2019 was a year with many accomplishments and important changes.
We are, today and every day, building for the future.
Sales grew 11% in 2019, to $4.75 billion. Acquisitions, primarily ECS, added 14% to sales growth. Organic sales decreased 3% from lower volume. Volume grew in several businesses including U.S. Spring, Automotive, Aerospace, and Work Furniture, but these improvements were more than offset by planned declines in Fashion Bed and Home Furniture (which collectively reduced sales by 3%) and weak trade demand for steel rod and wire. Raw material-related selling price inflation from increases implemented in late 2018 was offset by a negative currency impact.
EBIT increased $76 million, and adjusted1 EBIT increased $56 million. Earnings benefited from lower raw material costs (including LIFO benefit), the ECS acquisition, and improved earnings performance in our Furniture Products segment. EBIT margin was 10.8% and adjusted1 EBIT margin was 11.1%, flat with 2018’s adjusted1 EBIT margin. EBITDA1 margin was 14.8% and adjusted EBITDA1 margin was 15.2%, up from 2018’s adjusted EBITDA1 margin of 14.3%.
Earnings per share in 2019 were $2.47, including $.10 per share of restructuring-related costs and ECS transaction costs, an increase of 9% versus EPS of $2.26 in 2018. Adjusted1 EPS was $2.57, an increase of 4% versus adjusted1 EPS of $2.48 in 2018. As expected, 2019’s earnings included higher interest expense from the debt issued to acquire ECS.
Cash from operations was a record $668 million, an increase of 52% versus 2018. The improvement was driven by a significant reduction in working capital across the company and strong operating cash generation in many of our businesses, including ECS.
Our Bedding business continues to evolve, grow, and create value. The ECS acquisition added capabilities that strengthened our competitive advantage. We can support our customers’ needs from raw materials to components to finished mattresses and foundations to distribution and fulfillment. Our full complement of bedding capabilities positions us to serve both traditional OEM customers and new market entrants and create value at each point along the value chain.
The growth of online compressed mattress brands created a wave of change that revolutionized the industry. Consumers have accepted online purchasing and compressed mattresses. Online brands have proliferated. Big-box retailers and home improvement centers are now offering compressed mattresses, both in stores and online. Compressed hybrid mattresses, which incorporate both specialty foam and innerspring cores, are increasingly common.
Success in the changing market calls for several elements:
These market changes create opportunities for Leggett & Platt and we are well-positioned to capitalize on them.
Our Automotive business is closely aligned with the long-term changes in the market and we are investing to ensure this business remains a leading source of growth and value creation for years to come.
Consumer demand for comfort and convenience continues to grow. Automakers are focused on areas where we have unique capabilities:
Our advantages in this space are rooted in deep industry knowledge and customer engagement. Leggett is known as the leader in technology for seating comfort, and we are extending that into other comfort and convenience applications. We have a global footprint with the ability to engineer, manufacture, and deliver products around the world. Our incumbency with customers gives us a front row seat in the fast-changing industry, providing the insight necessary for what component features, electronics, and software will do to enhance the user experience. These advantages have driven our growth, provided market leadership for our business, and created a basis for continued success.
Our primary financial goal is to achieve Total Shareholder Return, or TSR², that ranks in the top third of the S&P 500 over rolling 3-year periods. The table below shows the components of the TSR framework, including our targets and our actual performance for the most recent 3-year periods. Our annual TSR was below the 11-14% target in 2017 and 2018, but significantly above the target in 2019. Over those same years, the TSR of the S&P 500 was well above historical averages. As a result, our recent 3-year averages did not meet our top-third goal. For the 3-year period that ended on December 31, 2019, our TSR performance placed us in the bottom third of the S&P 500. Long term, we believe our disciplined growth strategy, portfolio management, and prudent use of capital will support achievement of the top-third goal.
Our target for revenue growth is 6-9% annually, on average. We expect to achieve the growth target through a combination of sources, including market growth that approximates GDP (+2%) and acquisitions (+2%), with the remainder coming from content and market share gains that allow us to grow faster than our markets. We expect to achieve near-term growth through our pipeline of awarded programs in Automotive, our content gains and forward integration in Bedding, and building our capabilities in faster-growing markets such as Aerospace and Hydraulic Cylinders. We are controlling the pace of acquisitions (likely throughout 2020) as we focus on reducing the debt we added to acquire ECS. Once we accomplish our deleveraging goals, we expect carefully screened acquisitions to be a larger part of our revenue growth.
Our long-term sustainable EBIT margins should be in the range of 11.5-12.5%, and EBITDA1 margins should be in the range of 15.5-16.5%. From 2019 margin levels, we have opportunities to benefit from exiting Fashion Bed and restructuring Home Furniture into a smaller and healthier business. Both activities are now complete. We are also focused on reducing costs in businesses where market demand has slowed and improving efficiency in rapidly growing operations. Longer term, we expect margin gains from innovation of new products, ongoing portfolio management, and continuous improvement activity across our businesses.
Our commitment to dividend growth has not changed. In 2019, we raised our dividend for the 48th consecutive year, a record very few S&P 500 companies have achieved. In May, we increased the quarterly dividend by $.02, or 5.3%, to $.40 per share. At an indicated annual dividend of $1.60 per share, the yield was 3.1% based on the December 31, 2019 closing share price of $50.83. This was one of the highest yields among the 57 companies that comprise the S&P 500 Dividend Aristocrats. With our strong cash generation, we can comfortably support continued dividend increases.
Each year, for 30 years, our operations have produced more cash than needed to fund capital expenditures and dividends. That was once again the case in 2019. We generated a record $668 million of cash from operations. We also brought back offshore cash totaling $279 million. Major uses of cash in 2019 were:
We are maintaining our focus on balance sheet strength. For the near term, we are prioritizing debt repayment after funding organic growth and dividends as we work to reduce leverage. We are making progress. We ended 2019 with debt to trailing 12-months adjusted EBITDA1 of 2.9x, on schedule with our plan to reach approximately 2.5x by the end of 2020. Maintaining balance sheet strength enables us to withstand economic cycles and capture attractive investment opportunities that we uncover.
On January 1, 2020, several changes became effective:
In addition to these changes, Jeff Tate joined Leggett’s leadership team as CFO in September. Jeff brings extensive financial, strategic, operational, and general management experience to Leggett. You can read more about Jeff's and Steve's backgrounds in the narrative section of the annual report. We are conducting searches for two additional executive positions: the permanent leader of the newly formed Bedding Products segment and a Chief Human Resources Officer. These additions will bring unique expertise and new perspectives to our leadership team, ensuring we have the capabilities to thrive in a changing marketplace.
We also refreshed the Board of Directors over the past 18 months with the addition of four new directors. These individuals bring diversity of skill sets, gender, age, and ethnicity, adding important capabilities and perspectives to our already-strong Board.
We are proud of the culture Leggett & Platt has sustained over many decades. A culture steeped in attributes of Integrity, Respect, Accountability, Collaboration, Opportunity, Innovation, Safety, and Inclusion, to name a few. Qualities that describe who we are today and what we aspire to into the future. We have a tremendous foundation, and as we continue to grow we are committed to enhancing our diversity, inclusiveness, and talent development to prepare the next generation to lead. We are focused on building businesses and a culture that is sustainable for generations to come.
The framework is in place to support long-term profitable growth. We are investing in strong businesses with compelling market advantages. The segment realignment will allow us to optimize efficiency, particularly in the Bedding segment, and is consistent with how we run the business. We are proud and respectful of Leggett & Platt’s wonderful 137-year history. Today we are focused on building for an even brighter future. As always, we want to thank our employees, customers, and investors for their efforts, support, and commitment in 2019.
1 For non-GAAP reconciliations, please refer to Non-GAAP Reconciliations.
2 TSR = (change in stock price + dividends)/beginning stock price; assumes dividends are reinvested.
3 For the 3-year performance periods illustrated in the table, we generated 5%, 4%, and 7% growth from unit volume + acquisitions, with -3%, -1%, and +1% from effects of raw materials, currency, and divestitures.
4 Change in multiple has historically included change in interest and taxes. Due to increased interest expense from the ECS acquisition, changes in interest and taxes are now presented on a separate line.