2010 Outlook Improved
Leggett anticipates full year 2010 sales of approximately $3.1 - 3.4 billion. Considering uncertainties including market demand and steel pricing, Leggett projects that it should generate 2010 EPS of $.95 - 1.30. At the midpoint of its sales and EPS guidance the company would generate an EBIT margin of about 9.3%.
Cash from operations should exceed $300 million for the full year. Uses of cash include less than $90 million for capital expenditures and approximately $155 million for dividends.
LIFO
All of Leggett's segments use the FIFO (first-in, first-out) method for valuing inventories. An adjustment is made at the corporate level to convert about 60% of the inventories to the LIFO (last-in, first-out) method. Since the LIFO benefit is not recorded at the segment level, 2009 segment EBIT margins were unusually low. Earnings for the first quarter 2010 reflect a LIFO expense of $2.1 million, compared to a LIFO benefit of $17.0 million in 1Q 2009.
Furthermore, LIFO created significant variability in 2009 quarterly earnings. Steel deflation negatively impacted segment earnings for the first half of 2009. This impact was offset by a LIFO benefit at the corporate level, but that benefit was spread across all four quarters. LIFO-related impacts are not anticipated to be as significant during 2010.
Segment Results - First Quarter 2010 (versus 1Q 2009)
Residential Furnishings - Total sales increased $20 million, or 5%, as a result of improved market demand; unit volume increased 10%, but was partially offset by lower unit prices (from steel-related deflation that occurred during the first half of 2009). EBIT (earnings before interest and income taxes) increased $56 million due to improved sales, price discipline, cost structure improvements, the benefit associated with the sale of a building, and absence of last year's bad debt expense related to a customer bankruptcy.
Commercial Fixturing & Components - Total sales increased $26 million, or 23%, due to our strong position with value-oriented retailers and new programs with office furniture manufacturers. EBIT increased $11 million due to sales growth, cost reductions, and operational improvements.
Industrial Materials - Total sales increased $12 million, or 7%; unit volume was 18% higher, but was partially offset by lower unit prices (from deflation that occurred during the first half of 2009). EBIT was flat, with the impact of higher volume offset by lower metal margins (reflecting higher costs for scrap steel).
Specialized Products - Total sales increased $32 million, or 31%; significantly improved automotive demand was partially offset by weaker demand for machinery and commercial vehicle products. EBIT increased $17 million, with the benefit from higher volume, cost reductions, and operational improvements partially offset by unusual items (that total $4 million of expense).
Leggett & Platt Incorporated
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