That spring in your step after a good night's sleep may be there courtesy of Leggett & Platt (L&P) -- the pioneer of steel coil bedsprings. Using primarily aluminum and steel, the company makes residential furnishings (such as innersprings and bed frames) and commercial fixtures (store displays, shelves, furniture components). It also produces industrial materials (wire, steel tubing) and specialized items (quilting machines, automotive seating, docking stations for electronic devices). Customers include furniture retailers, telecommunications firms, and makers of automobiles, construction products, bedding, and lawn gear. L&P operates about 130 manufacturing facilities in nearly 20 countries.
Of L&P's 132 manufacturing sites worldwide, 89 are located in the US. The diversified company's international operations are principally located in Europe, China, Canada, and Mexico. In 2011 international sales accounted for 29% of L&P's total sales, with 9% attributed to China. The company also makes residential furnishings in Africa.
L&P is an international diversified manufacturer that designs and makes a wide variety of engineered components and products found in many homes (bedding, furniture, carpet underlay), offices (furniture), and retail stores (displays, garment racks, shelving), and automobiles (control cables, seating components). Residential furnishing account for about 50% of sales, while industrial materials accounts for about 25% of sales, and specialized materials, about a fifth.
L&P's 2011 sales increased by about 8% vs. 2010, while net income fell by 13% over the same period. Increased demand in some of the company's markets, notably automotive and office furniture, drove sales in 2011. In contrast, the residential segment continued to lag amid continued weakness in the economy and housing market. Despite increased sales in 2011 and 2010, the $3.6 billion rung up by L&P in 2011 was well below pre-recession levels.
In an effort to boost shareholder returns, L&P has narrowed its focus to sectors where it can be a market leader and achieve cost savings. The profit-centered strategy, launched in 2007, departed from L&P's growth through acquisition model, which resulted in the purchase of more than 100 companies since 1996. From 2007 onward, L&P has reduced combined annual spending for acquisitions and capital expenditures by more than 70%. Indeed, up until early 2012, the company had not made a significant acquisition. In January, it bought out Western Pneumatic Tube (Western), a provider of aircraft parts, from private equity firm Tinicum Capital Partners for $188 million. Unlike many previous acquisitions, L&P will operate Western within the tubing group as an independent company and continue to develop Western's customer base of aerospace suppliers and OEMs. (In 2011 Western generated $57 million in sales.)
The deal for Western followed a stream of disposals. Between 2007 and 2010, L&P shed more than half a dozen businesses, the largest of which was its $485-million-in-sales Aluminum Products segment (2008). L&P unloaded its declining Storage Products business unit in 2010. The company has used the approximately $1.8 billion in proceeds from the divestitures and cash flow generated since 2007 to increase its quarterly dividends by 50% and to repurchase stock.
L&P's restructuring is continuing. In late 2011 it approved a plan to reduce overhead costs and boost ongoing profitability. The plan involved the closure of four underperforming facilities by mid-2012.
State Street Corp. owns nearly 13% of L&P's shares. – less
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