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From Home Furnishing Business

Leggett & Platt Reports Double-Digit Profit Jump Despite Sales Decline

Leggett & Platt (NYSE: LEG), a major supplier of furniture and bedding components and finished furniture, reported a double-digit increase in earnings in 2016 despite a 4.3% drop in sales.

The company recorded full-year net income of $385.8 million or $2.76 per share. That was nearly 19% above 2015 net income of $325.1 million or $2.28 per share. The most recent year included income of $19.1 million or 14 cents per share from discontinued operations.

Sales for the year totaled $3.92 billion, down from $3.75 billion in 2015.

The company said unit volume grew 2%, and acquisitions added 1% to sales. However, those were more than offset by divestitures, raw material price deflation and foreign currency adjustments. Karl Glassman, president and CEO, said a strong performance by the automotive segment was offset by soft demand in several other markets, including bedding and home furniture.

Sales in the residential furnishings segment, which includes furniture and bedding components, fell 6.1% to $1.94 billion for the calendar year, while sales in the commercial products segment, which includes its Fashion Bed finished furniture business, rose 1.1% to $630.4 million.

During the year, Leggett & Platt sold four businesses that collectively generated about $100 million in annual sales. But the company also acquired three small businesses – a U.S. manufacturer of aerospace tube assemblies, a distributor of geosynthetic products, and a South African innerspring producer. In addition, it purchased the remaining minority interest in an automotive joint venture in China.

In the fourth quarter, sales fell 4.3% to $903.7 million, and net income rose 1.4% to $81.6 million or 59 cents per share.

For 2017, the company is projecting earnings from continuing operations of $2.55 to $2.75 per share, and sales of $3.95 billion to $4.05 billion. That would represent sales growth of 5% to 8%, including unit volume growth in the mid-single digits.

"Looking forward, we expect an approximate $250 million sales increase in 2017. The raw material deflation that impacted sales in 2016 has abated, and inflation is expected in 2017,” said Glassman. “We anticipate volume increases in our automotive, bedding, adjustable bed, work furniture, and geo components operations.

“Growth should come from content gains, new product introductions, market share increases, and overall market growth. With this anticipated growth, we expect that in 2017 we will achieve strong profit margins and increased (earnings per share.)”

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