Leggett & Platt Reports Third Quarter Results

October 28, 2024  by Karen Parrish in Business Strategy, Industry   

"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 HIGHLIGHTS

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

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 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
• Total liquidity at September 30 was $748 million

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)
• EPS is expected to be a loss of $3.56–$3.71
• Adjusted EPS is now expected to be $1.00–$1.10 (vs prior guidance of $1.10–$1.25)
• 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

SLIDES AND CONFERENCE CALL

A set of slides containing summary financial information and a restructuring update is available from the Investor Relations section of Leggett's website at www.leggett.com.