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Sagging Innerspring Sales Cause Lowered Leggett & Platt 4th Quarter Earnings Expectations

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Fortune 500 diversified manufacturer Leggett & Platt announced that fourth quarter earnings are expected to be at the low end of the company’s prior guidance (of 31 to 36 cents per share) issued two months ago. The single largest factor affecting earnings is an unanticipated decline in sales of bedding related components and products. Domestic innerspring unit sales are down 10% through the first two months of the fourth quarter (versus the same period last year). This is consistent with the broad industry decline seen in ISPA’s survey (covering 61% of industry shipments) showing reduced mattress unit sales for October. An additional impact to Leggett’s earnings comes from reduced sales and production of steel wire – the raw material from which innersprings are produced. Several lesser factors are also impacting earnings. These include a weaker dollar, and higher costs for transportation, wood, and oil-related raw materials (e.g. foam, resins, and fiber). The company has announced price increases, effective in January, aimed at recovering most of these higher costs. These negative impacts should be partially offset by modestly improved sales expectations in some lines of business. The company now anticipates net trade sales of $1.26 – $1.28 billion for the quarter, with organic growth (versus 4Q 2003) of approximately 9% - 10%. For 2005, the company anticipates sales growth between 6% and 10% for the full year. Organic growth is expected to contribute between 4% and 6%, with acquisitions adding the balance of the sales increase. The company foresees record full year earnings between $1.50 and $1.70 per share. The earnings growth arises primarily from increased sales and improved cost structure.

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