LEGGETT & PLATT REPORTS SECOND QUARTER EPS OF $.48
Carthage, MO, July 25, 2013
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2Q EPS was $.48, a 7% increase versus the prior year
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2Q EPS from continuing operations was $.44, a 13% increase versus the prior year
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2Q sales were $959 million, 3% higher than in prior year
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2Q EBIT margin increased to 10.3%, compared to 9.3% last year
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Revised 2013 guidance is $1.55—1.70 EPS, on sales of $3.75—3.85 billion
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Diversified manufacturer Leggett & Platt reported second quarter earnings per diluted share of $.48, compared to $.45 in the second quarter last year. EPS from continuing operations was $.44 in the second quarter, compared to $.39 in the second quarter of 2012. Quarterly earnings increased primarily as a result of higher unit volume.
Second quarter sales from continuing operations were $959 million, a 3% (or $24 million) increase versus the prior year. Same location sales increased 2%, with a 3% increase in unit volume partially offset by lower rod mill trade sales. Acquisitions increased sales by nearly 1%.
CEO Comments
CEO David S. Haffner commented, “Second quarter EPS from continuing operations improved 13%, or $.05, versus the same quarter last year. Sales grew 3%, and our EBIT margin increased by 100 basis points, to 10.3%. These improvements occurred despite sluggish demand in certain of our end markets, which led us to reduce full year sales and EPS guidance.
“During the quarter we exited three small operations and, as a result, recorded an EPS benefit of $.05 in discontinued operations, primarily driven by taxes. These three operations collectively generated about $15 million of annual sales during 2012, but posted negative EBIT. We also concluded the acquisition of a relatively small, UK-based provider of titanium, nickel alloy and stainless steel pipes and ducts for aerospace applications.
“Since 2007, our primary long-term financial goal has been to consistently rank in the top third of the S&P 500 companies for Total Shareholder Return (TSR1) as measured over rolling 3-year periods. For the three year period that began January 1, 2011, we have so far (over the last 31 months) generated annual average TSR of 19%, which currently places us in the top third of the S&P 500 companies.
“We continue to maintain our strong financial base. During the quarter we repaid $200 million of long-term debt that came due. At quarter’s end we had $479 million available under our existing commercial paper program. We ended the quarter with net debt to net capital at 29.3%, conservatively below our long-term 30%-40% target range.”
Dividends and Stock Repurchases
In May, Leggett & Platt’s Board of Directors declared a $.29 second quarter dividend, one cent higher than last year’s second quarter dividend. 2013 marks the 42nd consecutive annual dividend increase for the company, with a compound annual growth rate of 13%. Only two other S&P 500 companies can claim as high a rate of dividend growth for as many years.
| 1 | TSR = (Change in Stock Price + Dividends) / Beginning Stock Price; assumes dividends are reinvested |
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At yesterday’s closing share price of $31.53, the indicated annual dividend of $1.16 per share generates a yield of 3.7%, one of the highest dividend yields among the S&P 500 Dividend Aristocrats.
During the second quarter the company purchased 1.2 million shares of its stock, and issued 0.3 million shares. The number of shares outstanding decreased 0.9 million, to 141.9 million. For the first half of the year, the company issued 2.7 million shares, and repurchased 2.9 million shares. Approximately two-thirds of the stock issuance reflects employee stock option exercises in response to higher stock prices.
2013 Outlook Reduced
For 2013, Leggett & Platt now anticipates annual sales growth between 1% and 4%, a reduction versus prior guidance of 2%—6% sales growth. Full year sales guidance is now $3.75-3.85 billion; EPS guidance is now $1.55 - 1.70, and includes the tax-related benefit recorded in discontinued operations. EPS guidance for continuing operations is $1.50 - 1.65, a 2% - 12% improvement compared to 2012’s continuing operations adjusted EPS of $1.47.2 Prior continuing operations EPS guidance was $1.55 - 1.75.
Cash from operations should again exceed $350 million for the full year. Capital expenditures are expected to be approximately $85 million, and dividend payments should approximate $125 million (lower than normal, since the company accelerated the January 2013 dividend payment into December 2012).
As has been typical since 2007, after funding dividends and capital expenditures, any excess cash flow should be targeted toward acquisitions or stock repurchases. Management has standing authorization from the Board of Directors to repurchase up to 10 million shares each year; however, no specific repurchase commitment or timetable has been established.
Over the last few years, Leggett & Platt significantly reduced its fixed cost structure, but purposely retained spare production capacity. Accordingly, unit sales volumes can rebound appreciably without the need for large capital investment. As a result, the company has meaningful operating leverage that should significantly benefit future earnings as market demand rebounds.
SEGMENT RESULTS – Second Quarter 2013 (versus the same period in 2012)
Residential Furnishings – Total sales increased $14 million, or 3%, from higher unit volumes and raw material related price increases. EBIT (earnings before interest and income taxes) increased $2 million, from higher unit volume, favorable product mix in U.S. spring, and gains from building sales; these were partially offset by margin compression in fabric converting.
Commercial Fixturing & Components – Total sales increased $13 million, or 11%. EBIT increased $5 million due to higher sales and the absence of last year’s $2 million restructuring-related expense.
Industrial Materials – Total sales decreased $17 million, or 7%. Same location sales declined 9%, due in roughly equal parts to reduced trade sales at the rod mill and steel-related price deflation. EBIT improved by $4 million, primarily due to the absence of last year’s $2 million of acquisition-related costs, gains from equipment sales, and earnings from small acquisitions.
Specialized Products – Total sales increased $13 million, or 7%. EBIT improved $2 million, primarily due to higher sales.
| 2 | To aid investors’ awareness of basic operational profitability, 2012 adjusted EPS excludes $.18 in unusual tax benefits. Full year 2012 reported EPS was $1.70, including $.05 from Discontinued Operations. |
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