Bedding industry components and machinery supplier Leggett & Platt, with headquarters in Carthage, Mo., reported that sales for its third quarter of fiscal 2011 were $941 million, a 9%, increase over the third quarter of 2010.
But the company attributed the growth to items that it said brought little incremental profit. Inflation and currency-rate fluctuation accounted for the bulk of the growth. A change in sales at the company’s steel mill (from intrasegment to trade) provided 3% unit growth, L&P said in announcing the results. Across the remainder of the company as a whole, unit volume was flat.
“We are not satisfied with our results this quarter,” said David Haffner, L&P chief executive officer. “Though sales were approximately what we anticipated, unit demand was essentially flat. Gross margin declined, largely due to three factors: competitive pricing pressure in certain product categories, ‘decontenting’ as customers switched to lower-cost and lower-value components and our intentional effort to reduce inventory levels by curtailing production, which has the side effect of reducing overhead absorption.”
Earlier in the year, L&P had expected demand to increase in the fall.
“That has not happened and many of the recent forecasts and surveys from well-regarded sources suggest our economy will be facing headwinds for longer than previously expected,” Haffner said. “As a result, we have recently initiated additional efforts to decrease excess production capacity, reduce overhead and trim our cost structures.”
Overall, net income was $45.3 million for the quarter, down from $49.3 million in the prior-year period.
Sales from continuing operations in L&P’s Residential Furnishings Segment, which includes bedding components, adjustable beds, foam and other bedding-related products, increased $28.6 million, or 6.4%, to $472.3 million, largely from inflation and currency. Unit volumes were up 1% over the third quarter of 2010.
Earnings before interest and income taxes in the residential segment decreased by $5 million during the third quarter of 2011 due to higher raw material and restructuring-related costs, competitive pricing pressure and a less favorable sales mix, the company said.
Total sales in the Industrial Materials Segment, which includes mattress manufacturing equipment, increased $33.5 million, or 18.3%, to $216.7 million, reflecting steel-related price inflation and higher trade sales from the company’s steel mill, according to the company. Unit volumes decreased in both wire and tubing. Sales growth largely reflected a shift in sales of steel rod and billet from intrasegment in 2010 to trades sales in 2011, L&P said.
L&P’s board of directors increased the quarterly dividend by 1 cent, to $0.28, in the third quarter. Thus, 2011 marks the 40th consecutive annual dividend increase for the company, with a compound annual growth rate of 14%.
