Leggett Updates Guidance; Announces Acquisition, Divestitures And Plant Closures

Furniture World Magazine

Fortune 500 diversified manufacturer Leggett & Platt announced that third quarter earnings are expected to be approximately 27 cents per diluted share, a reduction from previous guidance. The major change from prior guidance is the inclusion of $11-13 million in expenses for divesting or closing 5 facilities, which results in a 4 cents reduction in 3Q EPS. Without these costs EPS for the third quarter would be about 31 cents, within the 31-36 cents 3Q EPS guidance issued by the company on July 17. Organic sales for the third quarter are expected to grow about 1% vs. 3Q 2001, just below the midpoint of the previous sales guidance range (of negative 1% to positive 4%) issued on July 17. Though overall residential segment sales should come in roughly as expected, a shift in mix of sales will negatively impact EBIT. In addition, higher raw material costs are modestly affecting earnings. Divestitures / Closures: The company is in the process of eliminating 5 facilities. Two of the five -- the company's one remaining aluminum smelter, located in Steele, Alabama; and an aluminum tool and die plant, located in Oakdale, Minnesota -- have been sold. The company is also in advanced negotiations to divest one of its aluminum die cast facilities. Finally, Leggett has plans to idle or close two additional facilities, including a commercial fixturing facility that primarily serves the telecom industry. Acquisition: The company signed a revised terms sheet to purchase, for cash, the carpet cushion business of Foamex International. This revised terms sheet replaces an earlier terms sheet signed in May, 2002 which anticipated payment of the purchase price by cash plus transfer of the company's polyurethane foam business to Foamex. When the acquisition is closed Leggett's annual carpet cushion revenue is expected to increase to almost $400 million, making Leggett the world's largest producer of carpet cushion. Leggett's operational efficiency in carpet cushion, long-standing and successful presence in the carpet underlay industry, and enhanced economies of scale, combine to make this "turnaround" acquisition appealing from a long- term perspective. However, over the short-term, the acquired operations will be modestly dilutive to earnings, reflecting the current health of the acquired operations and the cost of integrating and rationalizing several Foamex and Leggett facilities. The proposed acquisition is subject to Board approvals, satisfactory due diligence, definitive documentation and customary closing conditions. Leggett is targeting to close the acquisition in the fourth quarter. COMPANY DESCRIPTION: Leggett & Platt (NYSE: LEG) is a diversified manufacturer that conceives, designs and produces a broad variety of engineered components and products for customers worldwide. A member of the Fortune 500, the company is composed of 29 business units, 32,000 employee- partners, and more than 300 facilities located in 18 countries. The company has grown at an average of 15% annually since going public in 1967, with about one-third of the growth coming from internal expansion and market share gains. The company augments Internal growth with an active acquisition program, having completed over 100 acquisitions in the last five years, with the average acquisition adding $15-20 million to annual sales. Customers value Leggett's integrity, product innovation, low cost structure, financial strength, and outstanding customer service. The company serves a wide array of manufacturers and retailers, with no single customer accounting for 5% of sales. Primary raw materials include steel and aluminum. Main operations include metal stamping, forming, casting, machining, coating, welding, wire drawing, and assembly. Leggett & Platt is North America's leading independent manufacturer of the following: a) retail store fixtures and point of purchase displays; b) components for office furniture; c) non-automotive aluminum die castings; d) drawn steel wire; e) components for residential furniture and bedding; f) automotive seat support and lumbar systems; and g) bedding industry machinery for wire forming, sewing and quilting. Leggett's common stock (symbol LEG) is listed on the New York Stock Exchange, and is a component of the S&P 500 Index.