Profits up, sales down for Leggett & Platt

Profits were up, but sales were down for Carthage-based Fortune 500 company Leggett & Platt. From the company's news release issued Thursday:

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 (TSR1) 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.