Leggett & Platt Reports 2Q Results and Announces 3Q Dividend

  • 2Q sales were down 30% vs 2Q19, significantly impacted by the COVID-19 pandemic
  • 2Q EPS was ($.05), a decrease of $.69 vs 2Q19; 2Q adjusted1 EPS was $.16, down $.48 vs 2Q19
  • Liquidity at June 30, 2020 was $1.3 billion
  • Board declared third quarter dividend of $.40 per share

Diversified manufacturer Leggett & Platt reported second quarter sales of $845 million, a 30% decrease versus second quarter last year.

  • Organic sales were down 31%:
    • Volume was down 29%2, largely due to the economic impact of COVID-19
    • Raw material-related selling price decreases and negative currency impact reduced sales 2%
  • Acquisitions added 1% to sales growth

Second quarter EBIT was $23 million, down $113 million or 83% from second quarter last year, and adjusted EBIT was $51 million, an $85 million decrease.

 

  • EBIT and adjusted1 EBIT declined primarily as a result of lower volume, partially offset by fixed cost reductions
    • 2Q 2020 adjustments include a $25 million non-cash goodwill impairment charge related to our Hydraulic Cylinders business and $3 million of restructuring charges primarily from pandemic-related cost reductions
  • EBIT margin was 2.7% and adjusted1 EBIT margin was 6.0%, down from 11.2% in the second quarter of 2019
  • There was no LIFO benefit or expense in the second quarter of 2020, versus a benefit of $10.4 million (pretax) in the second quarter of 2019

Second quarter EPS was a loss of $.05, a $.69 decrease versus second quarter 2019, and included a goodwill impairment charge of $.19 and restructuring charges of $.02.  Second quarter adjusted1 EPS was $.16, a decrease of $.48, primarily from lower EBIT.

 

Debt, Cash Flow and Dividend

 

  • Net Debt was 3.10x trailing 12-month adjusted1 EBITDA
  • Operating cash flow was $112 million in the second quarter, a decrease of $60 million versus second quarter last year primarily from lower earnings
  • Second quarter dividend was $.40, equal to last year’s second quarter dividend

 

CEO COMMENTS

Chairman and CEO Karl Glassman commented, “Our second quarter results were significantly impacted by the economic effects of the COVID-19 pandemic.  We were pleased to see sales improve sequentially throughout the quarter as demand improved in most of our markets. The swift cost reduction actions implemented at the onset of the pandemic helped to mitigate some of the earnings impact from lower demand levels.

 

“We continue to see demand recovering through July, although at varied rates across our markets and geographies given the ongoing effects of the pandemic and continuing economic uncertainty.  We have improved our liquidity and will continue to carefully manage our cash and expenses.  We are committed to maintaining our strong balance sheet, investment grade credit rating, and position as a Dividend Aristocrat.

 

“Our focus remains on the health and safety of our employees and their families, along with our customers, suppliers and communities we serve around the world. I am extremely proud of how our employees are working together to keep each other safe and healthy while serving our customers during this challenging time.

 

“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. We are dedicated to our long-term vision for the Company and are confident that we will emerge from this crisis strong and focused on the future.”

 

COVID-19 IMPACT

 

  • Sales improved sequentially throughout the quarter after hitting their lowest point in early April, and continued to improve in the first three weeks of Q3 to levels near the prior year
  • Cost structure is 75% variable and 25% fixed
  • Aligning variable cost structure to demand levels
  • Fixed cost reductions are expected to drive 2020 savings of ~$100 million
  • Actions taken to optimize cash flow include:
    • Closely monitoring accounts receivable and collections
    • Controlling inventory
    • Reducing capital expenditures

 

LIQUIDITY AND BALANCE SHEET

 

  • $1.3 billion of liquidity at June 30
    • $209 million of cash on hand
    • $1.1 billion in capacity remaining under revolving credit facility
  • Debt at June 30
    • Long term debt of $2.1 billion, including $102 million of commercial paper outstanding
    • No significant maturities until August 2022
  • Amended existing credit agreement on May 6, 2020 to allow for additional liquidity
    • Financial covenant amended from a calculation of total debt to trailing 12-months EBITDA to net debt to trailing 12-months EBITDA
    • Covenant requires net debt to remain below 4.75x the trailing 12-months EBITDA through March 31, 2021. The ratio is then reduced by 0.5x every quarter through December 31, 2021 and thereafter remains at 3.25x.

 

DIVIDEND

 

  • The Company’s Board of Directors declared third quarter dividend of $.40, equal to the dividend declared in the third quarter of 2019
  • Dividend will be paid on October 15, 2020 to shareholders of record on September 15, 2020
  • At an annual indicated dividend of $1.60 per share, the yield is 4.0%, based upon Friday’s closing stock price of $40.09 per share; one of the highest yields among the S&P 500 Dividend Aristocrats

 

GUIDANCE

 

  • Company is not providing guidance at this time given continued macroeconomic uncertainty related to the effects of COVID-19

 

USES OF CASH

  • Remaining 2020 debt maturities of $25 million; no significant maturities until August 2022
  • Anticipating capital expenditures of approximately $60 million for the year
  • Expecting 2020 dividends of approximately $210 million
  • Limiting acquisitions

 

SEGMENT RESULTS – Second Quarter 2020 (versus 2Q 2019)

Bedding Products –

 

  • Trade sales were down 28%
  • Volume was down 25%, primarily from COVID-related demand declines and exited volume in Fashion Bed and Drawn Wire
  • Raw material-related price decreases and currency impact reduced sales 3%
  • EBIT decreased $45 million, primarily from lower volume and lower metal margin in our rod mill, partially offset by fixed cost reductions

 

Specialized Products –

 

  • Trade sales decreased 47%
  • Volume was down 46%, primarily from COVID-related demand declines
  • Currency impact decreased sales 1%
  • EBIT decreased $61 million, primarily from lower volume and the $25 million goodwill impairment charge in Hydraulic Cylinders, partially offset by fixed cost reductions

 

Furniture, Flooring & Textile Products –

 

  • Trade sales were down 22%
  • Organic sales decreased 25%
    • Volume decreased 24%, primarily from COVID-related demand declines
    • Raw material-related selling price decreases and currency impact reduced sales 1%
  • A small Geo Components acquisition completed in December 2019 added 3% to sales
  • EBIT decreased $8 million, primarily from lower volume, partially offset by fixed cost reductions and lower raw material costs

 

https://leggett.gcs-web.com/news-releases/news-release-details/leggett-platt-reports-2q-results-and-announces-3q-dividend

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