Leggett & Platt Inc.
), the manufacturer of diversified engineered products and
components, reported earnings per share of 39 cents, representing a
year-over-year increase of 11.4%. Quarterly earnings also swept
past the Zacks Consensus Estimate of 36 cents.
Total sales dipped 0.7% to $938.8 million compared with $945.2
million a year ago, while it also missed the Zacks Consensus
Estimate of $979 million. Sales decline for the quarter resulted
from a decrease of 2% in same location sales, which slipped due to
lower trade sales at the steel rod mill, currency rates, and
reduced store fixture sales. Excluding these factors, however, same
location sales registered a 2% increase with flat to positive unit
volume growth across most of the company's businesses.
revenue for the second quarter climbed 1.5% to $474.7 million
driven by 3% increase in unit volume, offset in part, by currency
translation effects. However, operating income declined 3% year
over year to $40.0 million as the benefit from increased volumes
were more than offset by an unfavorable product mix in some of the
Commercial Fixturing & Components
moved down 17.2% to $114.9 million, primarily due to a 10% decline
in same location sales as well as small divestiture. Consequently,
operating income during the quarter decreased 59% to $3.1 million
compared with $7.5 million in the prior-year quarter. Other
factors, which led to the downside, include the absence of
contribution from divested businesses as well as higher
Second quarter sales for the
segment was up 3% to $236.0 million backed by an 8% gain from the
acquisition of Western Pneumatic Tube. On the other hand, same
location sales dipped 5% driven by lower trade sales at the steel
rod mill. Operating income was up 31% to $17.8 million, on the back
of the Western acquisition and last year's restructuring
segment witnessed a growth of 5% to $195.9 million. Operating
income grew 21% to $25.9 million compared with $21.4 million,
mainly due to improved sales.
Gross profit for the quarter grew 2.9% to $187.2 million, while
gross margin expanded 70 basis points to 19.9%, mainly due to lower
cost of goods sold. Operating income jumped nearly 9% year over
year to $86.2 million. Simultaneously, operating margin also
improved 80 basis points to 9.2% driven by a rise in unit volume in
certain businesses, restructuring activity in the previous quarter,
and the Western Tube acquisition.
Other Financial Details
Leggett exited the second quarter of fiscal 2012 with cash and
equivalents of $271.2 million, long-term debt of $821 million, and
shareholders' equity of $1,347 million. During the quarter, the
company generated $81.2 million of cash from operations and paid
$39.2 million toward dividend and $0.3 million for buying back the
The strength in the company's financial base also reflected from
its ongoing commercial paper program and revolver facility balance
in excess of $330 million. Net debt to net capital at quarter end
was 33%, a decline from 34% in the previous quarter. The company's
current net debt to net cap ratio remains within its long-term
target range of 30% - 40%.
Reflecting the gains from the second quarter's one-time items as
well as better margins, the company has raised its earnings
forecast for fiscal 2012. The company now expects full-year
earnings per share between $1.35 and $1.50, with net sales for the
year in the range of $3.65 - 3.80 billion. The raised earnings
guidance compares with the previous forecast of $1.25 - $1.45 per
Going forward, the company expects to gain momentum as the
economy expands. Anticipating a modest economic recovery in 2012,
the company has raised its sales forecast for the fiscal in the
range of $3.65-$3.85 billion instead of $3.6-$3.8 billion
anticipated earlier. Further, the company forecasts earnings per
share between $1.25 and $1.45 for 2012, up from $1.20-$1.40 guided
For 2012, the company expects to generate about $350 million in
cash from operations, with capital spending and dividends estimated
at about $90 million and $160 million, respectively. Further, the
company expects to distribute about 2 million of its common shares
in the form of employee benefit and stock purchase plans.
The company also has an approved share repurchase authorization
making it eligible to buy back up to 10 million shares every year.
However, the company has not sketched any specific share repurchase
plan for fiscal 2012.
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 recommendation, waiting to see further
catalysts before becoming more positive on the stock.
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