Leggett & Platt First-quarter Earnings Down, Sales Rise

Industry supplier Leggett & Platt Inc., with headquarters in Carthage, Missouri, had first-quarter earnings of $86.1 million, a 4% decline compared with the first quarter of 2016.

Earnings per share were $0.62, a 2%—or one penny—decline over the prior-year quarter. First-quarter sales were $960 million, a 2% increase.

“Organic sales grew 4% during the first quarter,” said Karl Glassman, Leggett & Platt president and chief executive officer. “This is a welcome change after seven consecutive quarters of year-over-year organic sales decreases, which were primarily the result of deflation and currency impacts.”

“We completed two acquisitions during the first quarter that should increase annual revenue by approximately $50 million,” he continued. “The first is a distributor of geo-synthetic products that adds to the geographic scope and capabilities in our Geo Components business. The second manufactures surface-critical bent tube components in support of the private-label finished seating strategy in our Work Furniture business.”

“For a decade now our primary financial goal has been to achieve total shareholder return that ranks within the top third of the S&P 500 over rolling three-year periods,” Glassman said. “We are achieving these results while maintaining our strong financial base. Net debt to net capital was 40% at quarter end, at the top of our 30% to 40% target range, reflecting working capital investment, our typically strong first-quarter stock repurchases and increased acquisition activity. At quarter end, the company’s debt was 1.9 times its trailing 12-month adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).”

The company’s segment reporting structure was modified in January to align with changes made to its management structure. There were two changes to the business unit structure: The Home Furniture Group was moved from Residential Products to the Furniture Products segment (formerly called Commercial Products Segment). The Machinery Group was moved from Specialized Products to the Residential Products Segment.

First-quarter sales in the Furniture Products Segment, which includes adjustable beds and the Fashion Bed Group, were essentially flat, with gains in Adjustable Bed and Work Furniture offset by declines in Fashion Bed and Home Furniture. EBIT decreased $11 million, primarily due to steel inflation, costs associated with new program launches and nonrecurrence of last year’s gain on a building sale ($2 million), the company said.

In the Residential Products Segment, which includes bedding components, foam, other bedding-related products, Spuhl AG wire-forming machinery and Global Systems Group, total sales essentially were flat, with a 2% same-location sales decrease offset by acquisitions. Volume grew 2%, with demand improving late in the quarter; however, this was more than offset by a 4% sales decrease from fewer pass-through sales of adjustable beds. EBIT increased $9 million due to the absence of last year’s first-in, first-out inventory impact and a favorable sales mix in the current quarter, the company said.

Total sales decreased 14% in the Industrial Products Segment, which includes steel rod and wire, due to divestitures completed during 2016. Same-location sales decreased 4%. EBIT decreased $11 million due to the lag in recovering higher steel costs and reducedvolume, the company said.

Leggett & Platt’s 2017 outlook remains unchanged with sales growth expected to contribute to strong earnings. EPS is expected to be $2.55 to $2.75 for the year. Sales are anticipated to be $3.95 billion to $4.05 billion, or 5% to 8% growth. Volume growth is expected to be in the mid-single digits.

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