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Leggett & Platt Reports 1Q Results And COVID-19 Impacts

CARTHAGE, Mo., May 4, 2020 /PRNewswire/ -- Diversified manufacturer Leggett & Platt reported its first quarter 2020 results of operations, impacts from the COVID-19 pandemic on its business, and responsive actions.

SUMMARY

  • Crisis response team managing health and safety issues and a comprehensive plan for safe and productive long-term operation
  • Sales remained at weekly average levels that were consistent with 2019 through mid-March; rapid declines in last two weeks of first quarter have stabilized through the first three weeks of the second quarter and are currently at approximately 55% of average levels
  • Aggressive cost reductions; aligned variable cost structure to current demand levels; eliminated non-essential expenses; expect full year fixed cost reduction of $130ꟷ$150 million
  • Liquidity, as of March 31, of $734 million; $506 million of cash and $228 million in available capacity under our commercial paper program, backed by a revolving credit facility
  • Reduced full year capital expenditure budget by over 60% to $60 million; halting acquisitions; remaining 2020 debt maturities of $37.5 million with no significant debt maturities until August 2022
  • Dividend decision to be made at May Board meeting based upon impact from evolving economic conditions
  • 2020 guidance suspended, as previously announced on April 2nd

CEO COMMENTS
Chairman and CEO Karl Glassman commented, "I want to thank our employees and acknowledge their dedication and effort as we face unprecedented change from the COVID-19 pandemic.  Our first priority is the health and safety of our employees and their families, along with our customers, suppliers and the communities we serve around the world. We have taken early and decisive action to protect our employees and ensure as safe a work environment as we possibly can.

"Like so many in our community and around the world, we are facing significant business challenges as a result of the COVID-19 pandemic.  These extraordinary circumstances have forced us to make very difficult decisions as we take steps to reduce costs during this period of drastic decreases in demand. We rapidly deployed cost savings measures across the Company, significantly reducing production levels and enacting temporary layoffs. We are also aggressively reducing fixed costs and cutting capital spending.

"Our long-term fundamentals have not changed. We continue to be leaders in most of our markets, focused on innovation and working closely with our customers to provide more of what they need to be successful. Our capabilities are unmatched in our large and expanding addressable markets. The diversity of our businesses makes us stronger. We have an outstanding track record of strong cash flow and we remain committed to our long-standing transparency and financial discipline. We are focused on doing everything we can to return our employees to work.  We are confident we will emerge from this crisis in a very strong position."

FIRST QUARTER 2020 RESULTS
First quarter sales of $1.045 billion, a 9% decrease versus first quarter last year.

  • Organic sales were down 12%:
  • Acquisitions added 3% to sales growth (primarily ECS)

First quarter EBIT was $81 million, down $17 million or 18% from first quarter last year, and adjusted1 EBIT was $93 million, a $12 million decrease.

  • EBIT and adjusted1 EBIT declined primarily from lower volume and higher bad debt expense of $12 million, partially offset by lower raw material costs
  • EBIT margin was 7.7%, down from 8.5% in the first quarter of 2019, and adjusted1 EBIT margin was 8.9%, down from 9.1%
  • LIFO in the first quarter of 2020 was a benefit of $2.0 million (pretax), versus no benefit or expense in the first quarter of 2019.

First quarter EPS was $.34, an $.11 decrease versus first quarter 2019.  First quarter adjusted1 EPS was $.41, a decrease of $.08.  The decrease primarily reflects lower EBIT and a higher tax rate ($.02/share).

First Quarter Debt, Cash Flow and Dividends

  • Debt was 3.48x trailing 12-month adjusted1 EBITDA
  • Operating cash flow was $10 million in the first quarter, a decrease of $21 million versus first quarter last year primarily from lower earnings
  • First quarter dividend was $.40, two cents higher than last year's first quarter

SEGMENT RESULTS – First Quarter 2020 (versus 1Q 2019)

Bedding Products –

  • Trade sales were down 11%
  • Organic sales decreased 15%
  • ECS acquisition sales added 4%
  • EBIT decreased $14 million,

Specialized Products –

  • Trade sales decreased 11%
  • Volume was down 9%, from demand declines in Automotive and Hydraulic Cylinders
  • Currency impact decreased sales 2%
  • EBIT decreased $8 million, primarily from lower volume

Furniture, Flooring & Textile Products –

  • Trade sales were down 5%
  • Organic sales decreased 7%
  • A small Geo Components acquisition added 2% to sales
  • EBIT increased $8 million, primarily from lower raw material costs and the non-recurrence of $1 million restructuring-related charges, partially offset by lower volume in Work Furniture and Home Furniture

COVID-19 RESPONSE AND IMPACT

  • Focus on protecting our employees
  • Sales trends
  • Cost structure 75% variable, 25% fixed
  • Aligned variable cost structure to current demand levels
  • Fixed cost reductions, expected to drive 2020 savings of $130ꟷ$150 million

-- Eliminated non-essential expenses
-- Postponed major projects
-- Reduced executive officer and Board compensation

  • Focus on preserving capital and protecting financial well-being of company in uncertain environment
  • Optimizing cash flow

LIQUIDITY AND BALANCE SHEET

  • Carefully monitoring liquidity and cash position

-- $734 million of liquidity at March 31

- $506 million of cash on hand
- $228 million in capacity remaining under revolver

  • Debt at March 31
  • Commercial paper outstanding and capacity at May 1

-- $278 million of commercial paper outstanding
-- Weighted average interest rate of 2.53% and weighted average maturity of ~48 days
-- $372 million in capacity remaining under revolver

  • Currently in process with our banks to amend the covenant in our revolving credit facility

USES OF CASH

  • Remaining 2020 debt maturities of $37.5 million; no significant maturities until August 2022
  • Capital expenditures cut by over 60% to approximately $60 million
  • Acquisitions halted
  • Dividend decision to be made at May Board meeting based upon impact from evolving economic conditions

ANNUAL MEETING
Due to health concerns associated with the COVID-19 outbreak, Leggett is limiting the Annual Shareholders Meeting to only accepting ballots, discussion, if any, and reporting results of voting for the four proposals described in the Company's Proxy Statement dated March 31, 2020.  The Company does not plan to make traditional product or any other presentations.  The Company encourages shareholders to vote by proxy and not attend in person.

SLIDES AND CONFERENCE CALL
A set of slides containing summary financial information and COVID-19 response details is available from the Investor Relations section of Leggett's website at www.leggett.com. Management will host a conference call at 7:30 a.m. Central (8:30 a.m. Eastern) on Tuesday, May 5. The webcast can be accessed from Leggett's website. The dial-in number is (201) 689-8341; there is no passcode. 

Second quarter results will be released after the market closes on Monday, August 3, with a conference call the next morning.

FOR MORE INFORMATION: Visit Leggett's website at www.leggett.com.

COMPANY DESCRIPTION:  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 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.

FORWARD-LOOKING STATEMENTS: This press release contains "forward-looking statements," including, but not limited to, the timing regarding whether to declare a dividend; annualized savings from deploying cost savings measures, including fixed cost actions; savings from pausing/postponing major projects; the ability to maintain a strong liquidity and cash position; the amount of repatriated cash; maintaining a strong record of cash flow; the amount of capital expenditures; the temporary nature of the employee layoffs; limiting acquisitions; our ability to collect receivables within their terms; our ability to manage inventory; the amount of borrowing capacity under our commercial paper program and credit facility; and our ability to obtain a covenant amendment under the credit facility.  Such forward-looking statements are expressly qualified by the cautionary statements described in this provision and reflect only the beliefs of Leggett or its management at the time the statement is made. Because all forward-looking statements deal with the future, they are subject to risks, uncertainties and developments which might cause actual events or results to differ materially from those envisioned or reflected in any forward-looking statement. Moreover, we do not have, and do not undertake, any duty to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement was made. Some of these risks and uncertainties include: (i) the adverse impact on our sales, earnings, liquidity, cash flow and financial condition caused by the COVID-19 pandemic which has and could continue to materially negatively impact (a) the demand for our products and our customers' products, growth rates in the industries in which we participate, and opportunities in those industries (b) our manufacturing facilities' ability to remain open, or to re-open if closed (either from the lack of demand or mandatory governmental closure), obtain necessary raw materials and parts, maintain appropriate labor levels and ship finished products to customers, (c) operating costs related to pay and benefits for our laid off employees, (d) our ability to collect trade and other notes receivables in accordance with their terms; (e) potential impairment of goodwill and long-lived assets, and (f) our ability to access the commercial paper market or borrow under our revolving credit facility, including our ability to comply with the restrictive covenants in our credit facility that may limit our operational flexibility and our ability to pay our debt when it comes due; (ii) the Company's ability to achieve its operating targets; (iii) increases or decreases in our capital needs, which may vary depending on acquisition or divestiture activity, our working capital needs and capital expenditures; (iv) market conditions; (v) price and product competition from foreign and domestic competitors, (vi) cost and availability of raw materials and labor, fuel and energy costs, (vii) our ability to generate cash sufficient to pay the dividend, (viii) our ability to repatriate cash from offshore accounts; (ix) net interest expense, tax rates, increased trade costs, cybersecurity breaches, customer losses and insolvencies, disruption to our steel rod mill, foreign currency fluctuation, the amount of fully diluted shares, depreciation and amortization, litigation risks, and restructuring-related costs; (x) the preliminary nature of savings estimates; and (xi) other risk factors in the "Forward-Looking Statements" and "Risk Factors" sections in Leggett's most recent Form 10-K and Form 8-K reports filed with the SEC.

CONTACT:   Investor Relations, (417) 358-8131 or invest@leggett.com
Susan R. McCoy, Senior Vice President, Investor Relations
Wendy M. Watson, Vice President, Investor Relations
Cassie J. Branscum, Manager, Investor Relations

1 Please refer to attached tables for Non-GAAP Reconciliations.

LEGGETT & PLATT

RESULTS OF OPERATIONS 


FIRST QUARTER

(In millions, except per share data)


2020


2019


Change

Net trade sales 


$1,045.5


$1,155.1


(9)%

Cost of goods sold  


822.7


922.1



   Gross profit 


222.8


233.0


(4)%

Selling & administrative expenses 


117.8


118.6


(1)%

Amortization


16.4


14.1



Other expense (income), net


7.9


2.1



   Earnings before interest and taxes 


80.7


98.2


(18)%

Net interest expense


20.0


20.0



   Earnings before income taxes 


60.7


78.2



Income taxes 


15.0


17.1



   Net earnings 


45.7


61.1



Less net income from non-controlling interest


-


0.1



   Net earnings attributable to L&P


$     45.7


$     61.2


(25)%

Earnings per diluted share 







Net earnings per diluted share


$     0.34


$0.45


(24)%

Shares outstanding







   Common stock (at end of period)


132.3


131.2


0.8 %

   Basic (average for period)


135.4


134.4



   Diluted (average for period)


135.6


135.0


0.4 %








CASH FLOW


FIRST QUARTER

(In millions)


2020


2019


Change

Net earnings


$     45.7


$     61.1



Depreciation and amortization


47.5


46.3



Working capital decrease (increase)


(109.4)


(92.8)



Impairments


3.5


2.9



Other operating activity


23.1


13.9



   Net Cash from Operating Activity


$     10.4


$     31.4


(67)%

Additions to PP&E


(24.2)


(31.8)



Purchase of companies, net of cash


-


(1,244.3)



Proceeds from business and asset sales


0.7


0.2



Dividends paid


(52.7)


(49.6)



Repurchase of common stock, net


(7.6)


(2.0)



Additions (payments) to debt, net


340.1


1,289.3



Other


(8.5)


2.0



  Increase (Decr.) in Cash & Equiv.


$   258.2


$    (4.8)











FINANCIAL POSITION


31-Mar

(In millions)


2020


2019


Change

Cash and equivalents 


$   505.8


$   263.3



Receivables 


568.2


665.3



Inventories 


655.5


676.8



Other current assets 


52.5


53.6



   Total current assets 


1,782.0


1,659.0


7 %

Net fixed assets 


809.5


810.3



Operating lease right-of-use assets


155.3


157.9



Goodwill


1,391.4


1,395.5



Intangible assets and deferred costs


843.8


931.1



   TOTAL ASSETS


$4,982.0


$4,953.8


1 %

Trade accounts payable


$   429.1


$   431.2



Current debt maturities 


51.2


51.4



Current operating lease liabilities


39.6


38.1



Other current liabilities 


334.8


346.3



   Total current liabilities 


854.7


867.0


(1)%

Long-term debt


2,415.2


2,409.6


0 %

Operating lease liabilities


117.9


119.1



Deferred taxes and other liabilities 


355.6


362.9



Equity


1,238.6


1,195.2


4 %

   Total Capitalization 


4,127.3


4,086.8


1 %

   TOTAL LIABILITIES & EQUITY


$4,982.0


$4,953.8


1 %

 

LEGGETT & PLATT

SEGMENT RESULTS 1


FIRST QUARTER


(In millions)


2020


2019


Change


Bedding Products








Trade Sales


$   490.6


$   554.3


(11)%


EBIT


30.0


44.1


(32)%


EBIT Margin


6.1%


8.0%


-190 bps

2

Note impairment


8.4


-




   Restructuring-related charges


-


5.6




   ECS transaction costs


-


0.9




Adjusted EBIT


38.4


50.6


(24)%


Adjusted EBIT Margin


7.8%


9.1%


-130 bps


   Depreciation and amortization


26.8


24.8




Adjusted EBITDA


65.2


75.4


(14)%


Adjusted EBITDA Margin


13.3%


13.6%


-30 bps










Specialized Products 








Trade Sales


$   234.5


$   262.9


(11)%


EBIT


27.7


35.7


(22)%


EBIT Margin


11.8%


13.6%


-180 bps


   Depreciation and amortization


11.2


10.2




EBITDA 


38.9


45.9


(15)%


EBITDA Margin


16.6%


17.5%


-90 bps










Furniture, Flooring & Textile Products








Trade Sales


$   320.4


$   337.9


(5)%


EBIT


26.5


18.4


44 %


EBIT Margin


8.3%


5.4%


290 bps


   Restructuring-related charges 


-


0.7




Adjusted EBIT


26.5


19.1


39 %


Adjusted EBIT Margin


8.3%


5.7%


260 bps


   Depreciation and amortization


6.5


6.6




Adjusted EBITDA


33.0


25.7


28 %


Adjusted EBITDA Margin


10.3%


7.6%


270 bps










Total Company








Net Trade Sales


$1,045.5


$1,155.1


(9)%


   EBIT - segments


84.2


98.2


(14)%


   Intersegment eliminations and other


(3.5)


-




EBIT


80.7


98.2


(18)%


EBIT Margin


7.7%


8.5%


-80 bps


Note impairment 3


8.4


-




Stock write-off from prior year divestiture 3


3.5


-




   Restructuring-related charges3


-


6.3




   ECS transaction costs 3


-


0.9




Adjusted EBIT 3


92.6


105.4


(12)%


Adjusted EBIT Margin 3


8.9%


9.1%


-20 bps


   Depreciation and amortization - segments


44.5


41.6




   Depreciation and amortization - unallocated 4


3.0


4.7




Adjusted EBITDA 3


$   140.1


$   151.7


(8)%


Adjusted EBITDA Margin


13.4%


13.1%


30 bps


 

LAST SIX QUARTERS


2018


2019


2020

Selected Figures 


4Q


1Q


2Q


3Q


4Q


1Q

Net Trade Sales ($ million)


1,046.7


1,155.1


1,213.0


1,239.3


1,144.9


1,045.5

Sales Growth (vs. prior year)


6%


12%


10%


14%


9%


(9)%

Volume Growth (same locations vs. prior year)


0%


(3)%


(6)%


(1)%


(1)%


(9)%














Adjusted EBIT 3


120.0


105.4


136.0


147.9


140.1


92.6

Cash from Operations ($ million) 


189.2


31.4


172.0


212.9


251.4


10.4














Adjusted EBITDA (trailing twelve months) 3


609.0


619.9


651.0


689.1


721.3


709.7

(Long-term debt + current maturities) / Adj. EBITDA 3,5


1.92


3.97


3.70


3.26


2.94


3.48



























Organic Sales (vs. prior year) 6


4Q


1Q


2Q


3Q


4Q


1Q

Bedding Products


8 %


4 %


(8)%


(9)%


(10)%


(15)%

Specialized Products


0 %


(5)%


(3)%


5 %


4 %


(11)%

Furniture, Flooring and Textile Products


1 %


(3)%


(4)%


1 %


(2)%


(7)%

     Overall 


3 %


(1)%


(6)%


(2)%


(4)%


(12)%


1 Segment and overall company margins calculated on Trade sales.

2 bps = basis points; a unit of measure equal to 1/100th of 1%.

3 Refer to next page for non-GAAP reconciliations.

4 Consists primarily of depreciation of non-operating assets and amortization of debt issuance costs.

5 EBITDA based on trailing twelve months. 

6 Trade sales excluding sales attributable to acquisitions and divestitures consummated in the last 12 months.

 

LEGGETT & PLATT





RECONCILIATION OF REPORTED (GAAP) TO ADJUSTED (Non-GAAP) FINANCIAL MEASURES 12






















2018


2019


2020

Non-GAAP adjustments 7


4Q


1Q


2Q


3Q


4Q


1Q

Note impairment


15.9




-






8.4

Stock write-off from prior year divestiture


-


-


-


-


-


3.5

Restructuring-related charges


16.3


6.3


-


3.8


5.0


-

ECS transaction costs 


6.9


0.9


-


-


-


-

Non-GAAP adjustments (pretax) 8


39.1


7.2


-


3.8


5.0


11.9

Income tax impact


(7.5)


(1.8)


-


(0.4)


(0.1)


(2.9)

Non-GAAP adjustments (after tax)


31.6


5.4


-


3.4


4.9


9.0














Diluted shares outstanding


134.7


135.0


135.2


135.4


135.8


135.6














EPS impact of non-GAAP adjustments


0.23


0.04


-


0.02


0.04


0.07
















2018


2019


2020

Adjusted EBIT, EBITDA, Margin, and EPS 7


4Q


1Q


2Q


3Q


4Q


1Q

Net trade sales 


1,046.7


1,155.1


1,213.2


1,239.3


1,144.9


1,045.5














EBIT (earnings before interest and taxes)


84.0


98.2


136.0


144.1


135.1


80.7

Non-GAAP adjustments (pretax and excluding interest) 9


36.0


7.2


-


3.8


5.0


11.9

Adjusted EBIT ($ millions)


120.0


105.4


136.0


147.9


140.1


92.6














EBIT margin


8.0%


8.5%


11.2%


11.6%


11.8%


7.7%

Adjusted EBIT margin


11.5%


9.1%


11.2%


11.9%


12.2%


8.9%














EBIT


84.0


98.2


136.0


144.1


135.1


80.7

Depreciation and Amortization


35.1


46.3


50.0


48.4


47.2


47.5

EBITDA


119.1


144.5


186.0


192.5


182.3


128.2

Non-GAAP adjustments (pretax and excluding interest) 9


36.0


7.2


-


3.8


5.0


11.9

Adjusted EBITDA ($ millions)


155.1


151.7


186.0


196.3


187.3


140.1














EBITDA margin


11.4%


12.5%


15.3%


15.5%


15.9%


12.3%

Adjusted EBITDA margin


14.8%


13.1%


15.3%


15.8%


16.4%


13.4%














Diluted EPS 


0.39


0.45


0.64


0.74


0.64


0.34

EPS impact of non-GAAP adjustments


0.23


0.04


-


0.02


0.04


0.07

Adjusted EPS ($)


0.62


0.49


0.64


0.76


0.68


0.41
















2018


2019


2020

Total Debt to Adjusted EBITDA 10


4Q


1Q


2Q


3Q


4Q


1Q

Total Debt


1,169.0


2,461.0


2,415.0


2,248.3


2,117.6


2,466.4














Adjusted EBITDA, trailing 12 months


609.0


619.9


651.0


689.1


721.3


709.7














Total Debt / Leggett Reported 12-month Adjusted EBITDA


1.92


3.97


3.71


3.26


2.94


3.48

Total Debt / Leggett and ECS 12-month Pro Forma Adjusted EBITDA 11




3.56


3.45


3.15


2.93




7 Management and investors use these measures as supplemental information to assess operational performance.

8 The non-GAAP adjustments affected various line items on the income statement. Details by quarter:  4Q 2018: $4.4 million COGS, $19.6 million SG&A,  $11.9 million other expense, $3.2 million interest expense.  1Q 2019: $2.4 million COGS, $0.9 million SG&A, $3.9 million other expense.  3Q 2019: ($0.9) million COGS, $4.7 million other expense. 4Q 2019: $4.9 million other expense.  1Q 2020: $8.4 million SG&A, $3.5 million other expense.

9 4Q 2018 excludes $3.2 million of financing-related charges recognized in interest expense.

10 Management and investors use this ratio as supplemental information to assess ability to pay off debt.  These ratios are calculated differently than the Company's credit facility covenant ratio.

11 The Leggett and ECS pro forma adjusted EBITDA for the 12 months ended March 31, June 30,  September 30, and December 31, 2019 is presented in the table below.  Because the increase in total debt from December 31, 2018 to December 31, 2019 was directly attributable to the ECS acquisition, we believe it is more meaningful to investors to include ECS's pre-acquisition adjusted EBITDA for the trailing 12 months ended March 31, June 30, September 30, and December 31, 2019 in the total debt / 12-month adjusted EBITDA calculation.

 

  ECS pre-acquisition adjusted EBITDA from:


  4/1/18 –
1/16/19


   7/1/18 –
1/16/19


  10/1/18 –
1/16/19


  1/1/19 –
1/16/19

Net earnings


12


6


-


(1)

Interest expense


33


22


12


1

Taxes


6


4


1


0

EBIT


51


32


13


-

Depreciation and Amortization


14


10


5


1

Change in control bonus


7


7


7


-

EBITDA


72


49


25


1










   Leggett Adjusted EBITDA, trailing 12 months (including ECS from January 16, 2019)


620


651


689


721

   ECS pre-acquisition adjusted EBITDA


72


49


25


1

   Leggett and ECS Pro Forma Adjusted EBITDA, trailing 12 months


692


700


714


722

  Total Debt / Leggett and ECS 12-month Pro Forma Adjusted EBITDA


3.56


3.45


3.15


2.93


12 Calculations impacted by rounding.

 

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SOURCE Leggett & Platt