Leggett & Platt Reports 3Q Results

3Q sales of $1.1 billion, a 6% decrease vs 3Q23

3Q EPS of $.33; 3Q adjusted¹ EPS of $.32, a $.04 decrease vs adjusted¹ 3Q23 EPS

2024 EPS guidance is ($3.56)–($3.71), including impact of non-cash goodwill impairment charge, restructuring charges, real estate gains, and certain other costs

2024 guidance lowered: adjusted¹ EPS of $1.00–$1.10, sales of $4.3–$4.4 billion

President and CEO Karl Glassman commented, “We continued to make solid progress on our restructuring and operating efficiency improvement initiatives, although demand headwinds were more challenging than anticipated in the third quarter. Despite weaker than expected results, we paid down $124 million of debt and adjusted EBIT margin improved by 60 basis points sequentially this quarter.

“We expect weak demand in our residential end markets to persist into the fourth quarter due to a more challenging macro environment and softening in consumer spending. Additionally, our Automotive business continues to face headwinds from varying impacts of the transition to electric vehicles, consumer affordability issues, and economic softness in Europe. As a result, we are reducing our sales and EPS guidance.

“We are focused on simplifying our portfolio to businesses that are the right long-term fit. As a part of this strategic review, we are exploring the potential sale of our Aerospace business. Looking forward, we are confident that the actions we are taking to strengthen our balance sheet, improve operating efficiency and margins, and position ourselves for future growth opportunities will create long-term shareholder value.”

Third Quarter Results

Third quarter sales were $1.1 billion, a 6% decrease versus third quarter last year

• Organic sales² were down 6%
  • Volume was down 4%, primarily from continued weak demand in residential end markets, the expected loss of a customer in Specialty Foam, and demand headwinds in Automotive and Hydraulic Cylinders. These decreases were partially offset by higher trade sales in Steel Rod and Wire and growth in Aerospace.
  • Raw material-related selling price decreases, net of currency benefit, reduced sales 2%

Third quarter EBIT was $78 million, down $13 million from third quarter 2023 EBIT, and adjusted¹ EBIT was $76 million, a $10 million decrease from third quarter 2023 adjusted¹ EBIT.

• EBIT and adjusted¹ EBIT decreased primarily from unfavorable sales mix in Steel Rod and Specialty Foam, lower volume, metal margin compression, and higher bad debt reserves. These decreases were partially offset by lower amortization, operational efficiency improvements, and restructuring benefit.
  • 3Q 2024 adjustments include $12 million of restructuring charges and a $14 million gain from a real estate sale associated with restructuring
  • 3Q 2023 adjustment is for a $5 million gain from a real estate sale

EBIT margin was 7.1%, down from 7.8% in the third quarter of 2023 and adjusted¹ EBIT margin was 6.9%, down from 7.3%.

Third quarter EPS was $.33, a $.06 decrease versus third quarter 2023 EPS of $.39. Third quarter adjusted¹ EPS was $.32, down $.04 versus third quarter 2023 adjusted¹ EPS of $.36.

Debt, Cash Flow, and Liquidity

• Net Debt¹ was 3.78x trailing 12-month adjusted EBITDA¹
• Total Debt at September 30 was $1.9 billion, including $84 million of commercial paper outstanding
• Operating cash flow was $95 million in the third quarter, a decrease of $48 million versus third quarter 2023, driven primarily by less benefit from working capital and lower earnings
• Capital expenditures were $18 million
• Dividends were $7 million
  • On August 7, Leggett & Platt’s Board of Directors declared a third quarter dividend of $.05 per share, a decrease of $.41 per share versus last year’s third quarter dividend
• Total liquidity at September 30 was $748 million
  • $277 million cash on hand
  • $471 million in capacity remaining under revolving credit facility

Restructuring Plan Update

• Annualized EBIT benefit of $50–$60 million expected to be realized after initiatives are fully implemented in late 2025 versus our prior estimate of $40–$50 million as we now expect to realize approximately $10 million benefit in 2025 from G&A initiatives
  • Realized $6 million in third quarter 2024 and $9 million year-to-date; expect approximately $10–$15 million of EBIT benefit to be realized in 2024
• Continue to anticipate approximately $80 million of annual sales attrition after initiatives are fully implemented in late 2025
  • Realized $4 million of sales attrition in third quarter 2024 and $7 million year-to-date; now expect approximately $15 million in 2024 versus our prior estimate of $25 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
  • Realized $17 million in third quarter 2024 and expectations are now approximately $20 million in 2024 versus $15–$25 million
• Majority of cash restructuring and restructuring-related costs expected to be incurred in 2024

2024 Guidance

• Full year 2024 sales and EPS guidance lowered as demand is weaker than previously anticipated, particularly within our Specialized Products and Furniture, Flooring & Textile Products segments
• Sales are expected to be $4.3–$4.4 billion, down 7% to 9% versus 2023 (vs prior guidance of $4.3–$4.5 billion)
  • Volume is expected to be down mid-single digits (vs prior guidance of down low to mid-single digits)
  • Volume at the midpoint:
    • Down high single digits in Bedding Products Segment
    • Down mid-single digits in Specialized Products Segment
    • Down mid-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 $3.56–$3.71
  • 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
    • $.17 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 $1.00–$1.10 (vs prior guidance of $1.10–$1.25)
  • Decrease versus 2023 adjusted EPS of $1.39 is primarily from:
    • Lower expected volume in all three 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
    • Unfavorable sales mix, primarily in Bedding Products
    • 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 (9.3%)–(10.2%); adjusted EBIT margin is expected to be 6.0%–6.4%
• Additional expectations:
  • Depreciation and amortization $135 million
  • Net interest expense $80 million
  • Effective tax rate 24%
  • Fully diluted shares 137 million
  • Operating cash flow $300 million (vs prior guidance of $300–$350 million)
  • Capital expenditures $100 million (vs prior guidance of $110 million)
  • 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
• Implied 4Q Guidance:
  • Sales: $973–$1,073 million
  • EPS: $.12–$.27
  • Adjusted EPS: $.16–$.26

Segment Results – Third Quarter 2024 (versus 3Q 2023)

Bedding Products –

• Trade sales decreased 8%
  • Volume decreased 3%, primarily due to the expected loss of a customer in Specialty Foam and demand softness in U.S. and European bedding markets, partially offset by higher trade rod and wire sales
  • Raw material-related selling price decreases and currency impact reduced sales 5%
• EBIT decreased $5 million and adjusted¹ EBIT decreased $6 million, primarily from unfavorable sales mix in Steel Rod and Specialty Foam and metal margin compression, partially offset by lower amortization expense, operational efficiency improvements in Specialty Foam, and restructuring benefit
  • 3Q 2024 adjustments include $8 million restructuring charges and a $14 million gain on the sale of restructuring-related real estate
  • 3Q 2023 adjustment is for a $5 million gain on the sale of real estate

Specialized Products –

• Trade sales decreased 6%
  • Volume decreased 7% with declines in Automotive and Hydraulic Cylinders partially offset by growth in Aerospace
  • Currency benefit and raw material-related price increases added 1% to sales
  • EBIT decreased $6 million, primarily from lower volume and $4 million restructuring charges, partially offset by operational efficiency improvements and disciplined cost management
• Adjusted¹ EBIT decreased $2 million, primarily from lower volume partially offset by operational efficiency improvements and disciplined cost management

Furniture, Flooring & Textile Products –

• Trade sales decreased 4%
  • Volume decreased 2%, primarily from declines in Home Furniture, Geo Components, and Fabric Converting
  • Raw material-related selling price decreases, net of currency benefit, reduced sales 2%
• EBIT decreased $2 million, primarily from lower volume and $1 million restructuring charges, partially offset by disciplined cost management
• Adjusted¹ EBIT decreased $1 million, primarily from lower volume, partially offset by disciplined cost management

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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