CARTHAGE, MO - Furnishings manufacturer Leggett & Platt says first quarter sales grew 10 percent to $896 million, driven by higher unit volumes, but net earnings were flat at $45 million, as rising raw material costs took a toll.
Leggett's Residential Furnishings segment sales increased $25 million, or 6%, to $459.8 million. Earnings in the segment decreased $7 million due to higher raw material costs and a reduction in the amount of income from building sales. In the Commercial Fixturing & Components segments, sales fell 9 percent to $127 million.
Leggett & Platt segments include components for office and residential furniture, and bedding; drawn steel wire; automotive seat support and lumbar systems; carpet underlay; power foundations; and bedding industry machinery.
"Growth enhanced earnings, but was offset by higher raw material costs," said president and CEO David Haffner. "We implemented price increases during the quarter in response to cost inflation; as a result, we expect improved margins in subsequent quarters."
Haffner says Leggett& Platt is third step of the three-part strategic plan begun in 2007, with low performing businesses already divested and steps taken to improve margins and returns. Haffner now envisions 4-5 percent annual growth, in part from commercialization of innovative new products. Leggett & Platt's Global Systems Group will exhibit new production machinery at interzum.
Leggett & Platt says it has purposely retained spare production capacity so sales can rebound to over $4 billion without the need for large capital investment. Leggett & Platt anticipates 2011 sales of $3.5-3.8 billion. As cash from operations is expected to exceed $300 million for 2011, and capital expenditures funded from that should be $85 million this year.
Significantly, Leggett uses FIFO (first-in, first-out) inventory valuation, adjusting at at the corporate level to convert about 60% of the inventories to the LIFO (last-in, first-out) method. Steel cost increases contributed to a LIFO expense of $15 million for the full year 2010; for 2011, the company expects LIFO expense of $22 million.
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