of $.27; includes $.02 of earnings from discontinued operations.
-- 2Q sales from continuing operations of $1.06 billion, a 0.5% decrease
from 2Q 2007.
-- Divested the Aluminum segment yesterday for $300 million cash,
subordinated note, and preferred stock.
-- 2008 EPS guidance (from continuing operations) remains unchanged at
$1.00-$1.30, even though it now incorporates higher
restructuring-related costs.
Diversified manufacturer Leggett & Platt reported second quarter earnings
per diluted share of $.27, including $.02 per share from discontinued
operations. Per share earnings from continuing operations were $.25, and
include $.01 of restructuring-related costs, and a $.02 charge for a
non-recurring tax item. In the second quarter of 2007, earnings per share
were $.33, including $.03 per share from discontinued operations and other
items. The year-over-year reduction in continuing operations' earnings is
primarily due to soft demand in several markets.
Second quarter sales from continuing operations were $1.06 billion,
slightly lower than last year's sales (from continuing operations) of
$1.07 billion. Same location sales declined 0.5%, as soft market demand and
the company's decision to exit specific sales volume (with unacceptable profit
margins) were largely offset by market share gains and price inflation.
Increased sales from acquisitions were offset by sales reductions from
divestitures.
Earnings from discontinued operations in the second quarter of 2008 were
$.02 per share, and included approximately $.03 per share of non-operating
charges. In the second quarter of 2007, earnings per share from discontinued
operations were $.02.
CEO Comments
President and CEO David S. Haffner remarked, "Some of our investors have
expressed concern about three different issues: weakness in many of the
markets we serve, raw material cost inflation, and the likelihood of receiving
the divestiture proceeds we anticipate. We have good news to report on all
three fronts.
"Our U.S. bedding components business is enjoying market share gains due
to several factors. First, bedding manufacturers are importing fewer
innersprings, and instead increasing their use of domestically produced
innersprings. Second, earlier this year we began producing innersprings for a
strong regional bedding manufacturer that previously produced its own
components. Finally, foam and air mattresses have lost market share recently
as consumers back away from alternative bedding, because of its high cost, and
move instead to better value innerspring bedding.
"Global steel costs have escalated dramatically since the start of the
year; however, our vertically integrated position (i.e. melt furnace and rod
mill) yields a significant competitive advantage in this market. To a very
significant degree, we have successfully implemented price increases to
recover the higher raw material costs; however, we typically experience a lag
with the timing of the recovery. As costs potentially plateau later this
year, and our price increases catch up with the cost increases, we should see
enhanced profitability during the second half of the year.
"The divestitures we announced last fall are progressing, and we are
committed to selling or liquidating all seven of the operations we have
previously identified. As disclosed yesterday, the sale of the Aluminum
Products segment closed (for $300 million in cash, a $25 million subordinated
note, and shares of preferred stock), and yielded 75% of the total after-tax
cash proceeds we originally anticipated (back in November) for all seven
targeted business units collectively. We are in discussions with potential
buyers for the six remaining (smaller) business units, and anticipate the
successful disposition of all six during 2008.
"In contrast to these positive developments, second quarter results for
the Commercial segment are disappointing. The Store Fixtures business unit is
working diligently to meet our required expectations for improved performance,
in spite of extremely difficult market conditions and retailers' hesitancy to
make capital investments in this environment. We are aiming for returns in
this business unit of at least cost of capital levels by the fourth quarter of
2008. Third quarter is the seasonally strongest quarter for this unit, and
will be critical in our evaluation of progress toward the return target.
"Despite external economic challenges, we feel very comfortable with our
strategic direction and the initiatives we unveiled last November. We are
absolutely committed to the continued execution of our plan, and believe our
actions will reestablish Leggett as a more profitable company. Our goal is to
consistently generate total shareholder return of 12-15% per year, on
average."
Dividends and Stock Repurchases
Leggett declared a second quarter dividend of $.25 per share (paid on
July 15), representing a 39% increase over last year's second quarter dividend
of $.18 per share. The current dividend yield is approximately 6.3% (based on
a $16 stock price). This year marks the company's 37th consecutive annual
dividend increase at an average compound growth rate of over 14%.
During the quarter the company bought 2.7 million shares of its stock at
an average price of just under $18 per share. So far, the company has
purchased 6.9 million shares under its annual 10 million share repurchase
authorization. As a reminder, Leggett's Board has authorized the purchase of
an additional 20 million shares with proceeds from the divestitures.
2008 Outlook: $1.00 to $1.30 EPS
Expected earnings per share (from continuing operations) for the full year
2008 remain unchanged at $1.00-$1.30, even though guidance now incorporates
higher restructuring-related costs (of approximately $.10, versus the prior
estimate of $.05). Guidance does not include earnings from discontinued
operations, possible gains or losses from future divestitures, nor additional
stock repurchases the company expects to make with divestiture proceeds.
Per share earnings (from continuing operations) for the first half of 2008
were $.48, and included $.02 of restructuring costs; thus, guidance for the
second half of the year is $.52-$.82, and anticipates approximately $.08 of
restructuring costs. The company's forecast for the latter half of the year
anticipates: i) continued weak market demand overall, ii) ongoing market share
gains in bedding components, iii) earnings improvement as the company's price
increases catch up with escalating steel costs, and iv) production and sale of
steel billets as the company utilizes part of the Sterling mill's excess melt
capacity.
Sales (from continuing operations) are projected to be approximately $4.3
billion, or about 2% higher than in 2007. This increase reflects
steel-related price inflation, the deliberate elimination of approximately
$100 million of unprofitable revenue from the company's Store Fixtures
business, and minimal acquisition revenue.
SEGMENT RESULTS -- Second Quarter 2008 (versus 2Q 2007)
Residential Furnishings -- Total sales from continuing operations
decreased $8 million, or 1%. No acquisitions were completed during the past
12 months. Improved market share and inflation-related price increases
largely offset the weak market demand experienced in many parts of the
segment. EBIT (earnings before interest and income taxes) from continuing
operations increased $6 million, primarily due to market share gains and
operating improvements.
Commercial Fixturing & Components -- Total sales from continuing
operations decreased $34 million, or 16%, due to reduced spending by retailers
and the company's decision to eliminate revenue with unacceptable profit
margins. EBIT from continuing operations declined $6 million, largely due to
the sales decrease.
Industrial Materials -- Total sales increased $51 million, or 26%, as a
result of the pass through of higher steel costs, increased sales of steel
billets, and greater demand for wire (by our U.S. bedding operations). EBIT
increased $10 million due to higher sales and operating improvements.
Specialized Products -- Total sales from continuing operations increased
$1 million. Continued sales growth in the European and Asian automotive
markets was offset in the quarter by lower volume from North American
automotive markets and the fleet portion of Commercial Vehicle Products. EBIT
from continuing operations declined $3 million due to higher steel costs and
lower sales in certain markets.
Conference Call
Management will discuss these results in a conference call at 8:00 a.m.
Central (9:00 a.m. Eastern) on July 18. The webcast can be accessed (live or
replay) from the Investor Relations section of Leggett's website at
http://www.leggett.com. The dial-in number is (303) 262-2053; there is no
passcode. Third quarter results will be released after the market closes on
Thursday, October 16, 2008, with a conference call the next morning.
FOR MORE INFORMATION: Visit Leggett's website at http://www.leggett.com.
COMPANY DESCRIPTION: Leggett & Platt (NYSE: LEG) is a FORTUNE 500
diversified manufacturer that conceives, designs and produces a broad variety
of engineered components and products that can be found in virtually every
home, office, retail store, and automobile. The company serves a broad suite
of customers that comprise a "Who's Who" of U.S. manufacturers and retailers.
The 125-year-old firm's continuing operations are composed of 21 business
units, 24,000 employee-partners, and more than 250 facilities located in
20 countries.
Leggett & Platt isNorth America's leading independent manufacturer of:
a) components for residential furniture and bedding; b) retail store fixtures
and point of purchase displays; c) components for office furniture; d) drawn
steel wire; e) automotive seat support and lumbar systems; f) carpet underlay;
g) adjustable beds; and h) 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
LEGGETT & PLATT
RESULTS OF
OPERATIONS SECOND QUARTER YEAR TO DATE
(In millions,
except per share
data) 2008 2007 Change 2008 2007 Change
Net sales (from
continuing
operations) $1,063.1 $1,070.5 (0.7%) $2,061.4 $2,118.1 (2.7%)
Cost of goods sold 866.7 863.5 1,687.9 1,714.6
Gross profit 196.4 207.0 373.5 403.5
Selling &
administrative
expenses 107.6 113.4 (5%) 211.5 213.8 (1.1%)
Amortization 6.3 6.4 12.3 11.3
Other expense
(income), net 1.8 0.4 (0.1) (0.2)
Earnings before
interest and
taxes 80.7 86.8 (7%) 149.8 178.6 (16.1%)
Interest expense 13.1 14.2 26.4 27.9
Interest income 2.1 1.7 4.4 3.6
Earnings before
income taxes 69.7 74.3 127.8 154.3
Income taxes 26.2 18.0 45.1 41.6
Net earnings from
continuing
operations 43.5 56.3 82.7 112.7
Discontinued
operations, net of
tax (1) 2.8 3.7 7.0 23.0
Net earnings $46.3 $60.0 (23%) $89.7 $135.7 (33.9%)
Earnings per diluted
share
From continuing
operations $0.25 $0.31 $0.48 $0.62
From discontinued
operations $0.02 $0.02 $0.04 $0.12
Net earnings per
diluted share $0.27 $0.33 (18%) $0.52 $0.74 (29.7%)
Shares outstanding
Common stock (at
end of period) 164.3 174.7 164.3 174.7
Basic (average
for period) 171.3 181.9 172.2 182.5
Diluted (average
for period) 171.5 182.6 172.3 183.2
CASH FLOW SECOND QUARTER 2008
(In millions) 2008 2007 Change 2008 2007 Change
Net earnings $46.3 $60.0 $89.7 $135.7
Depreciation and
amortization 36.2 46.7 71.2 90.2
Working capital
decrease (increase) (42.2) (17.3) (86.9) 26.3
Asset Impairment 5.7 2.2 5.8 2.3
Other operating
activity 27.4 1.1 46.7 (13.2)
Net Cash from
Operating
Activity $73.4 $92.7 (21%) $126.5 $241.3 (48%)
Additions to PP&E (31.6) (26.9) 17% (64.8) (71.1) (9%)
Purchase of
companies, net of
cash (0.5) (1.1) (1.1) (83.7)
Dividends paid (42.5) (30.6) (85.7) (61.5)
Repurchase of common
stock, net (49.1) (48.5) (110.9) (84.5)
Additions (payments)
to debt, net 66.0 (66.7) 122.1 (3.2)
Other (0.7) 14.7 11.6 99.0
Increase (Decr.)
in Cash & Equiv. $15.0 $(66.4) $(2.3) $36.3
EBITDA (2) $129.0 $141.5 (9%) $240.7 $311.7 (23%)
FINANCIAL POSITION (3) June 30
(In millions) 2008 2007 Change
Cash and equivalents $203.1 $168.2
Receivables 683.6 848.2
Inventories 669.2 811.8
Held for sale 309.1 0.0
Other current assets 100.9 96.5
Total current
assets 1,965.9 1,924.7 2%
Net fixed assets 739.6 962.9
Held for sale 256.2 0.0
Goodwill and other
assets 1,256.9 1,490.8
TOTAL ASSETS $4,218.6 $4,378.4 (4%)
Trade accounts
payable $278.8 $290.4
Current debt
maturities 11.4 82.8
Held for sale 66.2 0.0
Other current
liabilities 389.0 386.5
Total current
liabilities 745.4 759.7 (2%)
Long term debt 1,227.9 1,054.8 16%
Deferred taxes and
other liabilities 164.4 174.4
Held for sale 0.3 0.0
Shareholders' equity 2,080.6 2,389.5 (13%)
Total
capitalization 3,473.2 3,618.7
TOTAL LIABILITIES
& EQUITY $4,218.6 $4,378.4
Net Debt to Net
Capital (4) 31.6% 27.4%
Return on Equity (5) (2.6%) 12.3%
(1) Discontinued operations include: Aluminum Products; Prime Foam,
Fibers, Wood Products, Coated Fabrics (formerly in Residential
Furnishings); Storage Products, Plastics (formerly in Commercial
Fixturing & Components); and the dealer portion of Commercial Vehicle
Products (formerly in Specialized Products).
(2) Earnings Before Interest, Taxes, Depreciation, Amortization, and
Impairments. Includes discontinued operations.
(3) In the 2008 balance sheet, amounts related to the planned divestitures
are reflected on the lines captioned "Held for sale." The 2007
balance sheet does not reflect comparable adjustments.
(4) Net Debt = Long Term Debt + Current Debt Maturities - Cash &
Equivalents. Net Capital = Total Capitalization + Current Debt
Maturities - Cash & Equivalents. These adjustments enable meaningful
comparison to historical periods.
(5) Return on Equity = Trailing Twelve Months Net Earnings / Shareholders'
Equity averaged for start and end of the twelve months.
LEGGETT & PLATT
SEGMENT RESULTS (1) SECOND QUARTER
(In millions) 2008 2007 Change
External Sales
Residential Furnishings $551.9 $561.5 (1.7%)
Commercial Fixturing &
Components 179.2 211.4 (15.2%)
Industrial Materials 169.7 131.4 29.1%
Specialized Products 162.3 166.2 (2.3%)
Total $1,063.1 $1,070.5 (0.7%)
Inter-Segment Sales
Residential Furnishings $5.9 $3.9
Commercial Fixturing &
Components 4.8 6.3
Industrial Materials 77.6 64.7
Specialized Products 17.2 11.9
Total $105.5 $86.8
Total Sales
Residential Furnishings $557.8 $565.4 (1.3%)
Commercial Fixturing &
Components 184.0 217.7 (15.5%)
Industrial Materials 247.3 196.1 26.1%
Specialized Products 179.5 178.1 0.8%
Total $1,168.6 $1,157.3 1.0%
EBIT
Residential Furnishings $48.6 $42.3 15%
Commercial Fixturing &
Components 8.6 14.7 (41%)
Industrial Materials 23.2 13.4 73%
Specialized Products 14.4 17.4 (17%)
Intersegment eliminations (2.6) (1.8)
Change in LIFO reserve (11.5) 0.8
Total $80.7 $86.8 (7%)
EBIT Margin (2) Basis Pts
Residential Furnishings 8.7% 7.5% 120
Commercial Fixturing &
Components 4.7% 6.8% (210)
Industrial Materials 9.4% 6.8% 260
Specialized Products 8.0% 9.8% (180)
Overall from
Continuing Operations 7.6% 8.1% (50)
LEGGETT & PLATT
SEGMENT RESULTS (1) YEAR TO DATE
(In millions) 2008 2007 Change
External Sales
Residential Furnishings $1,070.2 $1,145.0 (6.5%)
Commercial Fixturing &
Components 366.5 402.4 (8.9%)
Industrial Materials 309.6 252.4 22.7%
Specialized Products 315.1 318.3 (1.0%)
Total $2,061.4 $2,118.1 (2.7%)
Inter-Segment Sales
Residential Furnishings $10.1 $8.4
Commercial Fixturing &
Components 9.5 10.1
Industrial Materials 150.2 134.8
Specialized Products 33.3 22.6
Total $203.1 $175.9
Total Sales
Residential Furnishings $1,080.3 $1,153.4 (6.3%)
Commercial Fixturing &
Components 376.0 412.5 (8.8%)
Industrial Materials 459.8 387.2 18.8%
Specialized Products 348.4 340.9 2.2%
Total $2,264.5 $2,294.0 (1.3%)
EBIT
Residential Furnishings $85.9 $98.7 (13%)
Commercial Fixturing &
Components 16.3 22.6 (28%)
Industrial Materials 41.7 26.5 57%
Specialized Products 28.3 31.7 (11%)
Intersegment eliminations (7.3) (2.5)
Change in LIFO reserve (15.1) 1.6
Total $149.8 $178.6 (16%)
EBIT Margin (2) Basis Pts
Residential Furnishings 8.0% 8.6% (60)
Commercial Fixturing & Components 4.3% 5.5% (120)
Industrial Materials 9.1% 6.8% 230
Specialized Products 8.1% 9.3% (120)
Overall from
Continuing Operations 7.3% 8.4% (110)
LAST SIX QUARTERS 2007 2008
Selected Figures
(restated to
exclude
discontinued
operations) 1Q 2Q 3Q 4Q 1Q 2Q
Trade Sales
($ million) 1,048 1,071 1,092 1,040 998 1,063
Sales Growth
(vs. prior year) 0.0% (0.7%) (2.1%) 1.4% (4.7%) (0.7%)
EBIT ($ million) 91.8 86.8 105.1 (92.8) 69.1 80.7
EBIT Margin 8.8% 8.1% 9.6% (8.9%) 6.9% 7.6%
Net Earnings -
continuing
operations
($ million) 56.4 56.3 64.1 (117.4) 39.2 43.5
Net Margin -
continuing
operations 5.4% 5.3% 5.9% (11.3%) 3.9% 4.1%
EPS - continuing
operations
(diluted) $0.31 $0.31 $0.36 ($0.67) $0.23 $0.25
EBITDA
($ million) (3) 170 142 153 93 112 129
Cash from
Operations
($ million) (3) 149 93 194 178 53 73
Net Debt to
Net Capital (3) 27% 27% 28% 28% 31% 32%
Same Location
Sales
(vs. prior year) 1Q 2Q 3Q 4Q 1Q 2Q
Residential
Furnishings (3.3%) (6.6%) (8.6%) (7.1%) (11.0%) (1.2%)
Commercial
Fixturing &
Components (5.4%) (1.5%) (3.2%) (0.7%) (3.8%) (15.7%)
Industrial
Materials (5.0%) (2.4%) (3.5%) (2.7%) 7.7% 26.6%
Specialized
Products 9.3% 5.9% 11.2% 16.5% 0.7% 0.8%
Overall from
Continuing
Operations (1.8%) (3.0%) (4.4%) (1.0%) (6.2%) (0.5%)
(1) Prior years' results have been restated to exclude discontinued
operations.
(2) Segment margins calculated on Total Sales. Overall company margin
calculated on External Sales.
(3) These lines include amounts related to discontinued operations.
EBITDA excludes impairment charges.
SOURCE Leggett & Platt
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Copyright © 2008, NewsBlaze,
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