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Leggett & Platt, Incorporated (LEG)
Q4 2012 Earnings Call
February 05, 2013 9:00 am ET
David M. DeSonier - Senior Vice President of Strategy & Investor Relations
David S. Haffner - Chief Executive Officer, President, Director and Member of Executive Committee
Karl G. Glassman - Chief Operating Officer, Executive Vice President and Director
Susan R. McCoy - Director of Investor Relations
Matthew C. Flanigan - Chief Financial Officer, Senior Vice President, Director and Chairman of Enterprise Risk Management Committee
Keith B. Hughes - SunTrust Robinson Humphrey, Inc., Research Division
John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division
Budd Bugatch - Raymond James & Associates, Inc., Research Division
David S. MacGregor - Longbow Research LLC
Robert J. Kelly - Sidoti & Company, LLC
Allen Zwickler - First Manhattan Co., Research Division
Previous Statements by LEG
» Leggett & Platt, Incorporated Management Discusses Q3 2012 Results - Earnings Call Transcript
» Leggett & Platt, Incorporated Management Discusses Q2 2012 Results - Earnings Call Transcript
» Leggett & Platt, Incorporated's CEO Discusses Q1 2012 Results - Earnings Call Transcript
David M. DeSonier
Good morning, and thank you for taking part in Leggett & Platt's Fourth Quarter Conference Call. With me today are the following: Dave Haffner, our CEO and President; Karl Glassman, the Chief Operating Officer; Matt Flanigan, our CFO; and Susan McCoy, who is Staff Vice President of Investor Relations.
The agenda for the call this morning is as follows. Dave Haffner will start with a summary of the major statements we made in yesterday's press release. Karl will provide operating highlights. Dave will then address our outlook for 2013. And finally, the group will answer any questions you have.
This conference is being recorded for Leggett & Platt and is copyrighted material. This call may not be transcribed, recorded or broadcast without our expressed permission. A replay is available from the IR portion of Leggett's website.
We posted to the IR portion of the website a set of PowerPoint slides that contain summary financial information. Those slides supplement the information we discuss on this call, including non-GAAP reconciliations.
I need to remind you that remarks today concerning future expectations, events, objectives, strategies, trends or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties, and the company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the section in our 10-K entitled Forward-Looking Statements.
I'll now turn the call over to Dave Haffner.
David S. Haffner
Good morning, and thank you for participating in our call. We're very pleased with the operational progress we made in 2012. As expected, we realized significant earnings leverage as unit volumes grew in several of our businesses. This led to higher earnings and significantly improved margins. We completed the restructuring activity that was initiated in late 2011 and realized the anticipated benefits.
Western Pneumatic Tube, which was the first large acquisition we've made since our strategic change, exceeded our performance expectations during its first year in our portfolio. We have also maintained our focus on optimizing returns. Working capital levels remained lean throughout the year and operating cash grew significantly. Before I elaborate further on those details, I would like to thank all of our employee partners for their hard work that contributed to this 2012 progress.
As we reported yesterday, full year same-sales location increased 1% in 2012. Unit volumes increased 3% but were partially offset by lower trade sales from our rod mill and changes in currency rates. Full year unit volume growth was driven by several key businesses, including automotive, U.S. spring, adjustable bed, geo components, carpet underlay and parts of residential furniture components.
2012 earnings were a record $1.70 per share at the high end of the adjusted guidance we issued on January 10, which incorporated the $0.18 fourth quarter unusual net tax benefit. 2012 earnings from continuing operations adjusted to exclude unusual net tax benefits in both the second and fourth quarters were also a record at $1.46 per share.
In 2011, full year earnings adjusted to exclude fourth quarter restructuring-related costs were $1.20 per share. This 22% increase in adjusted EPS primarily reflected benefits from higher unit volume, cost improvements and the Western Pneumatic Tube acquisition.
EBIT grew and EBIT margins also improved to 9.2% for the full year. Fourth quarter same-location sales decreased 2% versus the fourth quarter of 2011. Unit volumes increased 1% but were more than offset by lower trade sales from our rod mill. Unit volume growth during the fourth quarter primarily occurred in key residential businesses, including U.S. Spring, Adjustable Bed, Carpet Underlay and parts of Residential Furniture Components.
Fourth quarter earnings per share, excluding the unusual net tax benefits, were $0.32. In the fourth quarter of 2011, earnings excluding the restructuring-related expenses were $0.22 per share. The year-over-year increase primarily reflects cost improvements, higher unit volumes and the Western Pneumatic Tube acquisition.
Cash from operations increased 37% to $450 million during 2012 on stronger earnings and improvements in working capital levels largely from reductions in accounts receivable. Optimizing returns on capital employed continues to be a major focus for our operations.
We ended the year with working capital at 13.2% of annualized sales, well below our 15% target. Our financial base remains very strong. We ended 2012 with net debt to net capital at 29%, slightly below the conservative end of our long-term targeted range of 30% to 40%. In August, we issued $300 million of 10-year notes. With the proceeds, we reduced our use of commercial paper and ended the year with our entire $600 million commercial paper program fully available.