Leggett & Platt looks to rebound after roller-coaster '05

Susan McCoy, director of investor relations for the Carthage-based Fortune 500 diversified manufacturer, said Leggett & Platt’s projected earnings per share in 2006 are $1.50 to $1.75. That increase comes after costly restructuring efforts cut 2005’s EPS to $1.30, down from $1.45 EPS in 2004.

During a month-long restructuring in September, Leggett & Platt closed or sold 36 facilities and cut 1,000 jobs. The company operates about 300 facilities in more than 20 countries and employs 32,000 people. The changes cost Leggett & Platt $78 million, $55 million of which was paid off last year.

Company officials say biting the $78 million bullet now will help the company in the long term.

“We feel pretty optimistic,” McCoy said. “A big part of the restructuring and the related cost are behind us, and we expect to get benefits going forward out of having done this.”

However, Leggett & Platt’s restructuring hurt the company’s bottom line enough that not even record sales of $5.3 billion – up 4.2 percent from 2004 – could save the day.

McCoy said there should be nothing happening in 2006 that would damage profits.

“We had a number of under-performing and underutilized operations that we had been holding on to for a number of years, expecting that market demand would ultimately recover,” she said. “We did not see that recovery as expected.”

Leggett & Platt reduced manufacturing volumes in four of its five divisions – 50 percent of the restructuring involved the company’s residential furniture segment (items such as home bedding), 25 percent of the restructuring involved its commercial fixtures segment (items such as store shelves) and 25 percent of the restructuring involved both its industrial materials segment (items such as wiring and tubing) and its specialized products segment (items such as automotive seat components).

The company’s only untouched division was its aluminum products segment, which produces aluminum components for small engines.

Into the fold

McCoy said the restructuring was unrelated to a slew of fourth-quarter acquisitions.

Seven of Leggett & Platt’s 12 acquisitions for the year came in October: Ikex Inc., a residential furnishings firm; Jarex Distribution LLC, a residential furnishings firm; a store fixtures manufacturing facility in Shanghai, China; a motion furniture mechanism business in Jia Jiang, China; Westex International, a down-comforters manufacturer; Everwood Products, a producer of metal rocker bases and specialty components for residential furniture; and America’s Body Co., a manufacturer of equipment for vans and light-to-medium duty commercial trucks.

McCoy said 2005 was a typical year for acquisitions, as Leggett & Platt’s goal is to grow sales 6 percent to 9 percent every year solely through acquisitions. She said Leggett & Platt has acquired as many as 30 businesses in one year before.

“There’s nothing out of the ordinary or unusual about it from a strategy standpoint,” she said, noting that the 12 acquisitions in 2005 cost Leggett & Platt $181 million.

The fourth-quarter buying spree was aided by the issuance in August of $200 million in 10-year bonds. That debt issuance was the fourth such action in two years for Leggett & Platt, with the other offerings ranging from $150 million to $200 million.

After the acquisitions and repayment of some long-term debt, Leggett & Platt ended 2005 with $65 million cash on hand.

Leggett & Platt shares (NYSE: LEG) closed March 8 at $23.66, compared to a 52-week range of $18.19 to $29.61.

Stock analysts rated Leggett & Platt as a strong buy the week of March 6. First-quarter EPS is projected at 36 cents a share, while analysts’ average estimate for the second quarter is 41 cents. The average estimate EPS is $1.63 for 2006 and $1.85 for 2007.