Leggett & Platt Reports 2Q Results

CARTHAGE, Mo., July 29, 2019 /PRNewswire/ --

• 2Q sales grew 10%, to $1.21 billion
• 2Q EPS was $.64, an increase of $.01 vs 2Q18
• 2Q cash flow from operations was a strong $172 million
• 2019 guidance lowered: sales of $4.7-$4.85 billion; EPS of $2.30-$2.50; adjusted EPS of $2.40-$2.60

Diversified manufacturer Leggett & Platt reported second quarter 2019 sales of $1.21 billion, a 10% increase versus second quarter last year.

• Acquisitions added 16% to sales growth (ECS and other smaller acquisitions)
• Organic sales were down 6%:
• Volume down 6%, 3% from exited business
• Currency impact -2%  
• Raw material-related selling price increases +2%

Second quarter EBIT was $136 million, up $15 million or 12% from second quarter last year.

• EBIT included $12 million of amortization expense from the ECS acquisition  
• EBIT margin was 11.2%, up from 11.0% in the second quarter of 2018

Second quarter EPS was $.64, an increase of $.01 versus 2018.  The increase reflects higher EBIT mostly offset by higher interest expense ($.05/share) and a higher tax rate ($.03/share).

Restructuring: 

• There were no significant restructuring-related charges in the second quarter
• Full year restructuring-related charges are expected to be approximately $17 million ($.10/share)
• $6 million cash and $11 million non-cash

CEO Comments
President and CEO Karl G. Glassman commented, "Sales grew 10% in the second quarter, primarily from the ECS acquisition. Sales also increased from continued market share and content gains in U.S. Spring, which was up 4% in the quarter, but this improvement was more than offset by lower volume from business exited in our Furniture Products segment, weak trade demand in the Industrial Products segment, and softer demand in Automotive.

"Second quarter EBIT increased a notable $15 million over second quarter last year, primarily from lower raw material costs (including LIFO benefit), and the ECS acquisition.  However, these increases were partially offset by lower volume in several businesses and other smaller items. 

"For the full year, sales growth will benefit significantly from the ECS acquisition. In addition, we continue to expect sales growth in Automotive, U.S. Spring, Aerospace, Hydraulic Cylinders, and Work Furniture, more than offset by the exit of both Fashion Bed and lower margin business in Home Furniture.  We anticipate improved EBIT from higher sales and decreasing steel costs (including LIFO benefit).

"Demand for our Bedding products remains strong and will benefit from the preliminary dumping duties on Chinese mattresses that were recently imposed by the Department of Commerce.  These rates range from 69% to 1,732% and should allow domestic mattress producers to compete on a more level playing field.  We anticipate a final determination in the matter by the end of the year.

"We are pleased with the progress of the restructuring activity we initiated in the fourth quarter of 2018 in our Home Furniture and Fashion Bed businesses.  The most significant elements of both plans are behind us and we expect to be substantially complete by the end of the third quarter."

Debt and Cash Flow

• Debt was 3.45x trailing 12-month pro forma adjusted[1] EBITDA; we expect to be at our target level of debt to trailing 12-months adjusted EBITDA of approximately 2.5x by end of 2020
• At the end of the second quarter, $866 million was available under the commercial paper program
• Operating cash flow was $172 million in the second quarter, an increase of $92 million versus second quarter last year

Dividends

• Leggett & Platt's Board of Directors declared a $.40 second quarter dividend, two cents higher than last year 

Stock Repurchases

• Consistent with our commitment to delever, we repurchased a de minimis number of shares surrendered for employee benefit plans
• Issued .2 million shares through employee benefit plans and option exercises
• Shares outstanding at the end of the second quarter were 131.4 million

2019 Guidance

• Full year 2019 sales and EPS guidance lowered
• Sales are expected to be $4.7-$4.85 billion, an increase of 10-14% versus 2018
• Organic sales are expected to decline -1% to -5%, including -3% from exited business
• Acquisitions should add 15% to sales; including approximately $600 million from ECS (commencing from the January 16^th acquisition date)
• EPS is expected to be $2.30-$2.50, including approximately $.10 per share of restructuring-related costs 
• Versus 2018, EPS reflects decreasing steel costs (including LIFO benefit), partially offset by lower organic sales and a higher tax rate
• Adjusted EPS is expected to be $2.40-$2.60
• ECS is expected to be neutral to EPS in 2019
• Based on this guidance range, EBIT margin should be 10.7-11.1%; adjusted EBIT margin should be
  11.1-11.4%
• Operating cash flow should approximate $550 million
• Prior Guidance:
• Sales: $4.95-$5.1 billion
• EPS: $2.35-$2.55; adjusted EPS: $2.45-$2.65

LIFO

• In the second quarter of 2019, lower steel costs resulted in a LIFO benefit of $10.4 million (pretax)
• In the second quarter of 2018, increasing steel costs resulted in LIFO expense of $12.8 million (pretax)

SEGMENT RESULTS – Second Quarter 2019 (versus 2Q 2018)

Residential Products –

• Total sales grew 38%; acquisitions added 39%
• Organic sales decreased 1%
• Volume was down 2%, with continued market share and content gains in U.S. Spring offset by declines in other businesses
• Raw material-related price increases, net of currency impact, added 1% to sales
• EBIT increased $4 million, with earnings from the ECS acquisition (after $12 million of amortization expense) partially offset by lower volume

Industrial Products –

• Total sales decreased 9%, with lower steel rod and wire volume (-17%) partially offset by raw material-related selling price increases implemented in 2018 (8%)
• EBIT increased $16 million, primarily from lower steel costs (including LIFO benefit)

Furniture Products –

• Total sales were down 11%
• Volume decreased 11%, from our decision to exit Fashion Bed and planned declines in Home Furniture
• Raw material-related selling price increases were offset by a negative currency impact
• EBIT increased $5 million, primarily from improved pricing combined with lower raw material costs (including LIFO benefit) and lower fixed costs attributable to restructuring activity

Specialized Products –

• Total sales decreased 3%
• Currency impact, net of raw material-related price increases in Hydraulic Cylinders, decreased sales 3%
• Volume was flat, with growth in Aerospace offset by softer demand in the automotive market
• EBIT decreased $10 million, primarily from lower volume in Automotive, negative currency impact, and new program ramp up costs in Aerospace

Slides and Conference Call
A set of slides containing summary financial information is available from the Investor Relations section of Leggett's website at www.leggett.com. Management will host a conference call at 7:30 a.m.Central (8:30 a.m. Eastern) on Tuesday, July 30. The webcast can be accessed from Leggett's website. The dial-in number is (201) 689-8341; there is no passcode. 

Third quarter results will be released after the market closes on Monday, October 28, with a conference call the next morning.

FOR MORE INFORMATION: Visit Leggett's website at www.leggett.com.

COMPANY DESCRIPTION:  At Leggett & Platt (NYSE: LEG), we create innovative products that enhance people's lives, generate exceptional returns for our shareholders, and provide sought-after jobs in communities around the world. L&P is a 136-year-old diversified manufacturer that designs and produces engineered products found in most homes and automobiles. The Company is comprised of 15 business units, 23,000 employee-partners, and 145 manufacturing facilities located in 18 countries.

Leggett & Platt is the leading U.S.-based manufacturer of: a) bedding components; b) automotive seat support and lumbar systems; c) specialty bedding foams and private-label finished mattresses; d) components for home furniture and work furniture; e) flooring underlayment; f) adjustable beds; g) high-carbon drawn steel wire; and h) bedding industry machinery.

FORWARD-LOOKING STATEMENTS: This press release contains "forward-looking statements," including, but not limited to, the 2019 sales and annualized sales of ECS; the acceleration of our Bedding businesses' sales; our ability to deleverage to a target level ratio of debt to trailing 12-months EBITDA of approximately 2.5 by year-end 2020; the Company's 2019 EPS, adjusted EPS, sales, sales growth, EBIT margin, adjusted EBIT margin, cash from operations, the amount of cash repatriated from offshore accounts, capital expenditures, dividends, dividend payout ratio, depreciation and amortization, net interest expense, tax rate and the amount of fully diluted shares; our ability to increase the dividend; and the amount and timing of 2019 restructuring-related charges related to the Fashion Bed and Home Furniture businesses (Restructuring Plan). Such forward-looking statements are expressly qualified by the cautionary statements described in this provision and reflect only the beliefs of Leggett or its management at the time the statement is made. Because all forward-looking statements deal with the future, they are subject to risks, uncertainties and developments which might cause actual events or results to differ materially from those envisioned or reflected in any forward-looking statement. Moreover, we do not have, and do not undertake, any duty to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement was made. Some of these risks and uncertainties include: (i) uncertainty of the expected financial performance of ECS following the acquisition; (ii) failure to realize the anticipated benefits of the ECS acquisition, including as a result of delay in integrating the businesses of ECS; (iii) difficulties and delays in achieving revenue synergies of ECS; (iv) inability to retain and hire key personnel and maintain relationships with customers and suppliers of ECS; (v) the Company's and ECS's ability to achieve their respective operating targets; (vi) increases or decreases in our capital needs, which may vary depending on a variety of factors, including, without limitation, any other acquisition or divestiture activity and our working capital needs; (vii) market conditions; (viii) alternative capital market opportunities, including, without limitation, the relative attractiveness of longer-term debt financing or equity financing; (ix) the impact of the Tax Cuts and Jobs Act, price and product competition from foreign and domestic competitors, changes in demand for the Company's products, cost and availability of raw materials and labor, fuel and energy costs, general economic conditions, possible goodwill or other asset impairment, foreign currency fluctuation, litigation risks; (x) the preliminary nature of the estimates related to the Restructuring Plan, and the possibility that all or some of the estimates may change as the Company's analysis develops, additional information is obtained, and the Company's efforts to downsize or consolidate any business progresses; (xi) our ability to timely implement the Restructuring Plan in a manner that will positively impact our financial condition and results of operations; (xii) the impact of the Restructuring Plan on the Company's relationships with its employees, major customers and vendors; and (xiii) other risk factors detailed from time to time in Leggett's reports filed with the SEC.

CONTACT:   Investor Relations, (417) 358-8131 or invest@leggett.com
Susan R. McCoy, Senior Vice President, Investor Relations
Wendy M. Watson, Director, Investor Relations
Cassie J. Branscum, Manager, Investor Relations

¹ Please refer to attached tables for non-GAAP reconciliations.

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SOURCE Leggett & Platt