Leggett & Platt, a diversified manufacturer of engineered products, is navigating a challenging macroeconomic environment with a focus on operational excellence and strategic realignment. The company reported annual net income of -$136.8 million, annual revenue of $4.729 billion, annual operating cash flow of $497.2 million, and annual free cash flow of $383.4 million in its latest fiscal year.
Financials
In the first quarter of 2024, Leggett & Platt's trade sales decreased 10% year-over-year to $1.097 billion, driven by volume declines, primarily in residential end markets, and raw material-related selling price decreases. Earnings Before Interest and Taxes (EBIT) for the quarter was $63 million, down 29% from the same period in 2023. Earnings per share (EPS) decreased to $0.23, compared to $0.39 in the prior year quarter.
Segment Performance
The company's Bedding Products segment, which contributed 41% of trade sales in the first quarter, saw a 15% decline in sales due to ongoing weakness in domestic and international bedding markets. Demand softness in the U.S. and European bedding markets negatively impacted volume, with U.S. spring volume down 15% year-over-year. The Specialized Products segment, accounting for 29% of trade sales, reported a 1% sales decrease, while the Furniture, Flooring & Textile Products segment, contributing 30% of trade sales, saw a 9% sales decline.
Recent Developments
Leggett & Platt's management team has taken proactive steps to navigate the current challenges. In January 2024, the company announced a restructuring plan primarily focused on its Bedding Products and Furniture, Flooring & Textile Products segments. The plan includes consolidating 15 to 20 production and distribution facilities out of 50 in the Bedding Products segment and a small number of facilities in the Furniture, Flooring & Textile Products segment. The company expects to incur restructuring and restructuring-related costs between $65 million and $85 million, with approximately half to be incurred in 2024 and the remainder in 2025.
The Restructuring Plan is expected to enhance annualized EBIT by $40 million to $50 million when fully implemented by the end of 2025. Additionally, the company anticipates receiving between $60 million and $80 million in pretax net cash proceeds from the sale of real estate associated with the plan. However, the company may experience a reduction in annual sales of approximately $100 million due to the restructuring activities.
Strategic Priorities
Leggett & Platt's management team has also outlined three strategic priorities to ensure the long-term success of the business: strengthening the balance sheet and liquidity, improving margins through operational optimization and cost structure optimization, and positioning the company for profitable growth opportunities.
Liquidity
In March 2024, the company proactively amended its existing revolving credit facility to provide additional liquidity and flexibility. The leverage ratio was increased from 3.5x to 4.0x through June 30, 2025, creating a larger cushion during the current period of weak demand in residential end markets.
Additionally, the company's Board of Directors recently declared a quarterly dividend of $0.05 per share, a significant reduction from the previous $0.46 per share. This decision was made to free up capital to accelerate the deleveraging of Leggett & Platt's balance sheet and solidify its long-held financial strength.
Outlook
Looking ahead, the company's full-year 2024 sales guidance remains unchanged at $4.35 billion to $4.65 billion, reflecting a 2% to 8% decrease compared to 2023. Volume is expected to be down low- to mid-single digits, with the Bedding Products segment anticipated to see a high single-digit decline, the Specialized Products segment expected to grow low single digits, and the Furniture, Flooring & Textile Products segment projected to decline low single digits. Deflation and currency are expected to reduce sales in the low single digits.
Earnings per share for 2024 are expected to be in the range of $0.95 to $1.25, including a $0.20 to $0.25 per share negative impact from restructuring costs and a $0.10 to $0.15 per share gain from the sale of real estate. Adjusted earnings per share are expected to be $1.05 to $1.35, primarily reflecting lower volume, pricing responses related to global steel cost differentials, modest metal margin compression, and several expense items that were abnormally low in 2023 and are expected to normalize in 2024.
Business Overview
Leggett & Platt's geographic footprint is diverse, with 39% of its sales generated by international operations, primarily in Europe, China, Canada, and Mexico. The company operates approximately 125 manufacturing facilities across 18 countries, with a significant presence in North America, Europe, and Asia.
The company's product portfolio spans several key markets, including bedding components, automotive seat comfort and convenience systems, home and work furniture components, geo components, flooring underlayment, hydraulic cylinders, and aerospace tubing and fabricated assemblies. This diversification has helped mitigate the impact of challenges in any single end market.
Risks and Challenges
Leggett & Platt faces several risks, including continued macroeconomic uncertainty, supply chain disruptions, labor shortages, and the potential for further weakening in residential end markets. The company's ability to navigate these headwinds and execute its strategic initiatives will be crucial in driving long-term shareholder value.
Conclusion
Overall, Leggett & Platt is taking proactive steps to strengthen its financial position, optimize its operations, and position the company for future growth. While the current environment presents challenges, the company's diversified product portfolio, strategic realignment, and focus on operational excellence position it well to weather the storm and emerge stronger in the long run.