Leggett & Platt Reports 3Q Results

CARTHAGE, Mo., Oct. 28, 2019 /PRNewswire/ --

• 3Q sales grew 14%, to $1.24 billion
• 3Q EPS was $.74, an increase of $.07 vs. 3Q18; 3Q adjusted¹ EPS of $.76, up $.10 vs 3Q18
• 3Q cash flow from operations was a strong $213 million
• 2019 EPS guidance raised: EPS of $2.40-$2.55; adjusted EPS of $2.48-$2.63

Diversified manufacturer Leggett & Platt reported third quarter 2019 sales of $1.24 billion, a 14% increase versus third quarter last year.

• Acquisitions added 16% to sales growth (primarily ECS)
• Organic sales were down 2%:

-- Volume down 1% (exited business -4%) 
-- Absent declines from exited business, volume up 3%
-- Raw material-related selling price decreases and negative currency impact -1%

Third quarter EBIT was $144 million, up $20 million or 16% from third quarter last year, and adjusted¹ EBIT was $148 million, a $24 million increase.

• EBIT benefited from:

-- ECS acquisition
-- Lower raw material costs
-- Improved earnings performance in Furniture Products

• EBIT margin was 11.6% and adjusted¹ EBIT margin was 11.9%, up from 11.4% in the third quarter of 2018

Third quarter EPS was $.74.  Third quarter adjusted¹ EPS was $.76, an increase of $.10 versus third quarter 2018.  The increase reflects higher EBIT and a lower tax rate ($.03/share) partially offset by higher interest expense ($.06/share).

Restructuring: 

• Third quarter included $4 million (pretax), or $.02 per share, of restructuring-related charges

-- $3 million cash and $1 million non-cash

• Full year restructuring-related charges are expected to be approximately $14 million ($.08/share)

-- $7 million cash and $7 million non-cash

CEO Comments
President and CEO Karl G. Glassman commented, "Sales grew 14% in the third quarter, primarily from the ECS acquisition.  Sales were stronger in Automotive, U.S. Spring, and Work Furniture but this improvement was more than offset by planned lower volume from business exited in Fashion Bed and Home Furniture and weak trade demand in the Industrial Products segment.

"Third quarter adjusted¹ EBIT increased a notable $24 million over third quarter last year, primarily from the ECS acquisition, lower raw material costs (including LIFO benefit), and improved earnings performance in Furniture Products. 

"Our Automotive business grew 8% versus third quarter 2018, exceeding the global market by over 1,000 basis points.  This year we should exceed market growth by 600–700 basis points.  While we remain confident in continued strong performance, ongoing disruption in the global market makes it difficult to predict our relative performance with precision.  Accordingly, we are moving away from our specific goal of exceeding market growth by 1,000 basis points, although we expect to significantly outperform the market over the long term. 

"Earlier this month, the U.S. Department of Commerce announced final dumping duties on mattresses imported from China that range from 57% to 1,732%.  Notably, approximately 90% of Chinese mattresses are now subject to antidumping duties in excess of 160%.  We expect the U.S. International Trade Commission to make a final determination in this matter no later than the first week of December.  In our U.S. bedding businesses, we continue to see strong demand.  U.S. Spring sales dollars were up 6%. Finished mattress units were up 28% in the third quarter, including ECS's year-over-year growth."

Debt and Cash Flow

• Debt was 3.15x trailing 12-month pro forma adjusted¹ EBITDA; we expect to be at our target level of debt to trailing 12-months adjusted EBITDA of approximately 2.5x by the end of 2020
• Operating cash flow was $213 million in the third quarter, an increase of $86 million versus third quarter last year

Dividends

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

Stock Repurchases

• Repurchased only .2 million shares at an average price of $40.00; primarily shares surrendered for employee benefit plans
• Issued .4 million shares through employee benefit plans and option exercises
• Shares outstanding at the end of the third quarter were 131.6 million

2019 Guidance

• Full year 2019 sales guidance narrowed, and EPS guidance raised
• Sales are expected to be $4.7-$4.8 billion, an increase of 10-12% versus 2018

-- Organic sales are expected to decline -3% to -5%, including -3% from exited business
-- Acquisitions should add 15% to sales

• EPS is expected to be $2.40-$2.55, including approximately $.08 per share of restructuring-related costs
• Adjusted EPS is expected to be $2.48-$2.63
• ECS is expected to be neutral to EPS in 2019
• Based on this guidance range, EBIT margin should be 10.7-11.0%; adjusted EBIT margin should be
  11.0-11.3%
• Operating cash flow should exceed $550 million
• Capital expenditures of approximately $160 million, versus prior guidance of $180 million
• Implied full-year effective tax rate of approximately 22%, versus prior guidance of 24%
• Prior Guidance:

-- Sales: $4.7-$4.85 billion
-- EPS: $2.30-$2.50; adjusted EPS: $2.40-$2.60

• Implied 4Q Guidance:

-- Sales are expected to be $1.1-$1.2 billion
-- EPS is expected to be $.57-$.72, including approximately $.02 per share of restructuring-related costs
-- Adjusted EPS is expected to be $.59-$.74

LIFO

• In the third quarter of 2019, lower steel costs resulted in a LIFO benefit of $7.6 million (pretax)
• In the third quarter of 2018, increasing steel costs resulted in LIFO expense of $6.0 million (pretax)

SEGMENT RESULTS – Third Quarter 2019 (versus 3Q 2018)

Residential Products –

• Total sales grew 41%; acquisitions added 38%
• Organic sales increased 3%

-- Volume was up 4%, primarily from continued market share and content gains in U.S. Spring
-- Raw material-related price decreases and currency impact reduced sales 1%

• EBIT increased $10 million, with earnings from the ECS acquisition (after $12 million of amortization expense) partially offset by $2 million in restructuring-related charges and other factors

Industrial Products –

• Total sales decreased 17%, from weak trade demand for steel rod and wire (-12%) and raw material-related selling price decreases (-5%)
• EBIT decreased $3 million, primarily from lower trade steel rod and wire volume and $1 million in restructuring-related charges, partially offset by an earnout of $2 million related to a prior-year divestiture

Furniture Products –

• Total sales were down 8%
• Volume decreased 8%, primarily from our decision to exit Fashion Bed and planned declines in Home Furniture, partially offset by growth in Work Furniture and Adjustable Bed
• Raw material-related selling price increases were offset by a negative currency impact
• EBIT increased $11 million, primarily from improved pricing and lower fixed costs attributable to restructuring activity, partially offset by $1 million in restructuring-related charges

Specialized Products –

• Total sales increased 6%
• Volume was up 7%, from growth in Automotive
• Currency impact, net of raw material-related price increases in Hydraulic Cylinders, decreased sales 1%
• EBIT increased $1 million, primarily from higher volume in Automotive partially offset by underperformance at our French Aerospace operation

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, October 29. The webcast can be accessed from Leggett's website. The dial-in number is (201) 689-8341; there is no passcode. 

Fourth quarter results will be released after the market closes on Monday, February 3, 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, 22,000 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 total sales, organic sales, annualized sales added by acquisitions including ECS, EPS, adjusted EPS, EPS impact from ECS, sales growth, improved EBIT, EBIT margin, adjusted EBIT margin, cash from operations, decreasing steel costs, LIFO benefit, restructuring-related costs, the International Trade Commission final antidumping duty determination; and our ability to deleverage to a target level ratio of debt to trailing 12-months adjusted EBITDA of approximately 2.5 by year-end 2020. 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) the Company's and ECS's ability to achieve their respective operating targets; (ii) inability to comply with the restrictive covenants in the Company's credit agreement; (iii) increases or decreases in our capital needs, which may vary depending on acquisition or divestiture activity, our working capital needs and capital expenditures; (iv) market conditions; (v) 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, our ability to increase the dividend, our ability to repatriate cash from offshore accounts, net interest expense, tax rates, increased trade costs, cybersecurity breaches, customer losses and insolvencies, disruption to our steel rod mill, general economic conditions, possible goodwill or other asset impairment, foreign currency fluctuation, the amount of fully diluted shares, depreciation and amortization, and litigation risks; (vi) changed restructuring-related costs as more information is obtained; and (vii) other risk factors in the "Forward-Looking Statements" and "Risk Factors" sections in Leggett's most recent Form 10-K and subsequent Form 10-Q reports filed with the SEC.

CONTACT:   Investor Relations, (417) 358-8131 or [email protected]
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.

SOURCE Leggett & Platt

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