U.S. Leggett & Platt Reports 4Q and Full-Year 2018 Results

•             4Q sales grew 6 %, to $1.05 billion

•             4Q EPS of USD 0.39, significantly impacted by restructuring-related and impairment charges1

•             4Q adjusted2 EPS of  USD 0.62, up 5 % vs 4Q17

•             2018 sales increased 8% to USD 4.27 billion

•             2018 EPS of USD 2.26; 2018 adjusted 2 EPS of USD 2.48, up 1% vs 2017

•             2019 sales guidance:  USD 4.95-USD 5.1 billion; 16-19% sales growth vs 2018

•             2019 EPS guidance: USD 2.35-USD 2.55; adjusted EPS of USD 2.45-USD 2.65

•             Acquired Elite Comfort Solutions (ECS)3 in January; expected to add ~USD 675 million to 2019 sales

Diversified manufacturer Leggett & Platt reported fourth quarter 2018 sales of USD 1.05 billion, a 6 % increase versus fourth quarter last year. Volume was flat.  Raw material-related price increases (net of currency impact) added 3% to sales growth and acquisitions also added 3 %. Fourth quarter EPS was USD 0.39. Fourth quarter adjusted2 EPS was USD 0.62, a 5 % increase versus 2017, primarily due to improved metal margins at our steel rod mill.

Full-Year Results

Full-year sales grew 8 %, to USD 4.27 billion, and same location sales increased 6 %. Volume grew 3 %, with gains in Automotive, Bedding, Adjustable Bed, Work Furniture, and Aerospace partially offset by declines in other businesses, primarily Home Furniture, Fashion Bed, and Flooring Products. Raw material-related price increases and currency impact added 3 %. Acquisitions, net of 2017 divestitures, contributed 2 % to sales growth.

Full-year 2018 EPS from continuing operations was USD 2.26. Full-year adjusted2 EPS from continuing operations increased 1 % to USD 2.48. EPS benefitted from improved metal margins at our steel rod mill and higher sales. However, these improvements were largely offset by higher raw material costs (including LIFO expense), the lag associated with passing along ongoing inflation, and weak performance in Home Furniture and Fashion Bed. EBIT margin was 10.2 % and adjusted2 EBIT margin was 11.1 %. In 2017, EBIT margin (both reported and adjusted2) was 11.9 %.

CEO Comments

President and CEO Karl G. Glassman commented, “We are pleased to have delivered 8 % sales growth for the full year and 6 % sales growth in the fourth quarter. This growth came primarily from new programs and added content in Automotive, market share and content gains in Bedding, strength in Adjustable Bed, and raw-material related price increases. Other businesses, including Aerospace and Work Furniture, also contributed to sales growth during the year.

“Portfolio management remains a strategic priority. Over the past several years we have enhanced our business portfolio and improved margins by growing our stronger businesses and exiting or restructuring businesses that consistently struggled to deliver acceptable returns. During 2018 we acquired three businesses: Precision Hydraulic Cylinders (PHC), a leading global manufacturer of engineered hydraulic cylinders primarily for the materials handling market, and two small geo components operations.

“We also recently completed the acquisition of ECS. Through this acquisition, we gained critical capabilities in proprietary foam technology along with scale in the production of private-label finished mattresses.  Our combined expertise in spring and foam technology makes us the leading provider of differentiated products for the global bedding industry.

“As we have previously discussed, the Fashion Bed and Home Furniture businesses have underperformed expectations in recent quarters, primarily from weaker demand and higher raw material costs.  An in-depth analysis of these businesses was conducted, and we have initiated restructuring activity.  We are exiting low margin business, reducing operating costs, and eliminating excess capacity.

“Looking forward, 2019 sales growth will benefit significantly from the ECS acquisition.  We also expect sales growth in Automotive, U.S. Spring, Aerospace and Hydraulic Cylinders, partially offset by planned declines in Fashion Bed and Home Furniture related to restructuring activity and from less promotional activity in Adjustable Bed. With the realization of higher sales and moderating steel inflation, we anticipate improved earnings in the coming year.

“Achieving Total Shareholder Return (TSR) that ranks within the top third of the S&P 500 over rolling three-year periods has been and continues to be a primary financial priority. While our recent performance has not met this target, we strongly believe our disciplined growth strategy and use of capital will support achievement of this goal over time.”

ECS acquisition3

On January 16, 2019, Leggett & Platt acquired ECS, a leader in proprietary specialized foam technology primarily for the bedding and furniture industries, for USD 1.25 billion in cash. The transaction was financed through an expansion of the Company’s commercial paper program and the issuance of a USD 500 million 5-year term loan with its current bank group.

ECS’s annual sales for the fiscal year ended September 2018 were USD 611 million and should approximate USD 675 million in 2019.  ECS is expected to generate double-digit sales growth and strong EBITDA margins that should be accretive to Company average margins. Due to impacts from purchase accounting, ECS is expected to have a slightly negative effect on consolidated EBIT margins. ECS is expected to be neutral to EPS in 2019 and accretive to EPS beginning in 2020. ECS will operate as a separate business unit within the Residential Products segment.

Fourth Quarter Charges1

*Includes USD 4 million in SG&A charges and USD 3 million of financing-related charges in interest expense.

The restructuring-related charges are primarily attributable to the Fashion Bed and Home Furniture businesses. In 2019, the Company expects an additional estimated USD 17 million (USD .10/share; USD 5 million cash/USD 12 million non-cash) in restructuring-related charges for these businesses. The restructuring activity should be substantially complete by the end of 2019.  

Cash Flow, Debt, Dividends and Stock Repurchases

Cash from operations was USD 440 million during 2018. Uses of cash included USD 160 million to fund capital expenditures, USD 194 million for dividend payments, USD 109 million for acquisitions, and USD 108 million (net) to repurchase stock.

The Company increased the borrowing capacity under its commercial paper program from USD 800 million to USD 1.2 billion. At the end of 2018, total debt was 1.9x the trailing 12-month’s adjusted2 EBITDA. After completing the ECS acquisition in January, debt levels increased as expected.

Leggett is committed to maintaining a strong, investment grade profile and expects to quickly deleverage (to a target ratio of debt to trailing 12-months EBITDA of approximately 2.5x) by temporarily suspending share repurchases, reducing other acquisition spending, and using operating cash flow to repay debt.

The Company posted its 47th consecutive annual dividend increase in 2018, a record that only ten S&P 500 companies currently exceed. Leggett is proud of its dividend record and plans to extend it. At Friday’s closing share price of USD 40.97, the indicated annual dividend of USD 1.52 per share generates a dividend yield of 3.7%, one of the highest dividend yields among the 57 stocks of the S&P 500 Dividend Aristocrats.

During 2018, Leggett repurchased 2.6 million shares of its stock at an average price of USD 43.10 and issued 1.2 million shares through employee benefit plans and stock option exercises. Shares outstanding declined to 130.5 million at year end, a 1.1% decrease versus the prior year.   

2019 Guidance

2019 Sales are expected to be USD 4.95-USD 5.1 billion, an increase of 16-19% versus 2018. The ECS acquisition should add approximately USD 675 million to sales. In addition to ECS, same location sales growth is expected to be flat to +3%. 

EPS is expected to be USD 2.35-USD 2.55, including approximately USD .10 per share of restructuring-related costs.  Adjusted EPS is expected to be USD 2.45-USD 2.65, reflecting slightly higher organic sales and moderating steel inflation, partially offset by a higher tax rate. Based upon this guidance range, 2019 EBIT margin should be 10.3-10.8% and adjusted EBIT margin should be 10.8-11.2%.

The Company expects 2019 depreciation and amortization of approximately USD 210 million and net interest of approximately USD 95 million, both increasing versus 2018 in large part due to the ECS acquisition. EPS guidance assumes a 24% tax rate (vs. 20% in 2018) and fully diluted shares of 136 million.

Cash from operations is expected to approximate USD 550 million in 2019. The increase versus 2018 primarily reflects the ECS acquisition and earnings growth. Capital expenditures should be approximately USD 195 million, and dividend payments should approximate USD 205 million. Leggett’s target for dividend payout is approximately 50% of adjusted earnings; payout for 2019 is expected to be above the target.

Leggett’s long-term priorities for use of cash are: fund organic growth, pay dividends, fund strategic acquisitions, and repurchase stock with available cash. As previously stated, the Company will temporarily suspend share repurchases, reduce acquisition spending, and prioritize debt repayment after funding organic growth and dividends.


Approximately 50% of Leggett’s inventories are valued on the last-in, first-out (LIFO) method. These are primarily the Company’s domestic, steel-related inventories. In 2018, increasing commodity costs resulted in a full-year LIFO expense of USD 31 million (pretax). For 2017, increasing commodity costs resulted in a full-year LIFO expense of USD 19 million (pretax).

SEGMENT RESULTS – Fourth Quarter 2018 (versus 4Q 2017)

Residential Products – Total sales grew 6%, from a 5% increase in same location sales and 1% from acquisitions. Volume was flat with continued growth in U.S. Spring offset primarily by lower sales in Flooring Products. Raw material-related selling price increases added 6% and were slightly offset by a negative currency impact of 1%. EBIT decreased USD 26 million, primarily from a USD 16 million non-cash impairment charge related to a note receivable, USD 4 million in costs incurred in connection with the ECS acquisition, and USD 1 million in restructuring-related charges. In addition, EBIT decreased from lower volume in certain businesses and increased spending to support growth in U.S. Spring.

Industrial Products – Total sales grew 22%, from raw material-related selling price increases (24%) slightly offset by lower volume (-2%). EBIT increased USD 17 million primarily from improved metal margins at our steel rod mill.

Furniture Products – Total sales were down 1%. Volume decreased 2% with growth in Adjustable Bed and Work Furniture more than offset by declines in Home Furniture and Fashion Bed. Raw material-related selling price increases, net of currency impact, added 1%. EBIT decreased from restructuring related-charges of USD 15 million. 

Specialized Products – Total sales grew 10%, from the PHC acquisition completed in early 2018. Same location sales were flat, with volume up 3% from growth in Aerospace and Automotive, offset by a negative currency impact of 3%. EBIT decreased USD 27 million primarily from the non-recurrence of a USD 23 million gain on the sale of real estate in the fourth quarter of 2017 and other smaller items.

SEGMENT RESULTS – Full Year 2018 (versus 2017)  

Residential Products – Total sales grew 5%, from a 4% increase in same location sales (due to raw material-related price increases) and 1% from acquisitions. Volume was flat, with growth in U.S. Spring, European Spring and Geo Components offset by lower sales in other businesses, primarily Flooring Products.  EBIT decreased USD 51 million, with USD 21 million of the decline from the fourth quarter charges described above.  In addition, EBIT decreased from higher raw material costs (including LIFO expense) and increased spending to support content and market share gains in U.S. Spring.

Industrial Products – Total sales grew 21%, from raw material-related selling price increases (18%) and higher volume (3%). EBIT increased USD 47 million from improved metal margins at our steel rod mill, higher volume and the non-recurrence of a USD 5 million impairment of a small wire products operation in 2017.  These improvements were partially offset by higher LIFO expense.

Furniture Products – Total sales grew 4%.  Volume increased 2%, with growth in Adjustable Bed and Work Furniture partially offset by declines in Home Furniture and Fashion Bed.  Raw material-related price increases and currency impact added 2% to sales growth.  EBIT decreased USD 32 million, USD 15 million from restructuring related-charges and the remainder primarily from higher steel costs (including LIFO expense), promotional activity, and lower overhead recovery.

Specialized Products – Total sales grew 12%. Same location sales increased 6% from volume gains in Automotive and Aerospace, and currency benefits.  The PHC acquisition added 9% and was partially offset (3%) by 2017’s CVP divestiture. EBIT decreased USD 7 million. 2017 EBIT included a USD 23 million gain on the sale of real estate and a USD 3 million loss from the CVP divestiture. Absent those items, the segment’s EBIT increased primarily from higher sales.

At Leggett & Platt, 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, 23000 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.