Growth in adjustable bed sales and several other business areas lifted leading industry supplier Leggett & Platt’s net sales in the third quarter by 6% to a total of $1.01 billion compared with the same period of 2016.
The Carthage, Missouri-based company posted earnings per share of $0.61 on third-quarter net earnings of $82.6 million, a decline of 9% versus third-quarter 2016. The earnings benefit from sales growth was offset primarily by higher raw material costs, including last-in, first-out expense.
“We are pleased to have delivered strong third-quarter sales, with growth coming from several businesses, including automotive and adjustable bed(s),” said Karl Glassman, president and chief executive officer. “Unit volume grew 4%, and inflation and currency added 2% to sales. As expected, earnings and margins were pressured in the quarter by higher steel costs and the timing lag we typically experience in passing along those increases. Assuming that steel costs stabilize, margins should improve by early next year.”
Glassman added that L&P continues to maintain its strong financial base. “Net debt to net capital was 38% at quarter end, near the top of our 30% to 40% target range, reflecting working capital investment, stock repurchases and acquisitions. At quarter end, the company’s debt was 2.1 times its trailing 12-month adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).”
In its Oct. 26 report, L&P narrowed its continuing operations EPS guidance for the year to $2.49 to $2.54, the upper half of the $0.10 range announced on Sept. 6. This guidance includes a net $0.04 per share benefit from divestiture of the company’s last Commercial Vehicle Products operation in August, a small third-quarter impairment charge, a gain from the October sale of real estate and an anticipated pension settlement charge in the fourth quarter.
Sales in the Furniture Products segment, which includes adjustable beds and the Fashion Bed Group, increased $22 million, or 8%, in this year’s third quarter versus the same period in 2016. Same-location sales increased 7%, primarily from gains in adjustable beds, the company said. A small acquisition in work furniture also added 1% to segment sales during the quarter. Earnings before interest and taxes decreased $2 million, with the benefit from sales growth in adjustable beds and work furniture more than offset by higher steel costs, including LIFO expense, in home furniture.
Total sales decreased $10 million, or 7%, in the Industrial Products segment, which includes steel rod and wire, due to divestitures completed in 2016 and a 3% reduction in same-location sales. Volume declines were partially offset by steel-related price increases, the company said. EBIT decreased $16 million due to higher steel costs (including LIFO expense), the timing lag associated with passing along inflation, lower volume and a $5 million impairment of a small wire products operation.
In the Residential Products segment, which includes bedding components, foam, other bedding-related products, Spuhl AG wire-forming machinery and the Global Systems Group, total sales increased $24 million, or 6% in the third quarter, the company said. Same-location sales improved 2%, and acquisitions contributed 4% to sales growth. Volume was flat, with growth in most businesses offset by a 2% sales decrease from lower pass-through sales of adjustable beds, which now are part of the Furniture Products segment. Raw material-related price inflation and currency impact increased sales by 2%. EBIT increased $5 million primarily from higher sales.