Company Update
May 2020
LEG (NYSE)
www.leggett.com
Forward-Looking Statements
Statements in this presentation that are not historical in nature are "forward-looking." These statements are | |
identified either by their context or by use of words such as "anticipate," "believe," "estimate," "expect," | |
"forecasted," "intend," "may," "plan," "should," "guidance" or the like. All such forward-looking statements are | |
expressly qualified by the cautionary statements described in this provision. We do not have, and do not | |
undertake, any duty to update any forward-looking statement. Forward-looking statements should not be relied | |
upon as a prediction of actual future events or results. Any forward-looking statement reflects only the beliefs of | |
Leggett at the time the statement is made. All forward-looking statements are subject to risks and uncertainties | |
which might cause actual events or results to differ materially from the forward-looking statements. Some of these | |
risks and uncertainties include: the adverse impact caused by the COVID-19 pandemic upon (i) the demand for | |
our products, (ii) our manufacturing facilities' ability to remain open and produce at historical utilization rates, obtain | |
necessary raw materials and parts, maintain appropriate labor levels and ship finished products to customers, (iii) | |
operating costs related to pay and benefits for our temporarily laid-off employees, (iv) our ability to collect | |
receivables in accordance with their terms, (v) potential impairment of goodwill and long-lived assets, and (vi) our | |
ability to access the commercial paper market or borrow under our credit facility, including our inability to comply | |
with the restrictive covenants in our credit facility; our ability to reduce fixed costs; our ability to achieve our | |
operating targets; projections of Company sales, earnings, EBIT margin, depreciation and amortization, capital | |
expenditures, dividends, cash from operations, net interest expense, tax rate and diluted shares; price and | |
product competition; cost and availability of raw materials and labor, fuel and energy costs, climate change | |
regulations, environmental, social and governance risks, foreign currency fluctuation, cash repatriation, litigation | |
risks and other risk factors in Leggett's most recent Form 10-K and subsequent Form 8-Ks and Form 10-Qs. | |
Market and Industry Data | |
Unless we indicate otherwise, we base the information concerning our markets/industry contained herein on our | |
general knowledge of and expectations concerning those markets/industry, on data from various industry | |
analyses, on our internal research, and on adjustments and assumptions that we believe to be reasonable. | |
However, we have not independently verified data from market/industry analyses and cannot guarantee their | |
accuracy or completeness. | 2 |
Leggett Distinctives
Strong balance sheet and cash flow
Disciplined use of cash
5-6% dividend yield; 49 consecutive annual increases Leader in most markets; few large competitors
Opportunities for long-termgrowth
Internal initiatives + market growth + acquisitions Large addressable markets
Management has "skin in the game"
Significant stock owners; forego comp in exchange for shares Incentive comp aligned with TSR focus
3
Our Markets
Macro Market Exposure | Product Mix | ||||
Automotive | |||||
(based on 2019 net trade sales) | |||||
20% | |||||
Automotive | |||||
Consumer | 18% | ||||
Durables | |||||
55% | Aerospace | ||||
Commercial/ | 3% | ||||
Industrial | |||||
25% | Bedding | Hydraulic Cylinders | |||
2% | |||||
46% | |||||
Geographic Split | Work Furniture | ||||
7% | |||||
(based on production) | |||||
Mexico Others | Home Furniture | ||||
5% | 2% | ||||
Canada | 7% | ||||
7% | |||||
China | Flooring & Textiles | ||||
17% | |||||
9% | |||||
Europe | |||||
11% | U.S. | ||||
66% |
4
% of 2019 net trade sales
Specialized
Bedding
23%
Segments
46%Furniture,
Flooring & Textile
31%
Bedding Products
Bedding
Mattress springs
Private-label finished mattresses, mattress toppers, pillows
Specialty bedding foams Foundations
Wire
Drawn steel wire Steel rod
Adjustable Bed
Adjustable beds
Machinery
Quilting & sewing machinery for bedding mfg.
Mattress packaging and glue-drying equipment
Specialized Products
Automotive
Auto seat support & lumbar systems
Motors, actuators & cables
Aerospace
Tubing
Tube assemblies
Hydraulic Cylinders
Hydraulic cylinders primarily for material handling, transportation & construction equipment
Furniture, Flooring &
Textile Products
Work Furniture
Chair controls, bases, frames Private-label finished seating
Home Furniture
Recliner mechanisms
Seating and sofa sleeper components
Flooring & Textiles
Flooring underlayment Textile converting
Geo components
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Current Topics
COVID-19 Response
Prioritizing Employee Health & Safety
- Cross-functionalteams leveraged learning from our early experience in China to implement new safety protocols, interpret government orders and secure personal protective equipment
- Developed a comprehensive handbook documenting new work procedures and facility modifications necessary to facilitate proper social distancing
- Implementing training and change management initiatives to drive and maintain new ways of operating
Reduced Costs
- Aligned variable cost structure to current demand levels
- Reduced fixed costs by $130-$150 million, eliminated non-essential spending
- Postponed major projects
- Reduced executive officer salaries and Board of Director cash compensation by 50%
Optimizing Cash Flow
- Closely monitoring working capital, focusing on customer collections and controlling inventory
- Cut 2020 capital expenditures by over 60% to $60 million
8
Responding to Demand Declines
Sales declined rapidly in final two weeks of 1Q
Reduced production and staffing levels to match demand
Weekly Sales
140 | ||
120 | ||
millions) | 100 | Total Company |
80 | ||
($ | ||
Sales | 60 | |
Bedding Products | ||
Trade | ||
40 | Furniture, Flooring & Textile Products | |
20 | Specialized Products | |
0 |
9
Liquidity Profile (as of 3/31/20)
Liquidity
- $1,284 million of liquidity1
- $506 million cash on hand
- $778 million available under our revolving credit facility1
Debt Structure
- Total debt of $2.5 billion
- $422 million commercial paper with a weighted average interest rate of 3.15% and weighted average maturity of 30 days
- $450 million 5-year Tranche A term loan at a 2.11% rate (bears a variable interest rate)
- $1.6 billion in bonds at a weighted average coupon of 3.8%
Maturities
- No significant maturities until August 2022
Primary Financial Covenant
- $1.2 billion unsecured revolving credit facility agreement amended 5/6/20
- ≤ 4.75x net debt to trailing 12-months adjusted EBITDA through 3/31/21
• Ratio reduced 0.5x every quarter until 3.25x (at 12/31/21 and thereafter)
- $1.2 billion maximum borrowing capacity
1 Assumes revolving credit facility agreement amendment in place on 3/31/20 | 10 |
Q1 2019 Highlights
- Sales decreased 9%, to $1,045 million
- Volume was down 9%; exited business -3%
- Raw material-related price decreases and currency impact reduced sales 3%
- Acquisitions added 3%
- Adj. EPS ¹ of $.41, down $.08 vs. adj. EPS ¹ of $.49 in Q1-19
- Adj. EBIT ¹ of $93 million, down $12 million vs. Q1-19
- Adj. EBIT ¹ margin down 20 bps, to 8.9%, vs. 9.1% in Q1-19
- 2020 guidance suspended, as previously announced April 2nd
1 See appendix for non-GAAP reconciliations | 11 |
Q2 2020 Priorities
- Keeping our employees safe
- Understanding changes in demand and corresponding opportunities
- Planning for expanded production as demand improves
- Optimizing cash flow
- Maintaining strong liquidity
12
Macro Indicators
Consumer confidence
More crucial than home sales since majority (~2/3rds) of bedding/furniture purchases are replacement of existing product
"Large ticket" purchases that are deferrable
Total housing turnover
Combination of new and existing homes sales
Employment levels
Consumer discretionary spending
Interest rate levels
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Longer Term | ||||
Value Creation | ||||
TSR in Top Third of S&P 500 | ||||
SOURCES | Revenue | Margin | Dividend | Stock |
Growth | Improvement | Yield | Buybacks | |
Target: | Growth in attractive | Payout target: | With available cash | |
6-9% annually | markets, product | ~50% of earnings | ||
development, cost | ||||
savings, efficiency | ||||
improvements | ||||
Total Shareholder Return = (∆ Stock Price + Dividends) / Initial Price | ||||
16 |
Growth Framework | ||||||
1 | 2 | 3 | ||||
6-9% | Increasing | Expanding | Identifying | |||
Average Annual | Content | Addressable | New | |||
and New | Markets | Growth | ||||
Revenue Growth | ||||||
Programs | Platforms | |||||
Organic + Acquisition | ||||||
17 | ||||||
U.S. Bedding Market Overview | ||||||
Finished Mattresses & | $8B | $1B | $1B | |||
Foundations at Wholesale | APPROXIMATE | |||||
Addressable Market | MARKET SIZE | |||||
~$10B | SEGMENT | MATTRESSES | ADJUSTABLE | STATIC | ||
FOUNDATIONS | FOUNDATIONS | |||||
COMPETITORS | ||||||
Innerspring maker-users and foam component suppliers | ||||||
Importers of innersprings, finished mattresses | ||||||
and adjustable foundations | ||||||
Private-label mattress manufacturers, | ||||||
primarily all foam | ||||||
Source: ISPA; Furniture Today; internal analysis | 18 | |||||
Bedding Market Disruption and Trends
Consumers accept online purchasing and compressed mattresses Changed traditional mattress route-to-market,number of brands
and product types
Growth of hybrid mattresses
Compressed mattresses expected to be half of the market by 2026
Non-traditional retail channels likely gain share, employing direct-to-consumer (DTC) brands and compressed mattresses
Traditional mattress retail channels remain and private label product offering grows
19
L&P Bedding Value Chain
Raw | Finished | Distribution | Brands/ | |||||
Components | Mattresses & | |||||||
Materials | & Fulfillment | Retail | ||||||
Foundations | ||||||||
Steel rod | Co-design and | B2B | Traditional | |||||
and wire | Innovation leader | produce private | ||||||
Direct-to- | ||||||||
in innersprings | label foam and | Consumer | ||||||
hybrid | ||||||||
Specialty foam | and specialty | |||||||
mattresses and | Brick & Mortar | |||||||
chemicals and | foam | finished | B2B2C | |||||
additives | foundations | eCommerce | ||||||
Supporting our customers from components to finished goods and fulfillment
20
Vertical Integration in Bedding Products
21
L&P Positioned to Win in Omni-Channel Environment
- Innovation and low-cost production advantage from integrated rod-wire-machinery-innerspring value chain
- Innovation advantage from ECS chemical-specialty foam value chain
- Innovation and value engineering advantage in private-label finished mattress production, particularly innerspring and foam hybrids
- Pair with adjustable and static ready-to-assemble foundations
- Build out B2B2C distribution and fulfillment capability
22
Global Automotive Market Overview
Cabin Comfort & Convenience | APPROXIMATE | $1B | $2B | $3B | $4B | $10B |
Addressable Market | MARKET SIZE |
~$20B | SEGMENT | COMFORT | CABLES | MOTORS | ADJACENT | |
ACTUATORS | ELECTRONICS/ | |||||
SOFTWARE | ||||||
COMPETITORS | Few, single- | Many; | Many; | Many; | Many; | |
functionality | ||||||
product focus | fragmented | make vs. buy | make vs. buy | |||
vs. cost | ||||||
CAGR | 5% | 2% | 5% | 5% | 9% |
~6% CAGR
outpacing vehicle production
23
Market Trends
Consumer demands for additional comfort, convenience and connectivity
Increasing global programs and platform sharing
OEM directed sourcing
Stricter standards drive innovation in lightweighting, efficiency, noise, and sustainability
Large share of the value chain is shifting to C.A.S.E.
Technological advances will have significant consumer and industry impacts over next
5-10 years - industry is transforming to our space in comfort and convenience
24
Trends Play to our Strengths
C | A | S | E | ||||
CONNECTED | AUTONOMOUS | SHARED | ELECTRIFICATION | ||||
Advantages Are Rooted In Our Deep Industry Knowledge And Customer Engagement | |||||||
Brand Reputation in | Vertical Integration | Intellectual Property/ | Flexible Global | ||||
Comfort Products | Trade Secrets | Manufacturing | |||||
The Results | |||||||
Long-term | Share leader | Share leader | Positioned for growth | The most | |||
in convenience and | |||||||
growth above | in | in fast growing | complete seat | ||||
adjacent | |||||||
industry | targeted | SUV and CUV | comfort subsystem | ||||
electronics/software | |||||||
production | segments | segments | supplier | ||||
applications | |||||||
25
Long-Term Sources of Margin Improvement
Portfolio management
Product innovation
Continuous improvement
26
Long-Term Disciplined Use of Cash
1 | Fund organic growth in attractive businesses | ||
2 | Pay dividends | ||
| 49 year history of dividend increases | ||
| S&P 500 Dividend Aristocrat | ||
| Payout target is ~50% of earnings |
3
4
Fund strategic acquisitions
Repurchase stock with available cash
27
Key Take-Aways
Near-term focus on COVID-19issues
Prioritizing employee health & safety Controlling costs
Optimizing cash flow
Maintaining strong liquidity
Planning for demand improvement
- $ Opportunities for long-termprofitable growth Maintaining capital discipline
28
FOR ADDITIONAL INFORMATION
Ticker: | LEG (NYSE) |
Website: | www.leggett.com |
Email: | invest@leggett.com |
Phone: | (417) 358-8131 |
Find our Fact Bookat www.leggett.com | |
Susan McCoy | Senior Vice President, Investor Relations |
Wendy Watson | Vice President, Investor Relations |
Cassie Branscum | Manager, Investor Relations |
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Additional Information
Cost Structure
| ||||
Costs are roughly 75% variable, 25% fixed | ||||
| Incremental/decremental volume | |||
| 25ꟷ35% contribution margin | |||
| Cost of Goods Soldcomposition (approximate): | |||
| 60% Materials, composed of: | |||
• Steel ~25% of RMs | ||||
• Chemicals ~15% of RMs | ||||
• Woven & non-woven fabrics ~10% of RMs | ||||
• Foam scrap, fibers ~3% of RMs | ||||
• Titanium, nickel, stainless ~2% of RMs | ||||
• Others, including sub-assemblies, hardware, components, | ||||
finished products purchased for resale, etc. ~45% of RMs | ||||
20% Labor (includes all burden and overhead) | ||||
20% Other, composed of: | ||||
• Depreciation, utilities, maintenance, supplies - each ~3% of COGS | ||||
• Shipping/transportation ~10% of COGS | ||||
• Other also includes rent, insurance, property tax, etc. | 32 | |||
Steel Impact
- Primary commodity exposure is steel; ~25% of RM's
- Main categories are scrap, rod, and flat-rolled
- Many grades of scrap - market data is generally available
- Limited credible data to track moves in other types of steel
- Impact from inflation/deflation
- Typically pass through; lag is ~90 days
- LIFO accelerates inflation/deflation into COGS
- Changes in metal margin (mkt price for rod - mkt price for scrap) also impact earnings
- Our scrap cost and rod pricing moves with the market; large swings cause Industrial Products segment earnings volatility
33
Customers Include
In North America: | |||||
Adient | HNI | Mattress Firm | Tempur Sealy | ||
Ashley Furniture | JLG (Oshkosh) | MCF | Tesla | ||
Best Home Furniture | Knoll | Rooms-to-Go | Toyota Boshoku | ||
Berkshire Hathaway | La-Z-Boy | Sanyo | Toyota Industrial Equip | ||
Casper | Lear | Serta | Tuft & Needle | ||
Eaton | Lincoln Electric | Simmons | United Technologies | ||
Haworth | Lowe's | Sleep Number | Walmart | ||
Herman Miller | Magna | Steelcase | Wayfair | ||
In Europe and Asia: | |||||
Dreams | Hay | Kuka | Silentnight Beds | ||
Eurasia | Hilding Anders | Natuzzi | Steinhoff | ||
Faurecia | Himolla | Nestledown | Volkswagen | ||
Fritz Hansen | Howe | Profim |
Diverse Customer Base - Low Concentration
34
L&P's Style of Competition: Critical Components
Dimension | Characteristic | |||||||||
Product / | 1. Role in value chain | Translate RM or components into critical component | ||||||||
2. Functional role | Functionally essential to end product | |||||||||
Service / | ||||||||||
Solution | ||||||||||
Where we | 3. % of finished COGS | <25% of finished COGS | ||||||||
Industry | 4. Customer set | Concentrated in few large customers | ||||||||
compete | ||||||||||
5. Competitive set | Small private companies w/ single focus | |||||||||
Structure | ||||||||||
Economics | 6. Gross margin | Earns attractive returns at ~20-30% GM | ||||||||
7. Asset intensity | Light manufacturing ~2x asset turns | |||||||||
8. Deep customer | Deep understanding of customer design, production | |||||||||
engagements | pain points, long-term relationships | |||||||||
9. Collaborative design | Co-design products/components for better functionality | |||||||||
How we compete | and lower | total cost | ||||||||
10. Flexible mfg | Long-runSKUs that can be adjusted to deliver custom | |||||||||
specs w/ minimal additional capital | ||||||||||
11. Continuous cost | Continuous cost improvement throughout life of long | |||||||||
improvement | run-length SKUs | |||||||||
35
Strong Peer Group
Diversified Manufacturers | |||||||||||
w/ Ticker & Fortune 1000 Ranking (May 2019) | |||||||||||
Leggett Ranking = 599 | |||||||||||
CSL | Carlisle | 570 | ITW | Illinois Tool Works | 214 | ||||||
DHR | Danaher | 160 | IR | Ingersoll Rand | n/a | ||||||
DOV | Dover | 412 | MAS | Masco | 366 | ||||||
ETN | Eaton Corp | n/a | PNR | Pentair | n/a | ||||||
EMR | Emerson | 178 | PPG | PPG Industries | 205 | ||||||
Characteristics of the Group | |||||||||||
Multiple Business Segments | Primarily Manufacturers | ||||||||||
Sell Mainly to Other Manufacturers | In "Old Economy" Markets | ||||||||||
Low Customer Concentration | Complex; Hard to Grasp | ||||||||||
Stamp, Cast & Machine Materials | Old, Established Firms | ||||||||||
Moderate Labor & Capital Intensity | Diverse Products | 36 | |||||||||
Governance/Directors | May 2020 |
- 9 Non-Management Directors (out of 11 total)
- Only Non-Mgmt Directors on Key Board Committees
Non-Management | Age | Joined | Position | Firm | |||||||
Mark Blinn | |||||||||||
| 58 | 2019 | Retired President & CEO | Flowserve | |||||||
Robert Brunner | | 62 | 2009 | Retired EVP | ITW | ||||||
Mary Campbell | | 53 | 2019 | Chief Merchandising Officer/ | Qurate Retail Group/ | ||||||
Manuel Fernandez | Chief Commerce Officer | QVC U.S. | |||||||||
| 74 | 2014 | Managing Director | SI Ventures | |||||||
Joe McClanathan | | 67 | 2005 | Retired President & CEO | Energizer Household Products | ||||||
Judy Odom | | 67 | 2002 | Retired Chair & CEO | Software Spectrum | ||||||
Srikanth Padmanabhan | | 56 | 2018 | Vice President | Cummins Inc. | ||||||
Jai Shah | | 54 | 2019 | Group President | Masco | ||||||
Phoebe Wood | | 67 | 2005 | Principal | CompaniesWood | ||||||
Management | |||||||||||
Karl Glassman ‡ | 61 | 2002 | Chairman & CEO | Leggett & Platt | |||||||
Mitch Dolloff | 54 | 2020 | President & COO | Leggett & Platt |
- Lead Director
- Chairman of the Board
Committees: Audit | Compensation | Nominating & Corporate Governance | 37 |
Compensation Rewards Strong Performance
- Annual Incentive
- Based on current year ROCE, free cash flow, and individual goals
- Performance Stock Units
- Long-termequity-based, significant portion of total comp for execs
- Three-yearperformance period with two equal measures
- Relative TSR performance (vs. peer group of ~300 companies)
- Company or segment EBIT CAGR
- Deferred Comp Program
- Opportunity (in December) to forego a portion of next year's cash salary and bonus to buy stock units
38
Financial Information
Sales and EBIT
Net Trade Sales | EBIT | ||
(million $'s) | (million $'s) | ||
$5,000 | $600 | ||
+11% |
$4,500
+8%
$4,000+4%+5%
$3,500
$3,000
$2,500 | $100 | ||||||||||||
'14 | '15 | '16 | '17 | '18 | '19 | '14 | '15 | '16 | '17 | '18 | '19 | ||
Amounts are from continuing operations and exclude unusual items. See appendix for non-GAAP reconciliations.
40
Net Earnings and EPS
$400
$350
$300
$250
$200
$150 $100
Net Earnings | EPS | |||
(million $'s) | ($'s per share) | |||
$2.75 | ||||
+6% | +1% | +4% | ||
$2.50 | -1% | |||
+32% | ||||
$2.25 | ||||
$2.00 | ||||
$1.75 | ||||
$1.50 |
'14 '15 '16 '17 '18 '19'15 '16 '17 '18 '19 Amounts are from continuing operations and exclude unusual items. See appendix for non-GAAP reconciliations.
41
Returns and TSR
Return on Invested Capital | 3-Year Avg TSR | ||||||||||||||||
25% | 30% | (at year end) | |||||||||||||||
20% | 25% | ||||||||||||||||
20% | |||||||||||||||||
15% | 15% | ||||||||||||||||
10% | 10% | ||||||||||||||||
5% | |||||||||||||||||
5% | 0% | ||||||||||||||||
0% | -5% | ||||||||||||||||
'14 | '15 | '16 | '17 | '18 | '19 | '14 | '15 | '16 | '17 | '18 | '19 | ||||||
Leggett | S&P 500 | ||||||||||||||||
- See appendix for return calculation
- TSR assuming dividends continually reinvested
42
Segment EBIT Margins
20% | |||||
18% | |||||
16% | |||||
14% | |||||
12% | |||||
10% | |||||
8% | |||||
6% | |||||
4% | |||||
2% | |||||
0% | '15 | '16 | '17 | '18 | '19 |
Bedding | Specialized | Furniture, Flooring & Textile | Total |
- Amounts exclude unusual items. See appendix for non-GAAP reconciliations.
43
Uses of Cash Flow
million $'s | 1,265 | |||||||||
$700 | ||||||||||
$600 | ||||||||||
$500 | 108 | |||||||||
193 | 155 | |||||||||
128 | 183 | |||||||||
$400 | 109 | |||||||||
39 | ||||||||||
$300 | 70 | 30 | ||||||||
$200 | 177 | 186 | 194 | 205 | ||||||
168 | 172 | |||||||||
$100 | 124 | 159 | 160 | 143 | ||||||
94 | 103 | |||||||||
$0 | ||||||||||
'14 | '15 | '16 | '17 | '18 | '19 | |||||
Cap-ex | Dividends | Acquisitions | Share Repurchases | Cash from Ops | ||||||
Operating Cash > Capital Expenditures + Dividends for over 30 years
44
Cash Flow Details | |||||||||||
$'s in millions | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||
Net Income | 101 | 329 | 286 | 293 | 306 | 334 | |||||
Deprec & Amort | 118 | 113 | 115 | 126 | 136 | 192 | |||||
Def Income Taxes | (40) | 24 | 18 | 16 | (3) | 8 | |||||
Impairment & Other | 124 | 19 | 15 | 11 | 32 | 20 | |||||
Working Capital | 54 | (171) | 15 | (80) | (46) | 80 | |||||
Other Non-Cash1 | 25 | 45 | 4 | 78 | 15 | 34 | |||||
Cash from Operations | 382 | 359 | 553 | 444 | 440 | 668 | |||||
Uses of Cash | |||||||||||
Capital Expenditures | (94) | (103) | (124) | (159) | (160) | (143) | |||||
Dividends | (168) | (172) | (177) | (186) | (194) | (205) | |||||
Acquisitions | (70) | (11) | (30) | (39) | (109) | (1,265) | |||||
Share Repurchases | (128) | (183) | (193) | (155) | (108) | (7) | |||||
1 2017 Other Non-Cash includes $67 million in deemed repatriation taxes as a result of the Tax Cuts and Jobs Act | |||||||||||
45 | |||||||||||
Debt Issued and Retired | |||||||||||
million $'s | $993 | ||||||||||
$600 | |||||||||||
$500 | |||||||||||
$400 | |||||||||||
$300 | |||||||||||
$200 | |||||||||||
$100 | |||||||||||
$0 | '14 | '15 | '16 | '17 | '18 | '19 | '20 | '21 | '22 | '23 | |
Issued | Retired | Cash | |||||||||
Excludes commercial paper borrowings and operating lease liabilities | |||||||||||
46 |
Financial Metrics Defined
- TSR: Total Shareholder Return
- Total benefit investor realizes from owning our stock
- (∆ stock price + dividends) / initial stock price
- EBIT CAGR: Compound Annual Growth Rate of EBIT
- ROCE: Return on Capital Employed
- Drives ~60-70% of annual bonus at operating level and corporate
- EBIT / (working capital (ex cash & current debt) + net PP&E)
- FCF: Free Cash Flow
- Drives ~20-30% of annual bonus at operating level and corporate
- EBITDA - capex +/- ∆ working capital (ex cash & current debt)
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Appendix
Non-GAAP Reconciliations
Non-GAAP Adjustments, Continuing Ops
($ millions, except EPS) | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
Non-GAAP Adjustments ($'s)1 | |||||||
Note impairment | - | - | - | - | 16 | - | 8 |
Stock write-off from 2008 divestiture | - | - | - | - | - | - | 4 |
Restructuring-related charges | - | - | - | - | 16 | 15 | - |
ECS transaction costs2 | - | - | - | - | 7 | 1 | - |
Gain from real estate sale | - | - | - | (23) | - | - | - |
Impairment charges | - | 6 | 4 | 5 | - | - | - |
Litigation accruals | 54 | 6 | - | - | - | - | - |
Pension settlement charge | - | 12 | - | 15 | - | - | - |
Gain/loss from sale of business | - | - | (27) | 3 | - | - | - |
Litigation settlement gain | - | - | (7) | - | - | - | - |
Non-GAAP adjustments (pre-tax $'s) | 54 | 23 | (30) | - | 39 | 16 | 12 |
Income tax impact | (21) | (9) | 12 | - | (7) | (2) | (3) |
TCJA impact3 | - | - | - | 50 | (2) | - | - |
Unusual tax items | - | - | - | (8) | - | - | - |
Non-GAAP adjustments (after tax $'s) | 33 | 15 | (18) | 42 | 30 | 14 | 9 |
Diluted shares outstanding | 143.2 | 142.9 | 140.0 | 137.3 | 135.2 | 135.4 | 135.6 |
EPS impact of non-GAAP adjustments | $.23 | $.09 | ($.13) | $.32 | $.22 | $.10 | $.07 |
1 | Calculations impacted by rounding | |
2 | 2018 includes $4 million in SG&A charges and $3 million of financing-related charges in interest expense | |
3 | Tax Cuts and Jobs Act of 2017 | 50 |
Reconciliation of Adj EBIT, Adj EBIT Margin, Adj EBITDA, and Adj EBITDA Margin
($ millions, except EPS) | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
Net trade sales | $3,782 | $3,917 | $3,750 | $3,944 | $4,270 | $4,753 |
EBIT (continuing operations) | $332 | $487 | $522 | $468 | $437 | $513 |
Non-GAAP adjustments, pre-tax1 | 54 | 23 | (30) | - | 36 | 16 |
Adjusted EBIT (cont. operations) | $386 | $510 | $492 | $468 | $473 | $529 |
Adjusted EBIT margin | 10.2% | 13.0% | 13.1% | 11.9% | 11.1% | 11.1% |
Adjusted EBIT (cont. operations) | $386 | $510 | $492 | $468 | $473 | $529 |
Depreciation & amortization | 118 | 113 | 115 | 126 | 136 | 192 |
Adjusted EBITDA (cont. operations) | $504 | $623 | $607 | $594 | $609 | $721 |
Adjusted EBITDA margin | 13.3% | 15.9% | 16.2% | 15.1% | 14.3% | 15.2% |
1 See slide 50 for adjustment details
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Reconciliation of Adj Earnings and Adj EPS
($ millions, except EPS) | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||
Earnings (continuing operations) | $225 | $328 | $367 | $294 | $306 | $334 | ||
Non-GAAP adjustments, after tax1 | 33 | 15 | (18) | 42 | 30 | 14 | ||
Adjusted Earnings (cont. operations) | $258 | $343 | $349 | $336 | $336 | $347 | ||
Diluted EPS (continuing operations) | $1.55 | $2.27 | $2.62 | $2.14 | $2.26 | $2.47 | ||
EPS impact from non-GAAP adjs1 | .23 | .09 | (.13) | .32 | .22 | .10 | ||
Adjusted EPS (cont. operations) | $1.78 | $2.36 | $2.49 | $2.46 | $2.48 | $2.57 |
1 See slide 50 for adjustment details
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Calculation of Return on Invested Capital
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||
Adjusted EBIT (cont. operations)1 | $386 | $510 | $492 | $468 | $473 | $529 | ||
Tax rate | 26.0% | 27.7% | 23.7% | 22.2% | 20.7% | 22.1% | ||
Net Operating Profit After Tax (NOPAT)2 | 285 | 369 | 375 | 364 | 375 | 412 | ||
Total debt (long-term + current) | $964 | $945 | $960 | $1,252 | $1,169 | $2,118 | ||
Operating lease liabilities3 | - | - | - | - | - | 161 | ||
Equity | 1,155 | 1,098 | 1,094 | 1,191 | 1,158 | 1,312 | ||
Less: Cash & Cash equivalents | (333) | (253) | (282) | (526) | (268) | (248) | ||
Invested Capital | $1,786 | $1,790 | $1,772 | $1,917 | $2,059 | $3,343 | ||
Average Invested Capital | $1,891 | $1,788 | $1,781 | $1,844 | $1,988 | $2,701 | ||
Return on Invested Capital (ROIC) | 15.1% | 20.6% | 21.1% | 19.7% | 18.9% | 15.3% | ||
1 | See slide 50 for adjustment details | |||||||
2 | NOPAT = Adjusted EBIT x (1 - tax rate) | |||||||
3 | New lease accounting rules adopted January 1, 2019. Prior year data is not available. |
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Calculation of Dividend Payout % of Adjusted EPS
Diluted EPS from cont. operations EPS impact from non-GAAPadjs1
Adjusted EPS from cont. operations Annual dividend per share
Dividend payout % of diluted EPS from continuing operations
Dividend payout % of adjusted EPS
- See slide 50 for adjustment details
2016 | 2017 | 2018 | 2019 |
$2.62 | $2.14 | $2.26 | $2.47 |
(.13) | .32 | .22 | .10 |
$2.49 | $2.46 | $2.48 | $2.57 |
$1.34 | $1.42 | $1.50 | $1.58 |
51% | 66% | 66% | 64% |
54% | 58% | 60% | 61% |
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Non-GAAP Financial Measures
While we report financial results in accordance with accounting principles generally accepted in the U.S. ("GAAP"), this presentation includes non-GAAP measures. These include adjusted EBIT, adjusted EBIT margin, adjusted EBITDA, adjusted EBITDA margin, adjusted earnings, and adjusted EPS. We believe these non-GAAP measures are useful to investors in that they assist investors' understanding of underlying operational profitability. Management uses these non-GAAP measures as supplemental information to assess the company's operational performance.
We believe the presentation of return on invested capital (ROIC) provides investors a useful way to assess how efficiently the Company uses investors' funds to generate income. Management uses this ratio as supplemental information to assess how effectively its invested capital is utilized.
The above non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered a substitute for, or more meaningful than, their GAAP counterparts.
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Disclaimer
Leggett & Platt Inc. published this content on 22 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 May 2020 14:47:00 UTC