Leggett & Platt Incorporated (LEG), a leading manufacturer of home furnishing components, has reported relatively strong third quarter results with earnings of 34 cents per share from continuing operations compared to 29 cents in the year-earlier quarter. The increase in the quarterly earnings was primarily due to stringent cost-cutting measures, pricing discipline and LIFO benefit. 

Leggett reported total sales of $810 million from continuing operations compared to $1.13 billion in the year-ago period – a decrease of 28%, due to the continued sluggish market demand and steel-related price deflation. Cash flow from operations was $142 million during the quarter and $430 million year-to-date. Leggett anticipates cash flow for full year 2009 to exceed $500 million, primarily due to optimization of working capital. 

Gross margin was 23.1% during the quarter, while EBIT margin was 11.7%. Leggett anticipates an EBIT margin (excluding the net LIFO benefit) of 8.5% to 9% for full year 2009 on annualized sales of $3 billion, which represents a 200 bps year-over-year improvement in margins despite a 25% decline in overall sales. The company realized net LIFO benefit of $11 million during the quarter. 

Leggett repurchased 4.4 million of common stock during the quarter at $18.40 each. Consequently, shares outstanding decreased to 152.3 million. Leggett has an authorization to repurchase 10 million shares every year under its share repurchase program, and currently 4.1 million shares remain available for repurchase in the remainder of 2009. At quarter end, the company had cash and cash equivalents of $221.5 million with no significant long-term debt maturing before 2013. Leggett’s net debt decreased to 23.7% of net capital during the quarter with virtually no short-term debt. 

With increased margin expectations and continued cost-cutting measures, Leggett has now revised its earnings guidance for 2009. The company now expects its earnings to vary within 65 cents to 75 cents per share compared to the prior guidance of 55 cents to 70 cents. However, Leggett has kept unchanged its full year 2009 sales guidance at approximately $3 billion. The company has marginally increased its quarterly dividend by 1 cent to 26 cents per share.
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