Leggett & Platt third-quarter sales surge, earnings exceed expectations

L&P third-quarter results
Net sales $997.4 million
Net income $48.2 million
Earnings per share $0.51
Residential Furnishings Segment sales Up 19%
Industrial Materials Segment sales Up 9%

Mattress industry components and machinery supplier Leggett & Platt (LEG) reported third-quarter sales from continuing operations grew 14% to $997.4 million, as compared with the third quarter of 2013–the Carthage, Missouri-based company’s strongest quarterly sales growth since 2011.

Adjusted earnings per share exceeded Wall Street analysts’ expectations and were a record $0.51 per share, a 31% increase as compared with the third quarter of 2013. The company raised the low end of its 2014 EPS guidance and now expects adjusted EPS of $1.75 to $1.85.

Net income for the quarter was $48.2 million, a 32% decrease as compared with the prior-year quarter. The company attributed the decrease to “a number of unusual items,” including foam-litigation settlement expenses and losses due to discontinued operations.

L&P reported that same location sales rose 9%, due to strong volume gains in most of its residential markets, which include bedding and adjustable bases.

“We’re very pleased that continuing operations have generated 8% sales growth year-to-date, which significantly exceeds our 4% to 5% annual growth target,” said David Haffner, L&P chairman and chief executive officer. “For the last two quarters we’ve seen strong, broad-based growth across the bulk of the company. As a result, earnings have improved meaningfully. Adjusted EPS for continuing operations increased 31% in the third quarter, and 22%, year-to-date. Adjusted EBIT margin for continuing operations was 10.7% in the third quarter, and 10.4% year-to-date.”

Total sales in L&P’s Residential Furnishings Segment, which includes bedding components, adjustable beds, foam and other bedding-related products, increased $96 million, or 19%. Same location sales grew 11%, with unit volume growth in most product categories. Acquisitions contributed the remainder of the sales growth. Earnings before interest and income taxes decreased $14 million as higher sales and a $2 million hurricane-related insurance gain were more than offset by a $32 million foam-litigation expense.

Total sales in the Industrial Materials Segment, which includes mattress-manufacturing equipment, increased $18 million, or 9%, during the third quarter. Same location sales improved 7%, and acquisitions contributed 2%. EBIT increased $2 million, due to higher sales.

“We continue to place a priority on maintaining our strong financial base,” Haffner said. “At quarter’s end we had nearly $450 million available under our existing commercial paper program. We ended the quarter with net debt to net capital at 34.8%, a modest decrease versus last quarter and comfortably in the middle of our long-term 30% to 40% target range.

“Given our sales growth, in 2014 we expect to again post record adjusted EPS from continuing operations for the full year. And as we look beyond 2014, we are encouraged by the positive momentum of several businesses including automotive, bedding, home furniture, and aerospace.”

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