Leggett & Plan Incorporated (LEG)
Q4 2010 Earnings Call
February 2, 2011 9:00 a.m. ET
David DeSonier – VP, Strategy and Investor Relations
Dave Haffner – President and CEO
Karl Glassman – Chief Operating Officer
Matt Flanigan – CFO
Susan McCoy – Director of Investor Relations
John Baugh – Stifel Nicolaus
Budd Bugatch – Raymond James & Associates
Andy White - Longbow Research
Keith Hughes – SunTrust
Robert Kelly – Sidoti & Company
Joel Havard - Hilliard Lyons
Herbert Hardt - Monness, Crespi & Hardt
Karen Lamark - Federated Investors
Robin Braudy - Waterfront Capital Partners
Previous Statements by LEG
» Leggett & Platt CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Leggett & Platt, Inc. Q2 2010 Earnings Call Transcript
» Leggett & Platt Q1 2010 Earnings Conference Call
Good morning and thank you for taking part in Leggett & Platt’s fourth quarter conference call. I’m Dave DeSonier and with me today are the following - Dave Haffner, our CEO and President, Karl Glassman, our Chief Operating Officer, Matt Flanigan, our CFO, and Susan McCoy, our Director 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 2011 and finally the group will answer any questions you have.
I’ll mention to you that during the Q&A Dave Haffner will direct the questions. We’re all located in different sites today due to the weather. We have about 20 inches of snow and many of us are still at home trying to dig out of our neighborhoods. This conference is being recorded for Leggett & Platt and is copyrighted material. This call may not be transcribed, recorded, or broadcast without our express permission. A replay is available from the IR portion of Leggett's Web site.
We've posted to the IR portion of the web site a set of PowerPoint slides that contains summary financial information. Those slides supplement the information we discuss on this call including non-GAAP reconciliation. 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.
Good morning from sunny Missouri and thank you for participating in our call. Yesterday we reported fourth quarter and full year results. For the quarter sales increased 4% compared to the prior year primarily reflecting growth in unit volumes in the specialized products and industrial materials segments. Earnings per share for the quarter were 21 cents versus 26 cents for the same quarter last year.
The earnings benefit from higher unit volumes and a lower effective tax rate were offset by a net change in LIFO impact and higher raw material costs. In the fourth quarter of 2009 we recognized a LIFO benefit of $15 million. As anticipated, that benefit did not recur this year. Instead in the fourth quarter of 2010 we incurred LIFO expense of $5 million for a year over year net change of $20 million. In late 2010 steel costs began increasing again.
These increases along with higher than anticipated LIFO expense led to 150-200 basis points of margin compression in the fourth quarter. We have announced price increases in our major steel consuming businesses to recover the higher costs. These increases vary in magnitude depending upon the product category and are being implemented during the first quarter of 2011. Because of the lag in cost recovery our first quarter margins will likely be under pressure. But we expect margins to normalize by the second quarter.
For the full year 2010 we’re pleased with the improvements we posted in both sales and earnings per share we achieved full year results at or above the high end of guidance issued at the start of the year. Sales grew 10% to $3.36 billion. Demand improved in many of our markets during the year. The automotive and office furniture markets experienced significant growth from very depressed demand levels in 2009.
Retail fixture demand was also reasonably strong. Our residential bedding and furniture markets started 2010 strong but weakened in the last half of the year as consumer spending on larger ticket items slowed. Activities completed over the past few years including the divestiture of businesses under our strategic plan, closure of certain underperforming and under utilized facilities, elimination of sales with unacceptable margins and other cost reduction initiatives improved our cost position and enabled earnings to benefit notably from the higher volume.
Full year earnings increased to $1.15 per share, which is a 64% improvement versus the 70 cents per share reported in 2009. During 2010 we completed the sale of the seventh and final divestiture identified as a part of our strategic realignment. The seven divestitures collectively generated $433 million of after tax cash proceeds over the past three years, exceeding our original $400 million goal. Our focus on optimizing returns was reflected throughout 2010 in part through the lower level of working capital that was maintained as sales began to recover.