Leggett & Platt Reports 4Q And Full Year 2019 Results

  • 4Q sales grew 9 %, to USD 1.14 billion
  • 4Q EPS was USD .64 and 4Q adjusted1 EPS was USD .68, increases vs 4Q18
  • 2019 sales increased 11%, to USD 4.75 billion
  • 2019 EPS was USD 2.47 and 2019 adjusted1 EPS was USD 2.57, increases vs 2018
  • 2019 cash flow from operations was a record USD 668 million
  • 2020 guidance: EPS of USD 2.40–USD 2.60 on sales of USD 4.7 – USD 4.9 billion

Diversified manufacturer Leggett & Platt reported fourth quarter 2019 sales of USD 1.14 billion, a 9% increase versus fourth quarter last year.

•             Acquisitions added 13 % to sales growth (primarily ECS)

•             Organic sales were down 4 %:

o             Volume up 2 % absent declines from exited business (which reduced sales 3 %)

o             Raw material-related selling price decreases and negative currency impact -3 %

Fourth quarter EBIT was USD 135 million, up USD 51 million or 61% from fourth quarter last year, and adjusted1 EBIT was USD 140 million, a USD 20 million or 17% increase.

•             EBIT and adjusted1 EBIT benefited from:

o             ECS acquisition

o             Lower raw material costs (including LIFO benefit)

o             Improved earnings performance in Furniture Products

•             EBIT margin was 11.8 %, up from 8.0 % in the fourth quarter of 2018, and adjusted1 EBIT margin was 12.2 %, up from 11.5 %

Fourth quarter EPS was USD .64, an increase of USD .25 versus fourth quarter 2018.  Adjusted1 EPS was USD .68, an increase of USD .06, and reflects higher adjusted1 EBIT partially offset by higher interest expense (USD .04/share) and a higher tax rate (USD .02/share).

Full-Year Results:

2019 sales of USD 4.75 billion, an 11 % increase versus last year

•             Acquisitions added 14 % to sales growth (ECS and other smaller acquisitions)

•             Organic sales were down 3 %:

o             Volume down 3 % due to exited business

o             Raw material-related selling price increases 1 %

o             Currency impact -1 %

2019 EBIT was USD 513 million, up USD 76 million or 18 % from 2018, and adjusted1 EBIT was USD 529 million, a USD 56 million or 12 % increase.

•             EBIT and adjusted1 EBIT benefited from:

o             ECS acquisition

o             Lower raw material costs (including LIFO benefit)

o             Improved earnings performance in Furniture Products

•             EBIT margin was 10.8 %, up from 10.2 % in 2018, and adjusted1 EBIT margin was 11.1 %, flat with 2018

2019 EPS was USD 2.47, an increase of USD .21 versus 2018.  Full-year adjusted1 EPS was USD 2.57, an increase of USD .09, and reflects higher adjusted1 EBIT partially offset by higher interest expense largely due to the ECS acquisition (USD .20/share) and a higher tax rate (USD .04/share).

Adjustments to Earnings:

•             Fourth quarter included USD 5 million (pretax), or USD .04 per share, of restructuring-related charges

o             USD 3 million cash and USD 2 million non-cash

•             Full-year adjustments included restructuring-related charges of USD 15 million (pretax) and ECS transaction costs of USD 1 million (pretax), or USD .10 per share

o             USD 9 million cash and USD 7 million non-cash

CEO Comments Chairman and CEO Karl G. Glassman commented, “In 2019, our employees achieved several milestones including the acquisition of ECS, the largest acquisition in Company history, record cash flow from operations, and our 48th consecutive annual dividend increase.  We also announced organizational changes, including segment realignment, effective January 1, 2020, and key executive and board appointments. 

“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 margins and returns.  During 2019 we acquired two businesses: ECS, which contributed meaningfully to EBIT and operating cash flow, and a small Geo Components operation.  We also completed the restructuring of Home Furniture and the exit of Fashion Bed. 

“During 2019, sales grew 11% primarily from the ECS acquisition.  Sales were stronger in U.S. Spring, Automotive, Work Furniture and Aerospace but these improvements were 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.  Full year adjusted1 EBIT increased USD 56 million over 2018, primarily from the ECS acquisition, lower raw material costs including LIFO benefit, and improved earnings performance in Furniture Products. 

“In 2020, we expect mid-single-digit volume growth from Automotive, U.S. Spring, ECS, Aerospace, Geo Components and Work Furniture, to be offset by further year-over-year sales declines from exited business in Fashion Bed and Home Furniture, continued weak trade demand for steel rod and wire and raw material-related selling price decreases which began in the second half of 2019.  Prior year acquisitions should add 1% to sales growth.  Earnings growth in Automotive, U.S Spring, ECS and several of our businesses is expected to be more than offset by increasing steel costs, including the non-recurrence of 2019’s LIFO benefit, and investments to support future growth.”

Debt and Cash Flow

•             Debt was 2.9x trailing 12-months pro forma adjusted1 EBITDA; we expect to be at debt to trailing 12-months adjusted EBITDA of approximately 2.5x by the end of 2020

•             Operating cash flow was a record USD 668 million during 2019, an increase of USD 228 million versus last year

2020 Guidance

•             Sales are expected to be USD 4.7–USD 4.9 billion, -1 % to +3 % versus 2019

o             Organic sales are expected to be -2 % to +2 %

             Volume expected to be -1 % to +3 %, including -1 % from exited business

             Raw material-related selling price decreases should reduce sales by 1 %

o             Prior year acquisitions should add 1 % to sales growth

•             EPS is expected to be USD 2.¬¬40–USD 2.60

•             Based on this guidance range, EBIT margin should be 10.7 %–11.0 %

•             Additional guidance expectations:

o             Depreciation and amortization USD 200 million

o             Net interest expense USD 80 million

o             Effective tax rate 23 %

o             Fully diluted shares of 136 million

o             Operating cash flow USD 550 million

o             Capital expenditures USD 160 million

LIFO

•             In 2019, lower steel costs resulted in a LIFO benefit of USD 32 million (pretax)

•             In 2018, increasing steel costs resulted in LIFO expense of USD 31 million (pretax)

SEGMENT RESULTS – Fourth Quarter 2019 (versus 4Q 2018)

Residential Products  

•             Total sales grew 32 %; acquisitions added 33 %

•             Organic sales decreased 1 %

o             Volume was up 2 %, primarily from continued market share and content gains in U.S. Spring

o             Raw material-related price decreases reduced sales 3 %

•             EBIT increased USD 26 million, primarily from the non-recurrence of a USD 16 million non-cash impairment charge related to a note receivable and USD 4 million in costs incurred with the ECS acquisition in the fourth quarter of 2018. EBIT also benefited from ECS acquisition earnings (after USD 12 million of amortization expense).

Industrial Products

•             Total sales decreased 24 %

o             Volume was down 14 % from weak trade demand for steel rod and wire

o             Raw material-related selling price decreases reduced sales 10 %

•             EBIT increased USD 1 million, primarily from lower raw material costs (including LIFO benefit) largely offset by lower metal margin and lower trade steel rod and wire volume

Furniture Products –

•             Total sales were down 5 %

•             Volume decreased 4 %, primarily from our decision to exit Fashion Bed and planned declines in Home Furniture, partially offset by growth in Adjustable Bed

•             Currency impact and raw material-related selling price decreases reduced sales 1%

•             EBIT increased USD 20 million, primarily from lower restructuring-related charges (USD 3 million in 4Q 2019 versus USD 15 million in 4Q 2018) as well as lower raw material costs (including LIFO benefit) and lower fixed costs attributable to restructuring activity

Specialized Products

•             Total sales increased 4 %

•             Volume was up 5 %, primarily from growth in Automotive and Aerospace

•             Currency impact decreased sales 1 %

•             EBIT increased USD 1 million, primarily from higher volume in Automotive and Aerospace partially offset by lower volume in Hydraulic Cylinders

SEGMENT RESULTS – Full Year 2019 (versus 2018)

Residential Products

•             Total sales grew 36 %; acquisitions added 35 %

•             Organic sales increased 1 %

o             Volume was up 1 %, with growth in U.S. Spring, European Spring and Geo Components offset by lower sales in other businesses, primarily Flooring Products and Machinery

o             Raw material-related price increases were offset by a negative currency impact

•             EBIT increased USD 38 million, primarily from earnings from the ECS acquisition (after USD 45 million of amortisation expense and a USD 5 million non-recurring charge related to acquired inventories) and the non-recurrence of a USD 16 million non-cash impairment charge related to a note receivable in the fourth quarter of 2018

Industrial Products

•             Total sales decreased 10 %

o             Volume was down 13 % from weak trade demand for steel rod and wire

o             Raw material-related selling price increases added 3 % to sales

•             EBIT increased USD 29 million, primarily from lower raw material costs (including LIFO benefit) partially offset by lower trade steel rod and wire volume

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

•             Raw material-related selling price increases were offset by a negative currency impact

•             EBIT increased USD 24 million, primarily from improved pricing and lower fixed costs attributable to restructuring activity and lower restructuring-related charges (USD 10 million in 2019 versus USD 15 million in 2018)

Specialized Products

•             Total sales were up 1 % from the PHC acquisition in early 2018; organic sales were flat

•             Volume was up 2 %, from growth in Automotive and Aerospace

•             Currency impact, net of raw material-related price increases in Hydraulic Cylinders, decreased sales 2 %

•             EBIT decreased USD 18 million, with earnings from higher volume offset by higher operating costs in Aerospace and Hydraulic Cylinders, negative currency impact, and investments to support future growth in Automotive.

First quarter results will be released after the market closes on Monday, May 4, 2020.         

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 137-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 140 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; and g) bedding industry machinery.

www.leggett.com