Leggett to Incur Antitrust Charges in Q3, Keeps '14 EPS View - Analyst Blog


Leggett & Platt Inc. ( LEG ), a manufacturer of diversified engineered products, has reached a tentative settlement in one of the civil antitrust cases filed against the company and many other defendants related to the sale of polyurethane foam. The settlement partly relates to the company's former Prime Foam Products business that was divested in the first quarter of 2007.

Though Leggett denies all accusations, it has agreed to pay a sum of $39.8 million to settle the antitrust claims related to the U.S. direct purchaser class portion of the polyurethane foam in order to counter the uncertainty, expense and distraction of litigation. The settlement, which is subject to approval by Court, includes all plaintiff attorneys' fees and costs.

To set out further details, the company revealed that it remains a defendant in many other antitrust cases related to the sale of polyurethane foam. The company said that it is currently not in a position to ascertain the possible result or amount of loss related to the remaining cases due to the complexities involved. However, it clarified that the total sales of polyurethane foam from Leggett in the remaining cases is comparatively lesser than the currently settled cases.

Leggett stated that a pre-tax charge of $39.8 million will be recorded in the third quarter of 2014 related to this settlement, which will likely impact earnings per share by 18 cents. Throwing further light on the matter, the company indicated that about one-fourth of the said charge will be accounted under discontinued operations as the settlement relates to the already sold off Prime Foam Products business.

Despite the anticipated impact on third-quarter earnings, the company has reiterated its full year 2014 earnings per share forecast of $1.70-$1.85 per share issued during the second-quarter results.

Further, during the earnings release, the company projected sales for 2014 to grow in the 4%-6% range and come in within $3.88-$3.98 billion driven by robust growth in majority of the company's businesses, offset by decreased demand for store fixtures.

Apart from this, the company expects operating cash flows for 2014 to be over $350 million. Capital expenditure for the year will be approximately $100 million, while the company hopes to spend $170 million toward dividend payout. Further, the company intends to buy back 5-7 million shares and issue nearly 2 million shares under the employee benefit plans in 2014.

Management seems impressed with its sound financials and anticipates record earnings in 2014. Thereafter, Leggett remains optimistic about its performance, given the strength of its various businesses like Automotive, Aerospace, Bedding, Home Furniture and Office Furniture. Also, the company strives to remain in the top 3 of the S&P 500 companies, on the basis of 3-year rolling period Total Shareholder Return (TSR).

Other Stocks to Consider

Currently, Leggett carries a Zacks Rank #3 (Hold). Better-ranked stocks in the consumer discretionary sector include Hanesbrands Inc. ( HBI ), Perry Ellis International Inc. ( PERY ) and V.F. Corp. ( VFC ). While Hanesbrands and Perry Ellis sport a Zacks Rank #1 (Strong Buy), V.F. Corp. carries a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: LEG , VFC , HBI , PERY



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