- 4Q EPS of $.23; sales were $770 million, 13% lower than in prior year.
- 4Q adjusted EPS from Continuing Operations of $.30, excluding an unusual international tax item.
- Full year earnings of $.70 per share; sales were $3.06 billion, 25% lower than in the prior year.
- Full year adjusted EPS from Continuing Operations of $.86, excluding unusual items.
- Cash flow from operations of $565 million for the full year, the second-highest level ever.
- Repurchased 4.1 million shares during the quarter; net debt remained at 23.7% of net capital.
- 2010 EPS guidance of $.75 - 1.15, on sales of $2.9 - 3.3 billion.
Diversified manufacturer Leggett & Platt reported fourth quarter earnings per diluted share of $.23. Earnings from Continuing Operations, adjusted to exclude an unusual tax item, were $.30 per share. In the fourth quarter of 2008, adjusted earnings from Continuing Operations were $.03 per share. Earnings improved, despite lower sales, as a result of cost reduction efforts, pricing discipline, and a $.06 per share LIFO benefit. Sales from Continuing Operations were $770 million, 13% lower than in the fourth quarter of 2008, with steel-related price deflation accounting for the bulk of the decline; unit volumes declined approximately 3%.
Full Year Financial Results
Full year reported EPS was $.70 (including $.12 per share of expenses due to three items: tax adjustments resulting from Mexican tax law changes, bad debt expense related to a specific customer bankruptcy, and the write-down of a note associated with the Aluminum Segment divestiture). Per share adjusted earnings from Continuing Operations were $.86 for the full year, a 2% decrease vs 2008; cost structure improvements and pricing discipline nearly offset the earnings impact of extremely weak market demand. Full year sales from Continuing Operations decreased 25% to $3.06 billion, largely due to unit volume decline.
The company generated $565 million of cash from operations during 2009, the second-highest level ever, reflecting targeted efforts to optimize working capital. Major uses of cash included $240 million to fund dividends and capital requirements, $188 million (net) to purchase Leggett stock, and $64 million (net) to reduce debt. Net debt to net capital was 23.7% at year end, well below the company's 30% - 40% target range.
Much Progress Despite Weak Economy
President and CEO David S. Haffner commented, "For the full year, Continuing Operations EPS was relatively unchanged from the prior year, despite a $1 billion (or 25%) decline in sales that was primarily market-driven. Our significant cost reduction efforts and pricing discipline allowed us to sustain EPS and improve margins, despite the weak economy. Full year gross margin was 20.6%, the highest level since the year 2000. Full year EBIT margin was 7.5%, an improvement of 180 basis points over 2008. I am extremely pleased with our employees' accomplishments in the face of such economic headwind.
"We continued to make notable progress on the key strategic changes we outlined in November 2007. Consistent with our stated intentions, during 2008 and 2009 combined, we:
- Generated cash of over $1.4 billion from both operations ($1.0 billion) and divestitures ($420 million).
- Increased quarterly dividends by 44% (from $.18 to $.26 per share).
- Bought back 15% (26 million shares) of Leggett's outstanding stock.
- Reduced long-term net debt to its lowest level (in dollars) in over a decade.
- Achieved 2-year Total Shareholder Return (TSR(1)) of 32%; within the top 4% of all S&P 500 companies.
"Our balance sheet and cash flow remain strong, and our cost structure has improved significantly, as margins indicate. We are very well positioned to ride out the economic downturn, which we anticipate will continue throughout 2010. Whether the economy remains lackluster or unexpectedly strengthens, our main financial objective remains to consistently achieve TSR within the top 1/3 of the S&P 500, a goal we have successfully achieved over the last two years."
Dividend and Stock Repurchases
2009 marked the 38th consecutive annual dividend increase for Leggett, with a compound annual growth rate of over 14% during that period. At yesterday's closing share price of $20.05, the indicated annual dividend of $1.04 per share generates a dividend yield of 5.2%.
During the fourth quarter, the company repurchased 4.1 million shares of its stock at an average price of $19.84 per share. For the full year, the company fully utilized its authorization from the Board of Directors to repurchase 10 million shares of its stock; as a result, shares outstanding declined by 7.0 million during 2009, to 148.8 million shares.
2010 Outlook
Leggett anticipates 2010 sales of approximately $2.9 - 3.3 billion, reflecting the company's belief that the economy will likely remain depressed. Based upon that sales expectation, and considering other uncertainties including inflation, steel pricing, and margins, Leggett projects that its Continuing Operations should generate 2010 EPS of $.75 - 1.15.
SEGMENT RESULTS – Fourth Quarter 2009 (versus 4Q 2008)
Residential Furnishings – Total sales decreased $44 million, or 10%, as a result of steel-related price deflation; unit volume was up slightly. EBIT (earnings before interest and income taxes) increased $31 million due to cost reductions, price discipline, and absence of last year's restructuring-related costs.
Commercial Fixturing & Components – Total sales decreased $35 million, or 25%, 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. EBIT increased $10 million, with the earnings impact of lower sales more than offset by cost reductions, operational improvements, and absence of last year's restructuring-related costs.
Industrial Materials – Total sales decreased $56 million, or 26%, due to steel-related price deflation; unit volume was up slightly. EBIT decreased $8 million, with the impact of reduced metal margin partially offset by cost reductions.
Specialized Products – Total sales decreased $9 million, or 6%; weaker demand for machinery and Commercial Vehicle Products was partially offset by improvement in automotive demand. EBIT increased $13 million, primarily due to cost structure and operational improvements.
SEGMENT RESULTS – Full Year 2009 (versus 2008)
Residential Furnishings – Total sales from Continuing Operations decreased $427 million, or 20%, due to weak market demand. EBIT from Continuing Operations decreased $60 million, with the impact of lower unit volumes partially offset by cost improvements, pricing discipline, and absence of last year's restructuring-related costs.
Commercial Fixturing & Components – Total sales from Continuing Operations decreased $220 million, or 31% for the year due to weak markets and the company's decision in Store Fixtures to walk away from sales with unacceptable profit margins. EBIT from Continuing Operations decreased $7 million, with the impact of reduced sales largely offset by cost reductions and operational improvements.
Industrial Materials – Total sales from Continuing Operations decreased $319 million, or 33%, from both deflation (related to steel prices) and reduced market demand. EBIT decreased $35 million, with the impact of reduced sales partially offset by improved cost structure.
Specialized Products – Total sales from Continuing Operations decreased $181 million, or 27%, due to weak market demand. EBIT from Continuing Operations decreased $27 million, with the impact of reduced sales partially offset by cost reductions.
COMPANY DESCRIPTION: Leggett & Platt (NYSE: LEG) is a diversified manufacturer (and member of the S&P 500) that conceives, designs and produces a broad variety of engineered components and products that can be found in most homes, offices, and automobiles. The company serves a broad suite of customers that comprise a "Who's Who" of U.S. manufacturers and retailers. The 127-year-old firm is comprised of 19 business units, 19,000 employee-partners, and more than 140 manufacturing facilities located in 18 countries.
Leggett & Platt is North America's leading independent manufacturer of: a) components for residential furniture and bedding; b) components for office furniture; c) drawn steel wire; d) automotive seat support and lumbar systems; e) carpet underlay; f) adjustable beds; and g) bedding industry machinery for wire forming, sewing and quilting.
FOR MORE INFORMATION: Visit Leggett's website at www.leggett.com.