Leggett & Platt Reports 1Q Results

1Q sales of $1.1 billion, a 10% decrease vs 1Q23

1Q EPS and adjusted¹ EPS of $.23, a decrease of $.16 vs 1Q23

Board declared second quarter dividend of $.05 per share

Company updated capital allocation priorities

2024 sales and EPS guidance unchanged: sales of $4.35–$4.65 billion; EPS of $.95–$1.25 and adjusted¹ EPS of $1.05–$1.35

President and CEO Mitch Dolloff commented, “First quarter results were in line with our expectations and our full year sales and EPS guidance range remain unchanged. We are making steady progress on the restructuring plan announced in January to optimize our manufacturing and distribution footprint and remain on track to achieve our objectives within our stated timeline.

“We are taking proactive steps to ensure the long-term success of our business and deliver sustainable returns for our shareholders. Our near- to mid-term strategic priorities include strengthening our balance sheet and liquidity, improving margins by optimizing operations and our general and administrative cost structure, and positioning the company for profitable growth opportunities.

“Consistent with these priorities, we are reducing the dividend to free up capital to accelerate the deleveraging of our balance sheet and solidify our long-held financial strength. Over the longer term, we expect to grow our business both organically and through strategic acquisitions, while also returning cash to shareholders via a combination of dividends and share buybacks. We are confident that the actions we are taking will better position us for the future and enhance shareholder value.”

First Quarter Results

First quarter sales were $1.1 billion, a 10% decrease versus first quarter last year

• Organic sales² were down 10%
  • Volume was down 6%, primarily from continued weak demand in residential end markets
  • Raw material-related selling price decreases reduced sales 4%

First quarter EBIT was $63 million, down $26 million or 29% from first quarter 2023 EBIT, and adjusted¹ EBIT was $64 million, a $25 million decrease.

• EBIT and adjusted¹ EBIT decreased primarily from lower volume, increased bad debt reserve, less benefit from a reduction to a contingent purchase price liability associated with a prior year acquisition, and the non-recurrence of pandemic-related cost reimbursements. These decreases were partially offset by lower current year amortization expense.
• EBIT margin was 5.7% and adjusted¹ EBIT margin was 5.8%, down from 7.4% in the first quarter of 2023

First quarter EPS and adjusted¹ EPS were $.23, a $.16 decrease versus first quarter 2023 EPS of $.39, reflecting lower EBIT.

Debt, Cash Flow, and Liquidity

• Net Debt¹ was 3.61x trailing 12-month adjusted EBITDA¹
• Amended existing credit agreement on March 22, 2024, to provide additional liquidity and flexibility
  • Financial covenant amended to 4.0x net debt to trailing 12-months adjusted EBITDA through June 30, 2025. The ratio reverts to 3.5x after June 30, 2025.
• Debt at March 31
  • Total debt of $2.1 billion, including $279 million of commercial paper outstanding
• Operating cash flow was a negative $6 million in the first quarter, a decrease of $103 million versus first quarter 2023, primarily driven by lower accounts payable (due to timing of purchases, reduced purchasing volumes, and deflation) and lower earnings
• Capital expenditures were $26 million
• Total liquidity was $806 million at March 31
  • $361 million cash on hand
  • $445 million in capacity remaining under revolving credit facility

Dividend

• The Company’s Board of Directors declared a second quarter dividend of $.05, a decrease of $.41 per share versus last year’s second quarter dividend.
• Dividend will be paid on July 15, 2024 to shareholders of record on June 14, 2024

Restructuring Plan Update

The restructuring plan in our Bedding Products segment and in our Furniture, Flooring & Textile Products segment is progressing as planned. 

• Annualized EBIT benefit of $40–$50 million expected to be realized after initiatives are fully implemented in late 2025
  • Approximately $5–$10 million of EBIT benefit expected to be realized in the second half of 2024
• Expect $100 million of annual sales attrition after initiatives are fully implemented in late 2025
• Also expect to receive cash from the sale of real estate associated with the plan, with transactions largely complete by the end of 2025
• Approximately half of restructuring and restructuring-related costs expected to be incurred in 2024 and the remainder in 2025
  • Majority of cash costs anticipated to be incurred in 2024
  • Expect $20–$25 million of restructuring and restructuring-related costs in first half of 2024 (approximately half in cash costs)

Capital Allocation Priorities

• Near term focus on upholding long-held balance sheet strength and continuing to invest in our businesses
  • Targeting long-term leverage ratio of 2.0x net debt to adjusted EBITDA
• Long-term capital allocation priorities are as follows:
  • Organic growth
    • Investing in our businesses for future growth
  • Strategic acquisitions
    • Primarily bolt-on opportunities complementing our existing portfolio of businesses
  • Shareholder returns
    • Dividends
    • Opportunistic share repurchases

2024 Guidance

• Full year 2024 sales and EPS guidance unchanged
• Sales are expected to be $4.35–$4.65 billion, -2% to -8% versus 2023
  • Volume is expected to be down low to mid-single digits:
  • Volume at the midpoint:
    • Down high single digits in Bedding Products Segment
    • Up low single digits in Specialized Products Segment
    • Down low single digits in Furniture, Flooring & Textile Products Segment
  • Raw material-related price decreases and currency impact combined expected to reduce sales low single digits
• EPS is expected to be $.95–$1.25
  • Earnings expectations include:
    • $.20 to $.25 per share negative impact from restructuring costs
    • $.10 to $.15 per share gain from sales of real estate, consisting of idle real estate and real estate exited from restructuring initiatives
• Adjusted EPS is expected to be $1.05–$1.35
  • Decrease versus 2023 is primarily from:
    • Lower expected volume in our Bedding Products and Furniture, Flooring & Textile Products segments
    • Pricing responses related to global steel cost differentials
    • Modest metal margin compression
    • Several expense items that were abnormally low in 2023 and are expected to normalize in 2024
  • Decreases are partially offset by lower amortization resulting from the 2023 long-lived asset impairment
• Based on this framework, 2024 EBIT margin is expected to be 6.0%–6.8%; adjusted EBIT margin is expected to be 6.4%–7.2%
• Additional expectations:
  • Depreciation and amortization $135 million
  • Net interest expense $85 million
  • Effective tax rate 25%
  • Fully diluted shares 138 million
  • Operating cash flow $300–$350 million (vs prior guidance of $325–$375 million)
  • Capital expenditures $100–$120 million
  • Dividends $135 million (vs prior guidance of $245 million)
  • Minimal acquisitions and share repurchases
• Expect to predominantly use commercial paper to repay $300 million of 3.8%, 10-year notes maturing in November 2024

Segment Results – First Quarter 2024 (versus 1Q 2023)

Bedding Products

• Trade sales decreased 15%
  • Volume decreased 10%, primarily due to demand softness in U.S. and European bedding markets
  • Raw material-related selling price decreases reduced sales 5%
• EBIT decreased $18 million and adjusted¹ EBIT decreased $16 million, primarily from lower volume, increased bad debt reserve, and steel-related pricing adjustments partially offset by lower amortization expense.

Specialized Products

• Trade sales decreased 1%
  • Volume was flat with growth in Aerospace offset by declines in Hydraulic Cylinders
  • Raw material-related price decreases and currency impact reduced sales 1%
• EBIT decreased $5 million, with improvements in Automotive and Aerospace more than offset by less benefit from a reduction to a contingent purchase price liability associated with a prior year acquisition, the lag associated with passing through raw material-related pricing changes in Hydraulic Cylinders, and other smaller items.

Furniture, Flooring & Textile Products

• Trade sales decreased 9%
  • Volume decreased 5%, from continued weakness in residential end market demand
  • Raw material-related selling price decreases reduced sales 4%
• EBIT and adjusted¹ EBIT decreased $5 million, primarily from lower volume

For full results click here.

About Leggett & Platt

Leggett & Platt (NYSE: LEG) is a diversified manufacturer that designs and produces a broad variety of engineered components and products that can be found in many homes and automobiles. The 141-year-old Company is a leading supplier of bedding components and private label finished goods; automotive seat comfort and convenience systems; home and work furniture components; geo components; flooring underlayment; hydraulic cylinders for material handling and heavy construction applications; and aerospace tubing and fabricated assemblies.

Contact:

Cassie J. Branscum – Vice President, Investor Relations – invest@leggett.com – (417) 358-8131

Source: Leggett & Platt, Incorporated