Leggett & Platt Q3 Profit Rises; Lifts FY09 EPS From Cont. Opns. Outlook

(RTTNews) - Thursday, engineered component maker Leggett & Platt, Inc. (LEG | Quote | Chart | News | PowerRating) reported an increase in third quarter profit, helped primarily by cost reduction efforts, pricing discipline, a last-in, first-out - LIFO benefit, and absence of last year's unusual tax items. The company witnessed a 28% revenue decline during the quarter, on continued weak market demand and steel-related price deflation. Earnings came in ahead of Street expectations. Looking ahead, the company raised its full year outlook related to its earnings from continuing operation.

The Carthage, Missouri-based company reported net income attributable to the company for the third quarter of $54.3 million or $0.34 per share, compared to $32.7 million or $0.20 per share in the year-ago quarter.

Net income from continuing operations decreased to $56.2 million or $0.34 per share from $49.5 million or $0.29 per share in the same quarter last year.

On average, six analysts polled by Thomson Reuters expected the company to earn $0.28 per share for the quarter. Analysts estimates typically exclude special items.

The higher net income for the quarter was indicated the result of cost reduction efforts, pricing discipline, a last-in, first-out or LIFO benefit, and absence of last year's unusual tax items.

Net sales from continuing operations for the quarter decreased 28% to $809.9 million from $1.13 billion in the prior-year quarter, due to continuing weak market demand and steel-related price deflation. Six analysts had a revenue consensus of $838.47 million for the third quarter.

In the immediately preceding second quarter, Leggett & Platt reported a sharp decline in profit of $19.0 million or $0.12 per share, on lower revenues reflecting weaker sales from all its segments. Sales from continuing operations dropped to $757.4 million.

Amongst others in the industry, Flexsteel Industries Inc. (FLXS | Quote | Chart | News | PowerRating) reported reported a first quarter profit of $1.4 million or $0.21 per share, compared to a net loss of $0.7 million or $0.11 per share in the prior year quarter. Quarterly net sales decreased 16.9% to $75.9 million from $91.4 million in the same quarter last year.

Another peer, Genuine Parts Co. (GPC | Quote | Chart | News | PowerRating) reported a third-quarter profit that declined 18% to $107.64 million or $0.66 per share, as sales declined across all segments. Net sales dropped to $2.61 billion.

For the quarter under review, segment wise, revenues from Residential Furnishings of Leggett & Platt dropped 23.6% to $443.3 million. Commercial Fixturing and components declined 28.2% to $143.3 million, due to the company's decision to walk away from sales with unacceptable profit margins, market softness in office furniture components, and reduced spending by retailers.

Industrial Materials plunged 41.3% to $172.02 million as a result of weak demand and lower steel-related price deflation. Specialized products fell 27.5% to $124.7 million reflecting weak global demand in all parts of the segment - automotive, machinery, and commercial vehicle products.

Selling and administrative expenses fell 20% to $84.8 million from $105.5 million in the comparable quarter of 2008.

During the quarter, Leggett increased its quarterly dividend by $0.01 or 4%, to $0.26. At October 21 closing share price of $19.26, the indicated annual dividend of $1.04 per share generates a dividend yield of 5.4%.

During the third quarter, the company repurchased 4.4 million shares of its stock at an average of $18.40 per share, and issued 0.3 million shares through employee benefit plans. As a result, shares outstanding decreased by 4.1 million shares to 152.3 million.

During the third quarter, the company repurchased 4.4 million shares of its stock at an average of $18.40 per share, and issued 0.3 million shares through employee benefit plans. As a result, shares outstanding decreased by 4.1 million shares to 152.3 million.

For the nine-month period, the company's net income attributable to the company fell to $76.6 million or $0.48 per share from $122.4 million or $0.72 per share in the similar period of last year.

Net sales for the period declined 28% to $2.29 billion from $3.19 billion in the prior-year period.

Looking ahead, the company reaffirmed its full year sales from continuing operations guidance of about $3.0 billion.

Further, the company raised its full year earnings per share from continuing operations guidance to $.65 - $.75 from its prior guidance of $.55 - $.70. The company said the guidance raise stems largely from increased margin expectations as a result of successful cost reduction activity. Analysts currently expect earnings of $0.64 per share on revenues of $3.04 billion for fiscal 2009.

David Haffner President and CEO commented, "Longer-term, as markets recover, we believe that $2 of EPS is achievable by 2012. We base this expectation on the following assumptions: an EBIT margin of 8 1/2 - 9% as we exit 2009, an economic recovery-driven increase in annual sales to approximately $3.6 billion, a contribution margin of 25-35% from those incremental sales, and stock repurchases.

The company said weak demand continues across its businesses though stable, markets show few signs of improvement. Leggett & Platt said it remains well positioned, from both balance sheet and cost structure perspectives, to ride out the demand downturn.

LEG closed Thursday's regular trading at $19.41, up $0.15 or 0.78%, on a volume of 3.24 million shares. In after-hours, the stock further gained $0.09 or 0.46%, to trade at $19.50. In the last 52-week period, the stock traded in the range of $10.03 to $20.17, with a three-month average volume of 1.59 million shares.

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