Leggett & Platt Reports 2Q Results

2Q sales of $1.1 billion, an 8% decrease vs 2Q23

2Q EPS of ($4.39), primarily due to a non-cash goodwill impairment charge

2Q adjusted¹ EPS of $.29, a $.09 decrease vs adjusted¹ 2Q23 EPS

2024 EPS guidance is ($3.43)–($3.58), including impact of non-cash goodwill impairment charge, restructuring charges, real estate gains, and certain other costs

2024 adjusted¹ EPS narrowed to $1.10–$1.25; sales guidance lowered to $4.3–$4.5 billion

President and CEO Karl Glassman commented, “While our second quarter results reflect the ongoing challenging macro environment, I am immensely proud of our team’s execution. The restructuring plan is on track, with some elements of the plan progressing ahead of schedule and exceeding expectations. We paid down $73 million of debt and adjusted EBIT margin improved by 50 basis points sequentially this quarter. We remain committed to investing in our key businesses to drive profitable growth when market conditions improve.

“Demand in our residential end markets remains weak as consumers continue to delay big-ticket, discretionary purchases. Additionally, the global automotive market remains volatile due to a slower than expected shift to electric vehicles and disruption from new Chinese market entrants. Due to these factors and continued deflationary pressure, we are lowering our full year sales guidance. We are also narrowing our adjusted EPS guidance, with a slightly lower mid-point. This revision reflects the impacts of lower volume, increased inventory write-downs/reserves, and higher bad debt reserves, partially offset by continued strong execution of our restructuring plan, operational efficiency improvements, and pricing discipline.

“We are currently conducting a strategic review of our diverse portfolio, assessing how each business fits into our long-term vision. This review, in addition to our restructuring plan and operational improvement initiatives, is leading to a clearer vision of the opportunities ahead. We fully expect the future Leggett & Platt to be more focused and more profitable.”

Second Quarter Results

Second quarter sales were $1.1 billion, an 8% decrease versus second quarter last year

• Organic sales² were down 8%
  • Volume was down 4%, primarily from continued weak demand in residential end markets and the earlier than expected loss of a customer in Specialty Foam
  • Raw material-related selling price decreases and currency impact reduced sales 4%

Second quarter EBIT was a loss of $614 million, down $710 million from second quarter 2023 EBIT.

• EBIT decreased primarily from a $675 million non-cash goodwill impairment charge. In connection with the preparation of the second quarter 2024 financial statements, the Company performed an impairment analysis and concluded that an impairment existed as a result of the significant decline in stock price and current market conditions.

Adjusted¹ EBIT was $71 million, a $21 million decrease from second quarter 2023 adjusted¹ EBIT.

• Adjusted¹ EBIT decreased primarily from lower volume, increased inventory write-downs/reserves, raw material-related pricing adjustments, metal margin compression, and higher bad debt reserves partially offset by lower amortization expense, operational efficiency improvements, and restructuring benefit.

EBIT margin was (54.4%), down from 7.8% in the second quarter of 2023 and adjusted¹ EBIT margin was 6.3%, down from 7.5%.

Second quarter EPS was a loss of $4.39, a $4.79 decrease versus second quarter 2023 EPS of $.40. Second quarter adjusted¹ EPS was $.29, down $.09 versus second quarter 2023 adjusted¹ EPS of $.38.

Debt, Cash Flow, and Liquidity

• Net Debt1 was 3.83x trailing 12-month adjusted EBITDA¹
• Debt at June 30
  • Total debt of $2.0 billion, including $208 million of commercial paper outstanding
• Operating cash flow was $94 million in the second quarter, a decrease of $17 million versus second quarter 2023, driven primarily by lower earnings partially offset by working capital improvement
• Capital expenditures were $15 million
• Dividends were $62 million (paid 1^st quarter dividend of $.46 per share on April 15)
  • On April 30, Leggett & Platt’s Board of Directors declared a second quarter dividend of $.05 per share, a decrease of $.41 per share versus last year’s second quarter dividend
• Total liquidity was $705 million at June 30
  • $307 million cash on hand
  • $398 million in capacity remaining under revolving credit facility

Restructuring Plan Update

The restructuring plan in our Bedding Products segment and in our Furniture, Flooring & Textile Products segment is progressing as planned. Additionally, we initiated a small restructuring opportunity in our Specialized Products segment during second quarter 2024.

• Annualized EBIT benefit of $40–$50 million expected to be realized after initiatives are fully implemented in late 2025
  • Realized $3 million in second quarter 2024 and now expect approximately $10–$15 million of EBIT benefit to be realized in 2024 versus our initial estimate of $5–$10 million
• We now anticipate approximately $80 million of annual sales attrition after initiatives are fully implemented in late 2025 versus our initial estimate of $100 million
  • Realized $3 million of sales attrition in second quarter 2024 and now expect approximately $25 million in 2024 versus our initial estimate of $40 million
• Also expect to receive cash from the sale of real estate associated with the plan, with transactions largely complete by the end of 2025
  • 2024 expectations are now $15–$25 million versus $0–$10 million as real estate sales are anticipated to be realized sooner than initially expected
• Majority of cash restructuring and restructuring-related costs expected to be incurred in 2024

2024 Guidance

• Full year 2024 sales guidance lowered and adjusted EPS guidance narrowed
• Sales are expected to be $4.3–$4.5 billion, down 5% to 9% versus 2023 (vs prior guidance of $4.35–$4.65 billion)
  • Volume is expected to be down low to mid-single digits
  • Volume at the midpoint:
    • Down high single digits in Bedding Products Segment
    • Flat 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 a loss of $3.43–$3.58
  • Earnings expectations include:
    • $4.61 per share impact from goodwill impairment
    • $.20 to $.25 per share impact from restructuring costs
    • $.03 per share impact from CEO transition compensation costs
    • $.15 to $.20 per share gain from sales of real estate, consisting of idle real estate and real estate exited from restructuring initiatives
    • $.01 per share gain from net insurance proceeds from tornado damage
• Adjusted EPS is now expected to be $1.10–$1.25 (vs prior guidance of $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
    • Increased inventory write-downs/reserves realized in the second quarter 2024
  • Decreases are partially offset by lower amortization resulting from the 2023 long-lived asset impairment, restructuring benefit, operational efficiency improvements, and pricing discipline
• Based on this framework, 2024 EBIT margin is expected to be (12.1%)–(13.3%); adjusted EBIT margin is expected to be 6.5%–6.9%
• Additional expectations:
  • Depreciation and amortization $135 million
  • Net interest expense $80 million (vs prior guidance of $85 million)
  • Effective tax rate 24% (vs prior guidance of 25%)
  • Fully diluted shares 137 million (vs prior guidance of 138 million shares)
  • Operating cash flow $300–$350 million
  • Capital expenditures $110 million (vs prior guidance of $100–$120)
  • Dividends $135 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 – Second Quarter 2024 (versus 2Q 2023)

Bedding Products –

• Trade sales decreased 13%
  • Volume decreased 7%, primarily due to the earlier than anticipated loss of a customer in our Specialty Foam business and demand softness in U.S. and European bedding markets, partially offset by higher trade rod sales
  • Raw material-related selling price decreases reduced sales 6%
• EBIT decreased $615 million, primarily from a $587 million non-cash goodwill impairment charge
• Adjusted¹ EBIT decreased $22 million, primarily from lower volume, increased inventory write-downs/reserves, raw material-related pricing adjustments, metal margin compression, and higher bad debt reserves, partially offset by lower amortization expense, operational efficiency improvements in Specialty Foam, and restructuring benefit

Specialized Products –

• Trade sales were flat
  • Volume was flat with growth in Aerospace offset by declines in Hydraulic Cylinders and Automotive
  • Raw material-related price increases added 1% to sales
  • Currency impact reduced sales 1%
• EBIT decreased $43 million, primarily from a $44 million non-cash goodwill impairment charge
• Adjusted¹ EBIT increased $2 million, primarily from operational efficiency improvements partially offset by currency impact

Furniture, Flooring & Textile Products –

• Trade sales decreased 6%
  • Volume decreased 3%, primarily from declines in Geo Components and continued weak demand in residential end markets
  • Raw material-related selling price decreases reduced sales 3%
• EBIT decreased $48 million, primarily from a $44 million non-cash goodwill impairment charge
• Adjusted¹ EBIT decreased $1 million, primarily from lower volume partially offset by pricing discipline and restructuring benefit

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