LEG - Earnings call transcript Q2 2021 | Leggett & Platt, Incorporated

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Operator

Greetings, and welcome to the Leggett & Platt's Second Quarter 2021 Webcast and Earnings Conference Call. At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. President Relations. Vice Senior McCoy, of Investor Susan Thank you.

may begin. You

Susan McCoy

Good and you, quarter for taking Thank conference you second part morning Platt's thank Daryl. & in call. Leggett

Please different are delays minor audio again We call mixed us from this this you conducting or quarter. bear quality. experience with if locations

due with PowerPoint is company Flooring Actual portion CEO; Products and and result a posted that Executive Sherwood, non-GAAP expectations, replay statement. portion obligation call transcribed, risks Textile expressed results the Jeff revise updated and outlook main Vice Leggett's A being uncertainties, objectives, IR; broadcast & details. you operating the & remarks On slides details will future these financial morning and summary website recorded CFO; that discuss today and update recorded call yesterday's documents our will made President will the and or and and is Leggett Branscum, forward-looking President no information events, differ segment the statements. Steve of events of is call and we along may The Karl of address are to Those release. Dolloff, number call a with remind of discuss We or EVP this points of copyrighted Director of IR of trends, available contain agenda and trends today demand President Specialized call on the COO; cover without Mitch Furniture, follows. reconciliations. the to results Chairman may the Henderson, materially permission. conference Cassie Director or I website. to is set undertakes segments; the Glassman, Mitch for including IR, financial Jeff IR. to need material. this strategies, Products from Relations and our concerning of This Tate, and constitute as supplement for our the in Karl or Senior for be Tarah not and Investor information start release we press summary yesterday's This XXXX. Platt press

and to release summary sections XX-K refer over of and now factors yesterday's our risk XX-Q Factors Statements. please press most a in turn and and call these I'll additional information, subsequent the the entitled Risk to Karl. Forward-Looking For recent

Karl Glassman

call. These adjusted sales to operations morning record Good thank the of in outstanding Yesterday, employees EBITDA. you around and time continuing and our hard quarter globe. EBIT are reported and from a results for our quarter work second record quarterly all dedication participating testament second we and the

sales Second $XXX all million $X.XX, $X.XX quarter were quarter of higher second EBIT XXXX. were earnings the per than significantly was and billion. share

basis press million sales in recovery significant points; of in estate EBITDA the gain Excluding to the the EBIT adjusted X%; and related year-over-year XX EPS was to was margin $X.XX. EBITDA X%; XX%. Strong results When was adjusted second up and yesterday's grew most impacts and trade comparing quarter XXXX, COVID-XX noted pandemic. our from $XXX the real adjusted EPS improved of adjusted adjusted release, results reflect increased businesses pre-pandemic

European Bedding and of work margin The the acquisition a manufacturing to call. of annual strategic furniture European At a made to Increased we U.S. located acquired innerspring million. office located toppers, customers Poland value acquisitions, $XX furniture our We and to During June sales in our in and product capabilities sales used our as combined been acquisitions that and X, With this EPS On important leading metal cost on has acquired and end our near Company local establishes mentioned. foam sales supplier private guidance support is inflation us detail bedding has expanding to production. in guidance, our UK offerings May, international facilities a two products mattresses other a bent expands two material label we foam of the and provider operation. business technology of residential in full-year and Dublin platform the finished allows Mitch. the Kayfoam we is quarter, an bedding the Rod just to I'll turn foam provide Similar our due anywhere and specialty more furniture in business. Ireland. finished Steel the that, businesses. our updated to primarily approximately manufacturer over later call customers our Jeff in result work and chain metal including the serving tubing finished and business, increased betting Kayfoam and capabilities the in Bedding mattress small of of from expansion pillows, related in components largely mattresses, will continued guidance to accessories. with

Mitch Dolloff

and Thank morning, good you, Karl, everyone.

I driving would like thank First, our for second results. quarter employees to record

raw shortages very us Your environment. demand strong and to ingenuity in challenges customers to and commitment resolved material labor constraints our freight a navigate allowed service

most to and efforts accomplishments and levels in transportation quarter, continued disruptions our quarter, near semiconductors, of notably businesses, or volume sales second strong Your operating chain as labor in greatly in have are performance had most above We appreciated. chemicals the constraining the throughout supply recovered pre-pandemic growth.

incremental to and seeing in in in of continue areas, are create improvement both they we While supply volatility many costs. these

X% non-woven in component constrained performance. constrain inflation more negatively impacting shortages raw from to from at than which which pace second labor production. demand XXXX, logistics quarterly our Products U.S. good Bed of to due quarter comments related to last anticipated provides in price the in selling second and business quarter Given compare up down impact was and part increases a Volume the our will supplier second primarily improved material my pandemic due to our results, to availability, versus operating results – due steel, exited segment Availability foam were production quarter our insight in chemicals segment Fashion to Bedding was significant specialty year's Sales and related business XXXX, our and slower operation in meaningful second unit to continue of chemicals used a Volume Drawn challenges. mattress foam finished mattress production quarter, U.S. Wire. lower disruptions and during the also and the fabrics. but

online we for second cost Products segment the our period, Rod business, for over over our European growth several increasing Industry the the remainder throughout the semiconductor heavily opportunities we more metal over mattresses many anticipate quarter our Long-term, recently, Similar OEMs Kayfoam with in In reducing and was May of compressed Bedding the some due anticipate to margins through we seasonal While was or primarily have models. some could ComfortCore expected completely our at to seamless place Spring, softening pre-pandemic shortages last the April supply over the requirements purchasing shutting readily improve discipline, two-year these signs but US down and the products continue in EBITDA still tube impacted for more to to demand acquisition. business, recent is US in lower as automotive XXXX the Supply of largely first production fabricated least In hybrid and improved we from fixed are well quarter volume chemical trends In levels. volume across we've past becomes the are shortages. of the the ComfortCore down summer in the in Demand and European year. persist expansion slowly Aerospace segment. allocations the was primarily from market planned demand in second more for two-year strong quarter were Europe segment is capacity down welded in X% and assemblies production degree seen expanded but and our months. second of years, half business near XXXX, specialty in inventory the customer Specialized Steel taken built actions but year. seeing foam throughout below duct consumers to available. our some Adjusted is levels, phone pricing period, innersprings in Bedding fulfill business Sales to improved demand form of margins mattresses. with in XXXX.

impact levels truck strong until demand travel chain buildup industry resulting and aircraft the The and With to of In return with pandemic-related the lift inventories. supply demand air XXXX from is to XXXX. surge disruption in very in orders. and is lingering Cylinders market not anticipated Hydraulic the

OEMs availability However, chain ability to and constraints, global production. the up ramp hampered have supply labor

lower & Components. Flooring expect fixed cost the our in segment this in period, by in in of year. business primarily but second as declined sales margins demand were volume, persist taken Textile XXXX. We XX% OEM supply segment increases, early the driven last two-year chain from Furniture, production actions EBITDA versus could constraints partially up quarter into the Furniture to Home over offset Products our and Geo XXXX Sales strength by increase

market strong our Geo softened expect private our constraints bedding products Components XXXX. and our business, and of furniture to Furniture market strong. due in and foam We is that are for the in the into In business business impacting Home Demand demand demand the year construction Fabric remainder manufacturers. retail converting

in And segment anticipate end XXXX lags demand well demand to residential hospitality the over two-year other levels As rebound. whereas in above sales the furniture foam In we levels. products, availability period. is improves, remains pre-pandemic Flooring market below businesses the recovery work comparison while

are versus from to focused structure took see over business actions We necessary keeping with by year. adding some residential fixed margin support $XX future see only higher and as all in improved strong we our of primarily last the variable continue controlling fixed cost demand of taken volumes segment Adjusted costs improvement in cost Overall, last second aligned demand quarter contract our for demand quarter actions on levels EBITDA the in the sold for two-year approximately reduced Home to cost our fixed use period, increased Furniture second opportunities. beginning to businesses, and the cost are our and million market. Across XXXX. products and the costs growth year we by

to our to in Wire second mill Spring meet production order improves the will operation US the Rod, In allow for quarter build three Steel foam quarter, the industry. also in inventory the as to US We weeks labor to anticipated Drawn and third demand increase availability across replace furnace. Spring rod of businesses fourth customer have take reheat through our out and and plan to we

inventory to the in I'll levels seasonal flow to of As a cycle in result, alter likely now expected some degree. these the the through call over are build turn normal of Jeff. businesses year. our cash inventory will The remainder higher sales

Jeff Tate

higher everyone. partially capital just inventory levels million, higher planned $XX morning was from good and were inflation investments the Mitch, the the you, working and In to as earnings build in well operations by quarter, Mitch cost cash as that Thank inventories. of maintain discussed, second offset those

quarterly with the estimate. the higher full approximate of end our lowered per This the among increases. year of have XXXX. operating of $XXX extend half million return yield of for cash expectation based yields at dividend now At we the operations of anticipate higher adjusted levels offshore is S&P of XXX carrying of record inventory dividend the and back working of share. cash We marks our In annualized currently year, X.X% year. and Aristocrats. of upon quarter, the the flow dividend the to indicated May, million increased brought our $XXX in price the $XXX proud cash $X.XX At a percentage year, annual year by as Dividend capital annual we With it. to the the to $X.XX XXth to we of an $X.XX, plan one from million Friday's We're year the of of we cash during end least through first closing $XX.XX, consecutive sales a XX.X%; full expect of

with along and XX-month ended total two and billion give over our flexibility times the debt last trailing of of when the base efforts EBITDA decisions. us financial investment capital quarter making deleveraging strong net liquidity. $X.X X.X We to Our years with

organic and include with They in acquisitions share for strategic growth, long-term priority, cash funding repurchases funding cash. use priorities order of unchanged. paying Our available dividends, are

For acquisition continue as the do of focus expenditures year full $XXX we significant million. of we million. approximately We and share a approximately expect Dividend XXXX, $XXX any should $XXX not million on to capital spending repurchases deleveraging. expect approximate

$X.X $X.X to to our again divestitures. XX% of now of material acquisitions, per earnings or related announced are and X% XXXX higher price to acquisition guidance currency material XX% billion and sales XXXX, the we be mid versus raw sales. combination of growth, share sales increasing As increases, prior $X.X net guidance. over price and to billion high-single-digit are $X yesterday, approximately volume to XXXX resulting The reflects increases expected growth related billion raw from benefit up increase from billion

$X.XX while as for automotive estate including remainder cost in per home-related XXXX move per closing, this in as and call XXX both quarter. share us are per we comments, acquisitions. cash million. full share guidance and back be year should long-term We diluted tax be XX.X%. improvements Earnings assumes expect and constraints gain and margin manner the result savings $XX guidance be $X.XX, second disciplined increased this capital XX%, metal of demand earnings rate on actions to due guidance earnings continued a to recognized to in balanced of upon net be real interest strategic XXXX and $XXX fully chain expected some in and global $X.XX $X.XX of million. our effective In – deploying higher products over through supply This adjusted a full to expense guidance opportunities, primarily of the strong range is growth Full now of versus to taken debt and approximately per adjusted consumer share approximate to focused fixed positions now those to near million $X.XX to from of to Susan. with of the along million, approximately through reducing margin. shares $XX that remain $X.XX, capture in prior framework, year. depreciation we EBIT With a also XX.X% Based $X.XX to year with I'll turn organically the year share to to range assumes amortization the XXXX generation, $X.XX expected

Susan McCoy

direct thank your questions. your we'll Q&A your it our answer Daryl, session attention questions. we're our glad to answer ready group to That prepared Q&A. and will remarks. you concludes We in for the as start be Karl will

Operator

your [Operator from Raymond Instructions] is come with the with James. line questions. first Bobby Our question Griffin proceed of Please

Bobby Griffin

very growth for morning, touch actually want Good first over I everyone well. segment. you last on everybody. been the of couple international guys a is bright I It's years. taking Thanks doing the to I spot bedding good hope for guess, my questions. of

acquisition international a participate frame go-to-market strategy, little business the up So you your in now with acquisition, be of the might springboard capabilities Karl with the for that give Continental a U.S. can over or different in you business kind terms that think phone X kind or Mitch, there the Is then did U.S.? maybe or to capabilities? in to we your you importantly, in bedding what where opportunity And in the this with do how launch Kayfoam, about more that X-year now of to in of there. Europe addition

Karl Glassman

question, Yes, Bobby. unravel thanks that? to the you for Mitch, do want

Mitch Dolloff

over right, pandemic. you're And really including Bobby. the been strong years this international last year of has the morning, us, Europe Good – sure. in really the of particularly out and coming grew bedding Yes, for couple

Europe. the Kayfoam market were here do we different it's more product us. up to other place regions segmented really, we UK taking it's growth the that see that and meaningful us as advantage the types. than So in trends parts acquisition sets take see of different them really U.S. And for a But opportunity U.S., see different with similarly of in across the that we and the happening a

of So foam Kayfoam the a in is finished first mattresses. it's off, – provider specialty

expertise. this for with that in a collaborating for commodity Chemical We business, much specialty They've us. fills foam bedding and over foam are in mark Technology really Peterson so that utilizing decade interested and the not been

not as or label gives allows but mattresses, only specialty us anywhere really also it scale to production of capability it to foam, got value from our us way to all similar chain, finished value US in along component that in private what chain the mattresses we of the customers dislike support innersprings to finished accessories. specialty really other foam through of and the Bedding So ECS

This business broader it we in similar grow the possibilities of primarily to we opportunities Ireland the So really UK and to focused will look continue European market. Europe. well like, sets our we explore through is feel that up us as in

Bobby Griffin

Okay, before from appreciate in lastly I That's guess jump then I the me And back helpful. that. I queue.

in understand the chip really auto getting catch-up from a be in think type to the about will there, is when things impacted I and of Just the the be there'll XQ catch-up then going model supply pretty on year? our and catch-up of shortages chain, back Or the inventories on what's XXXX XXXX and big this going in normal is much where year for we start the in rest XQ this levels.

Karl Glassman

that you that's trying good that tried Yes, information why question. to But, contemporary the answers really most a Bobby, don't work have those Steve, based on ourselves. answer – we're question through we to

Steve Henderson

we All number us pretty way think right, QX as to players The right again, going is issue. the are opaque of it other that chain. good and now caveat a value morning, of What the we the then in really see the and was Bobby. to we peak the see that

that then but QX. units X.X continuing more we to right sitting like the really QX somewhat year-on-year XXXX QX units million should million into and impact at million X.X we looking is are in at first lost now, down QX, days, So and And the to lost probably the million million right in around recovery we in earnest about XX but point QX X.X into between QX really start probably in somewhere X.X lowest since of being X QX. million units X.X they the lost where as are U.S., we're units be. from would probably the lower now sitting in and – quarter able in being were [ph] see build inventories the to inventories at which and August up and sitting the

take out it So the get will that parity to probably XX to again. X rebuild months inventory once to we

Bobby Griffin

here of helpful. jump in That's Thank queue. best half. back luck in you. But I'll very second the the

Karl Glassman

Thank you.

Operator

you. Thank

Our with question with of questions. next Hughes proceed comes line your Please the Truist Securities. Keith from

Keith Hughes

the guess in the question of the for what's is guidance this coming in that you. kind third and Thank quarter? my your outlook on fourth I margins, metal

Karl Glassman

over and in that of certainly or our case cost scraps inflated price Keith, downs rod years the Yes, and one And few the that and metal sell story rate. the then margin of That's faster either good because ups and there our capacity with two the a difference of as year margins price, up each in has or input between the last different dynamics, has aggregate a dramatically the metal U.S. been scrap. which the at is kind month defined sales wire case increased really but demand rod $XXX pretty The exists. versus lack the in a in this ton. of is wire

just few over post-COVID And wire back need there of the half we many lot years, mills was offline. downtime capacity has down. for mean, of our last there some a to So demand us mills and I the in taken like heck, one maintenance. shut of really take the routine year strong been

any pricing forecast of good buy But to down the next the week. – be – expectation just – rod reduction it to sometime in is and wire it's There answer There country. an hard the continue and here inflate spreads tell forecastable scrap the again some outlook this long-winded will $XX. will is shape and despite for the will the slightly settle future. really to expectation is that August, in is is in no will scrap there spreads availability. probably trade But you So just down wire because in kind rod that

Keith Hughes

well on get it's coming will environment up see Okay. double on down, way in you prices? guess are on Usually scrap positive as a that extra some really like make you price could could that when your actually prices margins fall. eventually nice a What downturn do it now the sounds you I margin, on

Karl Glassman

That's the near-term expectation, Keith.

Keith Hughes

you final producers supply anticipate When your more up, particularly is mattress of caught mattresses? guess question foam the the pretty getting in okay. in some Yes, And what be – perhaps terms need the in if I given business strong to will, industry do you demand meet there. will

Karl Glassman

the Mitch, one. but… easy to easy, Metal Karl, you that want grab margin that question. answer I

Mitch Dolloff

Yes, at quarters have several certainly Keith. a it's shot something I else in over chemical morning, happen. resolved think that. Good last we dynamic, foam constraints the are to been right, mean, that into time translate seems very, that getting every think that I very we thought

this So jinx quarter. over I don't second to year. But somewhat want have they improved the

constraints is we and as really resolved to on – them The incrementally are continue we all a We primarily going on shorter third quarter part the next the expect don't is building it forward end to foam we work that to and year, hopefully quarter, that's and are but We timeframe. into a which yes, through to availability. year in we short will the labor respond, in improve quarter. this planning fourth continue go as that maybe answer third know, answer we expand capacity be to frankly, we carryover, the through depend something the to and want surge, to little there expect right. move go we we inventory through and they fourth want bit able be we're of as If as case, will resolved very if the and in But be is but chemical ready happens see why quickly.

Keith Hughes

your space now. And bit a out sold inventory Okay. to and demand build with right ECS try little

Mitch Dolloff

I'm was sorry, what that.

Keith Hughes

offseason, the the for Given ECS like level future? and fact the some to sounds inventory foreseeable demand build the out is sold trying you're in that

Mitch Dolloff

so kind for on of ECS, our secondary right. components, At us impact it's Yes. spring

constrained capacity by can ECS our of foam mattress production through production in capacity we are immediately our and – finished there. have and the foam respond We there so are plenty –

everything point. we we are making basically selling can at this and So

Keith Hughes

much. very you thank Okay,

Operator

you. Thank

Please question your Maklari questions. next with of Susan the Sachs. with comes Goldman from Our proceed line

Susan Maklari

capacity you of Good morning, of you're side terms Bedding around My first you that with then this of the question everyone. is capacity in – was you're how Can you Karl, there, through Mill. comments to much think that at about or you how talk year. Karl your us incremental And that's I that I it with where talk sizes that coming you. on can are and mentioned, coming that increasing increasing things, Rod about through working Thank how this in adding guess production too, think to capacity it? the some online

Karl Glassman

Mitch, the why first as regards don't part, take you ComfortCore capacity?

Mitch Dolloff

Yeah, okay. Sure.

Susan. more bring So want capacity largely said. about staffed. to we fully over through capacity as because got we've staffing the capacity shifts. talked as capacity are from of it, machining are as expansion little talk operations do do of coming last then as ComfortCore don't that largely to up or to Adding plan about said, our we to not several four tell? planned I a very a Most need furnace that Frankly, we the place good morning, Yes, bit reheat good want are that They And you all well you today. online. me quarters. we've machinery we we very, through the and as But Karl,

Karl Glassman

No, please Yes, do. go ahead.

Mitch Dolloff

takes now, really And need it. toll a furnace capacity not us and replace that. production the it clarification that a expansion was reheat maybe and on then there, due really it's essentially to to reheat of to do the so slight furnace it dynamics replacement really for a And time the just and overtime the really essentially of – is

a a us. But to for put we will reheat don't us a it and stable place not and going make brand it sure have new So allow outages furnace with expansion us forward. in is capacity we'll

build down. some of inventory the we'll so ahead rod mill that taking – And taking

So that you on inventory will it back have hand comes plenty up. of as

Susan Maklari

Got you.

that's helpful. Okay,

increasing there sorry you're I thought was production that. that mistake. And for but my the that

Mitch Dolloff

No problem.

Susan Maklari

for more these you over the terms pipeline, these of couple quarter. of two next M&A acquisitions this you're smaller going some there? other seeing maybe quarters? what through potential my And of Can question on is, talk deals what's So you did the the in

Karl Glassman

Yeah, Susan.

fill or look we we're to platform. speak to to a to continue and had find to strategic that capabilities existing strong where fits out continue trying We so always gap build

everything to So consider anything at don't expect would on continues deleveraging small as would near considered we're focus looking that deleveraging well. term be bolt-on large important and to and the be

deleveraging. done Our teams of have job a great

want to lever. continue that pull to work We

Susan Maklari

Got you.

Good thanks Karl. Okay, luck.

Karl Glassman

Susan. you, Thank

Operator

[Operator Keith the of with Instructions] Sandler. question Please Peter next you. Our questions. proceed comes Thank from line Piper your with

Peter Keith

Hi, you. for the thank everyone. morning, taking Good Thanks questions.

now? to own factories mentioned capacity some your you the right had trouble I You that labor getting shortages seeing various seeing inflation? your constraints fully what you're just guess segments it’s are across due having where wage was curious Are pockets labor any backdrop you're however, staffed, any given there

Karl Glassman

Yes, Mitch, grab want do you to one. that

Mitch Dolloff

sure. Yes,

we're just where not labor it's But and we're a get a constraining pandemic. of a ECS the probably we’re our coming just impacted, bit but point, any place smaller think think out at really is of so struggling I an little But those just challenge the bit couple world, operations our is like of severely seen the we'll in marginally look for us challenge, that I think probably where a output. ongoing in workforce this are I – as tackle. everybody

We seeing are bit a of inflation. wage

I either. think unique that's not to us

Peter Keith

on you some impact volume if those headwind Bed was from Fashion somewhere to Drawn out My Pivoting I volumes math goes of the this. down envelope, I've Betting, just you've X% the a two-year looks Okay, And XXXX. mix? been called investor there's volume now basis. would from and two-year the couple on XX% Wire. like on sort to And growth from exited are think specifically got back customer general you Maybe a wondering of it it was quantify basis could thanks. questions really you of say address about the your that or a over what if to

Karl Glassman

The from Is biggest that quantified those is issue, the constraint of for businesses. exit never but the Peter, correct? the impacts, sure foam Susan, we've

Susan McCoy

couple done though haven't which is was XXXX just segment about relative the map after X% mean know segment – you'd year-over-year Not the can – with if I have XXXX that level in the We the like. rough don't as we size company-wide closer back reduction maybe at X%, level, quantified it follow-up that's were looking and there would to I Peter, the Bedding X% math. roughly of the company-wide, for you but we XXXX call so, that's at to very because, or

Peter Keith

EPS certainly then got material beaten it raise like here, passing arguably Okay, there with at however looks It And anything the acquisitions raw nice flow I guidance and well? QX, adjusting then the the the EPS is you're up? much that you've QX look through back margin articulated the price on year of but good. if thanks. for sales sounds front, the outlook bump job as is and raise half there the your guess, in Or increases the allows we raise through but that

Susan McCoy

right no, what half. anything cost in adjusting And there that You're back that is the the about margin. It's increases. for largely metal for not we're

year. anticipate the of the half as second we So move would through we

talked about – ability see to recover third and quarter, so and supply quarterly we've material to and through improvement, fourth in chain relative sales constraints following So and already the forth. margin raw EBIT with sequential quarter in expectations to our costs improvement EPS our

adjustments. special no but So,

Peter Keith

for thanks good and Okay, luck. the overview

Karl Glassman

you. Thank

Operator

for Susan comments. this Thank at you. turn to There are no the questions floor back further McCoy closing like I over any would to time.

Susan McCoy

we us you Thank you look – to forward will quarter. joining talking And We today. you. next appreciate to we

Operator

for That teleconference. morning’s you. participation. you this Thank conclude does Thank

lines disconnect this may your at You time.

Leggett & Platt (LEG) 3 Aug 212021 Q2 Earnings call transcript