Leggett & Platt posts lower Q2 profit
Diversified manufacturer Leggett & Platt reported second quarter earnings per diluted share of $.27, including $.02 per share from discontinued operations. Per share earnings from continuing operations were $.25, and include $.01 of restructuring-related costs, and a $.02 charge for a non-recurring tax item.
In the second quarter of 2007, earnings per share were $.33, including $.03 per share from discontinued operations and other items. The year-over-year reduction in continuing operations' earnings is primarily due to soft demand in several markets.
Second quarter sales from continuing operations were $1.06 billion, slightly lower than last year's sales (from continuing operations) of $1.07 billion. Same location sales declined 0.5%, as soft market demand and the company's decision to exit specific sales volume (with unacceptable profit margins) were largely offset by market share gains and price inflation. Increased sales from acquisitions were offset by sales reductions from divestitures.
Earnings from discontinued operations in the second quarter of 2008 were $.02 per share, and included approximately $.03 per share of non-operating charges. In the second quarter of 2007, earnings per share from discontinued operations were $.02.
President and CEO David S. Haffner remarked, "Some of our investors have expressed concern about three different issues: weakness in many of the markets we serve, raw material cost inflation, and the likelihood of receiving the divestiture proceeds we anticipate. We have good news to report on all three fronts.
"Our U.S. bedding components business is enjoying market share gains due to several factors. First, bedding manufacturers are importing fewer innersprings, and instead increasing their use of domestically produced innersprings. Second, earlier this year we began producing innersprings for a strong regional bedding manufacturer that previously produced its own components. Finally, foam and air mattresses have lost market share recently as consumers back away from alternative bedding, because of its high cost, and move instead to better value innerspring bedding.
"Global steel costs have escalated dramatically since the start of the year; however, our vertically integrated position (i.e. melt furnace and rod mill) yields a significant competitive advantage in this market. To a very significant degree, we have successfully implemented price increases to recover the higher raw material costs; however, we typically experience a lag with the timing of the recovery. As costs potentially plateau later this year, and our price increases catch up with the cost increases, we should see enhanced profitability during the second half of the year.
"The divestitures we announced last fall are progressing, and we are committed to selling or liquidating all seven of the operations we have previously identified. As disclosed yesterday, the sale ofthe Aluminum Products segment closed (for $300 million in cash, a $25 million subordinated note, and shares of preferred stock), and yielded 75% of the total after-tax cash proceeds we originally anticipated (back in November) for all seven targeted business units collectively. We are in discussions with potential buyers for the six remaining (smaller) business units, and anticipate the successful disposition of all six during 2008.