Leggett & Platt Inc.
) - the manufacturer of diversified engineered products and
components - reported record-high earnings per share of 45 cents,
a sharp rise of 45% year over year, in the third quarter of 2012.
Prior to this, the company had posted record quarterly earnings
of 39 cents per share way back in 2006. Quarterly earnings also
swept past the Zacks Consensus Estimate of 38 cents.
Better-than-expected results were mainly driven by a sturdy
operational performance that comprised of superior volume and
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Total sales escalated 4% to $982.2 million compared with $940.9
million a year ago, while it marginally exceeded the Zacks
Consensus Estimate of $981 million. Robust sales performance in
the quarter came mainly from a 7% rise in same location sales
volumes. However, this increase was slightly impacted by a 4%
decline in revenue, which resulted from a slip in rod mill trade
sales and fluctuations in currency rates.
Gross profit for the quarter surged 20.6% to $205.5 million,
while gross margin expanded 280 basis points to 20.9%, mainly due
to increased sales results and lower cost of goods sold.
Operating income soared 47% year over year to $104.9 million
benefiting from higher unit volumes, diminished raw material
costs in certain businesses, late-2011 restructuring activity and
the acquisition of Western Pneumatic Tube. Simultaneously,
operating margin also improved 310 basis points to 10.7%.
revenue climbed 2% to $481.7 million on the back of a 4% rise in
unit volume, offset in part, by currency translation effects.
Operating income increased 19% year over year to $39.7 million,
benefiting from the enlarged unit volumes as well as diminished
raw material costs in certain businesses.
Commercial Fixturing & Components
moved up 14.9% to $162.8 million, primarily due to a 21% increase
in same location sales, offset by a decline resulting from a
small divestiture. On the other hand, operating income recorded a
whopping 187% increase to $19.2 million compared with $6.7
million in the prior-year quarter, driven by higher sales coupled
with smaller cost improvement benefits.
Third quarter sales of the
segment witnessed a marginal rise of 0.6% to $218 million backed
by a 9% sales gain from the acquisition of Western Pneumatic
Tube. However, an 8% decline in same location sales driven by
lower trade sales at the steel rod mill offset the sales growth.
Operating income escalated 65% to $19.3 million, on the back of
Western Pneumatics' acquisition, reduced steel costs in some
businesses and last year's restructuring activities.
segment's sales inched up 1.8% to $191 million driven by a 5%
unit volumes growth, offset by currency effects. Operating income
grew 11% to $22.8 million, mainly due to improved sales.
Other Financial Details
Leggett had a solid financial base at the end of the third
quarter of fiscal 2012 with cash and equivalents of $264.9
million, long-term debt of $860.2 million, and shareholders'
equity of $1,400.8 million. The company's net debt to net capital
ratio as of September 30, 2012, was 33%, well within the
company's long-term targeted range of 30%-40%.
For the nine months, ended September 30, 2012, the company's cash
generated from operations increased 19% to $241.0 million. The
strength in the company's financial base also reflected in its
ongoing commercial paper program and revolver facility balance of
nearly $600 million as of the quarter's end.
Simultaneously, the company has an impressive dividend policy
alongside a regular share repurchase program, focused on
returning better value to the shareholders. In August, the
company raised its quarterly dividend by a penny to 29 cents per
share. This represents a 3.6% increase from the previous
dividend. On an annualized basis, the company's dividend comes to
$1.16 per share, yielding about 4.6% based on a closing price of
$25.40 as of October 26, 2012.
Further enhancing investor returns, the company bought back
nearly 0.6 million shares and issued 1.1 million shares to
employees who exercised their stock options during the third
Leggett forecasted full-year 2012 earnings per share between
$1.45 and $1.52, representing a significant rise from earnings
per share of 62 cents, 70 cents, $1.15 and $1.04 reported in the
trailing four years. Net sales are anticipated in the range of
However, the company projects fourth quarter earnings and sales
to be shy of the third quarter results impacted by the company's
seasonality issues. The company guided fourth quarter earnings
per share in the range of 25-32 cents, with sales coming in the
$830-$880 million range.
Further, continuing its trend of generating cash in excess of the
amount required to fund dividends and capital expenditures, the
company predicted operating cash flows of over $350 million.
Capital expenditures for the year are expected to be about $80
million, while the company anticipates paying $160 million
Leggett faces stiff competition from its rivals, such as
Flexsteel Industries Inc.
Genuine Parts Company
). The company currently retains a Zacks #3 Rank, which
translates to a short-term Hold rating. Moreover, we remain
slightly cautious on the stock and uphold our long-term 'Neutral'