Leggett & Platt Reports Record EPS In 3Q And Announces 4Q Dividend

(Full Leggett & Platt Q3 news release available here)

CARTHAGE, Mo., Nov. 2, 2020 /PRNewswire/ —

  • 3Q EPS was a record1 $.77, an increase of $.03 vs 3Q19 
  • 3Q adjusted2 EPS was a record1 $.80, up $.04 vs 3Q19 adjusted2 EPS 
  • 3Q sales were $1.208 billion, down 3% vs 3Q19 
  • 3Q cash flow from operations was a record $261 million
  • Board declared fourth quarter dividend of $.40 per share

Diversified manufacturer Leggett & Platt reported a quarterly record1 third quarter EPS of $.77, a $.03 increase versus third quarter 2019.  Third quarter adjusted2 EPS was a quarterly record1 $.80, an increase of $.04 versus 2019 third quarter adjusted2 EPS, primarily from higher EBIT. 

Third quarter EBIT was $147 million, up $3 million or 2% from third quarter last year, and adjustedEBIT was $153 million, a $5 million or 3% increase.

  • EBIT and adjusted2 EBIT benefited from fixed cost reductions partially offset by lower volume and LIFO impact versus third quarter of 2019 
    • Fixed cost reductions implemented earlier in the year reduced third quarter costs by approximately $30 million, on track to realize nearly $100 million for full year 2020 as previously stated 
    • LIFO expense was $2.0 million in 3Q 2020, versus a LIFO benefit of $7.6 million in 3Q 2019 
    • Adjustments include restructuring-related charges of $6 million ($.03 per share) in 3Q 2020 and $4 million ($.02 per share) in 3Q 2019
  • EBIT margin was 12.2%, up from 11.6% in the third quarter of 2019, and adjusted2 EBIT margin was 12.7%, up from 11.9%, reflecting our focus on maintaining cost savings as volume recovers

Third quarter sales were $1.208 billion, a 3% decrease versus third quarter last year. 

  • Organic sales were down 3%: 
    • Volume was down 3%3, strong demand in residential end markets was more than offset by weakness in Aerospace and Work Furniture
    • Raw material-related selling price decreases were offset by a currency benefit
  • Acquisitions and divestitures offset each other

Debt, Cash Flow and Dividend 

  • $60 million prepayment of a portion of Term Loan A in third quarter 
  • Net Debt was 2.74x trailing 12-month adjusted2 EBITDA 
  • Operating cash flow was a record $261 million during the third quarter, an increase of $48 million versus third quarter last year, largely due to working capital improvements 
  • Third quarter dividend was $.40, equal to last year’s third quarter dividend

CEO COMMENTS

Chairman and CEO Karl Glassman commented, “We are pleased to deliver strong third quarter results in these uncertain times.  The efforts of our employees around the world drove the outcome, and I want to thank them for their dedication, hard work and creativity.  I also want to thank our teams for their commitment to developing and implementing effective protocols to keep our employees safe and our facilities running during the pandemic.   The health and safety of our employees is our first priority, and I’m proud of what we’ve accomplished.  

“We generated quarterly record EBIT, EBITDA and EPS in third quarter. We also generated quarterly record cash flow from operations of $261 million, driven by a significant reduction in working capital. These outstanding results reflect our continued priority on operational performance and closely controlling all elements of working capital.

“Third quarter sales were $1.208 billion, down 3% versus third quarter of 2019. Following steep declines in second quarter, we returned to year-over-year sales growth this past quarter in ECS, U.S. and European Spring, Home Furniture, Fabric Converting and Geo Components. These businesses continued to benefit from a consumer spending focus on home products. Automotive sales were roughly flat with the prior year. Challenges remain in Aerospace and Work Furniture with weak demand in these end markets expected to continue. 

“Bedding sales were negatively impacted by extraordinary COVID-related supply chain and labor constraints in third quarter and evolving government restrictions on plant operations. We are diligently working to increase production while managing supply challenges with nonwoven fabrics and chemicals and labor shortages so that we can better meet the growing levels of bedding market demand.

“The Company remains well-positioned, both competitively and financially, to capitalize on long-term opportunities in our various end markets. Our enduring long-term fundamentals give us confidence in our ability to continue to create value for our shareholders.” 

LIQUIDITY AND BALANCE SHEET

  • $1.4 billion of liquidity at September 30
    • $245 million of cash on hand 
    • $1.2 billion in capacity remaining under revolving credit facility
  • Debt at September 30
    • Total debt of $2.0 billion; no commercial paper outstanding 
    • No significant maturities until August 2022

DIVIDEND

  • The Company’s Board of Directors declared fourth quarter dividend of $.40
  • Dividend will be paid on January 15, 2021 to shareholders of record on December 15, 2020
  • At an annual indicated dividend of $1.60 per share, the yield is 3.8% based upon Friday’s closing stock price of $41.73 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 approximately $12 million
  • Anticipating capital expenditures of approximately $70 million for the year 
  • Expecting 2020 dividends of approximately $210 million
  • Limiting acquisitions 

SEGMENT RESULTS – Third Quarter 2020 (versus 3Q 2019) 

Bedding Products – 

  • Trade sales were down 2%, including 1% due to exiting the Fashion Bed business 
  • Organic sales decreased 1% from lower volume 
    • Strong demand in ECS and U.S. and European Spring was more than offset by lower volume in Adjustable Bed and exited volume in Drawn Wire
  • EBIT increased $3 million, primarily from fixed cost reductions partially offset by LIFO impact, lower metal margin in our rod mill and higher freight costs

Specialized Products – 

  • Trade sales decreased 9% with Automotive sales roughly flat 
  • Volume was down 10% primarily from weak demand in Aerospace and Hydraulic Cylinders 
  • Currency benefit increased sales 1% 
  • EBIT decreased $12 million, primarily from lower volume and $4 million in restructuring charges, partially offset by fixed cost reductions

Furniture, Flooring & Textile Products – 

  • Trade sales increased 1% 
  • Organic sales decreased 2% from lower volume 
    • Strong demand in Fabric Converting, Geo Components, and Home Furniture was more than offset by weak demand in Work Furniture and Flooring Products’ hospitality business
  • A small Geo Components acquisition completed in December 2019 added 3% to sales 
  • EBIT increased $12 million, primarily from fixed cost reductions, lower raw material costs and a favorable product mix

SLIDES AND CONFERENCE CALL

A set of slides containing summary financial information 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, November 3. The webcast can be accessed from Leggett’s website. The dial-in number is (201) 689-8341; there is no passcode.  

Fourth quarter results will be released after the market closes on Monday, February 8, 2021, with a conference call the next morning.

(Full Leggett & Platt Q3 news release available here)

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