Greetings, and welcome to the Leggett & Platt Second Quarter 2022 Webcast and Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Susan McCoy, Vice President of Investor Relations for Leggett & Platt. Please go ahead.
Good morning and thank you for taking part in Leggett & Platt's Second Quarter Conference Call. On the call today are Mitch Dolloff, President and CEO, Jeff Tate, Executive Vice President and CFO, Steven Henderson, Executive Vice President and President of the Specialized Products and Furniture, Flooring & Textile Products segments, Tyson Hagale, Senior Vice President and President of the Bedding Products segment, and Cassie Branscum, Senior Director of Investor Relations. The agenda for our call this morning is as follows. Mitch will start with summary of the main points we made in yesterday's press release and discuss operating results and demand trends. Jeff will cover financial details and address our outlook for 2022, and the group will answer any questions you have. This conference call is being recorded for Leggett & Platt and is copyrighted material.
This call may not be transcribed, recorded, or broadcast without our express permission. A replay is available from the IR portion of Leggett's website. We posted to the IR portion of the website yesterday's press release and a set of PowerPoint slides that contain summary financial information along with segment details. Those documents supplement the information we discuss on this call, including non-GAAP reconciliations. I need to remind you that remarks today concerning future expectations, events, objectives, strategies, trends, or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties, and the company undertakes no obligations to update or revise these statements. For a summary of the risk factors and additional information, please refer to yesterday's press release in the sections in our most recent 10-K and subsequent 10-Q entitled Risk Factors and Forward-Looking Statements.
I'll now turn the call over to Mitch.
Thanks, Susan. Good morning, and thanks everybody for participating in our second quarter call. Our employees continued to drive strong results in the quarter despite ongoing macroeconomic, geopolitical, and various end market challenges. Sales from continuing operations were a quarterly record of $1.33 billion. EBIT was $143 million, and earnings per share was $0.70. Sales in the quarter were up 5% versus second quarter 2021, reflecting our successful pass-through of significant inflation over the past several quarters, partially offset by lower volume and currency impact. EBIT decreased 17% versus second quarter 2021 and was down slightly versus second quarter 2021 adjusted EBIT. Last year's second quarter EBIT included a $28 million gain from the sale of real estate associated with our exited Fashion Bed business.
EBIT decreased slightly versus last year's Adjusted EBIT, primarily from volume declines and lower overhead absorption as production and inventory levels were adjusted to meet reduced demand, mostly in bedding. These decreases were largely offset by expanded metal margins in our steel rod business and pricing discipline in our Furniture, Flooring, and Textile Products segment. EPS was $0.70, a 15% decrease versus second quarter 2021, and a 6% increase versus last year's Adjusted EPS. We are lowering our full year guidance to reflect macroeconomic uncertainties, including impacts of inflation, tightening monetary policy, and softening consumer demand continuing through the back half of the year. We expect solid demand in our industrial and automotive end markets to partially offset softer consumer markets. Now I'll move on to the segments. Sales in our Bedding Products segment were up 1% versus second quarter of 2021.
Raw material related selling price increases, strong trade demand in steel rod and drawn wire, and the addition of our Kayfoam Woolfson acquisition made in the second quarter of last year were largely offset by volume declines from soft demand in U.S. and European bedding markets. Market demand was negatively impacted by higher energy costs and general inflation early in the quarter, but then remained relatively consistent. Mattress consumption has been on the leading edge of consumer spending activity and began to slow in the fourth quarter of last year, making year-over-year comparisons difficult. Sequentially, demand was down only slightly from the first quarter. Commodity costs seem to have stabilized, although at historically high levels. Other manufacturing inputs, including energy, continued to increase during the quarter. We are carefully managing these costs and the impact to our business and our customers.
Within our Bedding Products businesses, the supply chain remained stable, and we are well protected against future disruptions. We began to adjust production, manufacturing cost and inventory in the fourth quarter of last year. Inventory levels have trended down since that time, and we will continue to monitor them closely while maintaining our ability to service customer requirements. We are well positioned to address further demand changes, whether up or down, and will respond quickly and responsibly. Provided no major changes in the macroeconomic backdrop, we expect demand in the segment for the back half of the year to remain consistent with levels seen in the first half of the year.
EBITDA margins in the segment were lower versus second quarter 2021 Adjusted EBITDA margins, primarily from lower volume and lower overhead absorption as production and inventory levels were adjusted to meet reduced demand, mostly offset by expanded metal margin in our steel rod business. Sales in our Specialized Products segment increased 8% versus second quarter 2021 from strong volume growth in all three businesses. These volume gains were partially offset by currency impact. The industry forecast for global automotive production has stabilized since April. The current forecast anticipates just under 5% growth in the major markets this year. Consumer demand remains strong and vehicle inventory remains at record low levels. As supply chains continue to stabilize, the industry should see improving production for the next several years. Industry forecasts now indicate recovery continuing through 2024.
In our aerospace business, demand for fabricated duct assemblies remains at pre-pandemic levels, and we continue to see modest demand recovery for welded and seamless tube products. We expect continued recovery in 2022, and the industry is anticipated to return to 2019 demand levels in 2024. End market demand in hydraulic cylinders is strong and order backlogs in the industry are at record levels. However, labor availability and global supply chain constraints have hampered the ability of our OEM customers to ramp up production. We're seeing some improvement in these areas, but it could be late 2022 or longer before industry backlogs normalize. We expect our sales in this business to continue to grow as OEM production increases. EBITDA margins in the segment declined primarily from higher raw material and transportation costs, labor inefficiencies, and currency impact, partially offset by higher volume.
Sales in our Furniture, Flooring & Textile Products segment were up 10% versus second quarter 2021, primarily from raw material-related selling price increases and volume recovery in work furniture, partially offset by lower volume in home furniture, textiles, and flooring. In home furniture, mid and upper-level price points should remain relatively strong through the third quarter due to customer backlogs. However, backlogs are coming down due to consumer demand shifts and macroeconomic uncertainties. Demand at lower price points has continued to soften, negatively impacting our business in China. The Chinese market was also impacted by COVID-related lockdowns during the second quarter. We expect work furniture sales to continue to grow from improving demand in the contract market as companies redesign their footprints and invest in office space. However, demand for products sold for residential use is softening.
In textiles, we expect geo components to grow in 2022 as demand remains strong across both the civil construction and retail markets. In flooring products, residential demand has softened with lower home improvement activity, and hospitality demand remains well below pre-pandemic levels. EBITDA margins in the segment improved versus second quarter 2021, primarily from pricing discipline, partially offset by lower volume. Before I turn the call over to Jeff, I'd like to thank our employees for once again delivering strong quarterly results. Your collective ingenuity, commitment, and effort allows us to effectively navigate this dynamic operating environment. Jeff, I'll hand it over to you.
Thank you, Mitch, and good morning, everyone. In the second quarter, we generated cash from operations of $90 million, up $49 million as compared to $41 million in second quarter 2021, reflecting a much smaller use of cash for working capital. Working capital increased significantly last year due to restocking efforts following inventory depletion in 2020, but increased to a lesser extent this year as we continue to return to inventory levels more reflective of current demand. We expect cash from operations of $550 million-$600 million in 2022, as last year's significant inflationary impact stabilized and we continue to balance inventory levels. We ended the second quarter with adjusted working capital as a percentage of annualized sales of 15.7%. Our priorities for use of cash are unchanged.
They include an order priority, funding organic growth, paying dividends, funding strategic acquisitions, and share repurchases with available cash. Capital expenditures in the second quarter were $22 million. In May, our board of directors increased the quarterly dividend to $0.44 per share, $0.02 or 5% higher than last year's second quarter dividend. At an annual indicated dividend of $1.76, the yield is 4.4% based upon Friday's closing price, one of the highest among the Dividend Kings. With the leveraging we accomplished over the past few years, share repurchases have returned as one of our priorities for use of cash. The level of repurchases will vary depending on various considerations, including alternative uses of cash and the opportunities to repurchase shares at an attractive price.
We took advantage of the lower share price during the second quarter and repurchased 1 million shares at an average price of $35.01 per share. Total repurchases for the quarter were $35 million. This brings year-to-date repurchases to 1.6 million shares or $57 million. We ended the second quarter with net debt to trailing twelve-month Adjusted EBITDA of 2.39 times. Our strong financial base gives us flexibility when making capital and investment decisions. We remain focused on cash generation while maintaining our balance sheet strength and deploying capital in a balanced and disciplined manner that positions us to capture near- and long-term growth opportunities, both organically and through strategic acquisitions. Now moving to guidance. As Mitch stated earlier, we are lowering our full-year guidance for both sales and earnings per share.
2022 sales are now expected to be $5.2 billion-$5.4 billion, or up 2%-6% over 2021. Guidance reflects volume down low- to mid-single digits, with the Bedding Products segment down low double digits, Specialized Products segment up low double digits, and Furniture, Flooring & Textile Products roughly flat. The guidance also reflects continued inflationary impact, primarily from raw material related price increases, including those implemented as we move through 2021. The guidance assumes negative currency impact and acquisitions in 2021 should add 1% to sales growth, but will be mostly offset by small divestitures. 2022 earnings per share are now expected to be in the range of $2.65-$2.80.
The decrease versus prior guidance primarily reflects lower expected volume in consumer end markets, partially offset by continuing strength in industrial and automotive markets, as well as metal margin expansion in our steel rod business. Based upon this guidance framework, our 2022 full year EBIT margin range should be 10.5%-10.7%. Earnings per share guidance assumes a full year effective tax rate of 23%, depreciation and amortization to approximate $200 million, net interest expense of approximately $80 million, and fully diluted shares of 137 million. For the full year 2022, we expect capital expenditures of approximately $130 million, and dividends should approximate $230 million. In closing, Leggett & Platt remains well positioned, both competitively and financially, to capitalize on long-term growth opportunities in our various end markets.
Our enduring fundamentals give us confidence in our ability to continue creating long-term value for our shareholders. With those comments, I'll now turn the call back over to Susan.
Thanks, Jeff. That concludes our prepared remarks. We thank you for your attention, and we'll be glad to answer your questions. Operator, we're ready to begin the Q&A session.
Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Bobby Griffin with Raymond James. Please proceed with your question.
Good morning, everybody. Thank you for taking my questions. First, Mitch, I want to first start off on Specialized Products segment. It's really a two-part question. I mean, one, we saw you guys tick up the volumes pretty notably and for the full year. Maybe just unpack what areas of that business are coming in stronger than expected and kind of what's a little bit more detail on what's going on in those end markets. Secondly, just what's the pathway back for margins to return to kind of the mid-teens in that segment that we're used to seeing? Is there a path back there or has structurally something changed within the businesses that it's gonna need to be a little bit lower margin business going forward?
Yeah, good morning, Bobby, and thanks for participating today. Appreciate the good question. So I think a couple of things here. I'll take your questions in order. First, the volume up, you know, from the prior guidance. Why? I think it's really just more confidence in the actual improvement of production across all three of those businesses. We've seen significant improvement in Aerospace and hydraulic cylinders, although that's still somewhat impacted by the OEM's ability to to navigate labor and chip issues. We have seen increased production over the last several months. Similar in automotive as well, where while they're not getting all of the chips that are needed to enhance production there, it has become more stable. The production schedules are way less, you know, dynamic than they were, probably last year.
We continue to see some improvement there. I think in automotive, the projection for the major markets is, you know, second half production up about 11% versus the first half. All of those things kind of holding up are what really gave us the confidence to increase our guidance around the volume there. Then your questions around the margins is also a good one. I do think that we have a path forward to those mid-teen kind of margins again. I think a few things dynamics are in play there. First, all three of those businesses were the most impacted at different times. As the pandemic hit, and in 2020 we saw the volumes there just decline very, very significantly. This is, I think, old news, right?
Everybody knows that it's been a real struggle for those industries to regain their traction. As I just said, they're starting to now. We certainly have the impacts from lower volume, which is significant, lower overhead recovery. Just some of the inefficiencies as the production schedules, as I said, are so dynamic.
The other element that is critical, and we talked about this on the call last quarter that it started more significantly to impact us in automotive, is the impact of commodity inflation. It's less of a commodity business than if you think about, you know, the steel products in bedding or home furniture or things like that. So it's normally not much of an issue. But over time, over the course of the, you know, this dynamic last year or two, there have been inflationary impacts that have built up, whether it's around resins or, you know, steel impacts or just other raw materials, transportation that had built up, and we talked about it last quarter, to become relatively significant for the business.
You know, we've made really material progress, I would say, in the cost recovery starting in the second quarter. I would expect that to continue sequentially as we go through the year. One thing to note is that, you know, pricing in automotive is very, very different than any other of our businesses, maybe similar to aerospace, but that, you know, the industry generally works on fixed pricing with cost downs over the life of a program. Prices typically don't go up and down throughout the life of a program unless there is some really significant event like we've seen over the last couple of years, really the last year. It takes time for enough pressure to build through the supply chain that the OEMs are then sort of forced to concede price changes. It's tough to predict exactly the timing.
It's not as simple as, you know, industries who are built to have these kind of pricing fluctuations. We have seen that momentum build and start to see actual tangible benefits of that in the second quarter. Again, tough to predict exactly in the timing, but we do expect to continue to make significant progress over the second half of the year. That recovery can take the form of a number of items. It could be actual price changes, it could be delaying cost downs, it could be some engineering changes or even one-off payments. We do feel confident that the ball is rolling now. We're starting to see the results, and that will continue. The second area that we talked about. Bobby, just one more thing real quick.
Last time we talked about some operational issues that we're having in one of our facilities in the U.S. We've also made substantial progress there in that plant. Inventory positions are improved. The premium freight is going down and our excess labor costs are going down. Not done, still work to do, but making progress.
Very good. I appreciate that detail. It was very helpful. Thank you, Mitch. Then I guess secondly, just as a follow-up maybe on the commodity or steel side of the business, we have started to recently see some of the steel commodities roll over. Has the spread or the metal margins changed at all with the recent kind of reduction in some of the steel indexes? It's been a very long time since we've kind of seen steel deflation. The last couple years have been inflation. How do you think the business, you know, will respond to potential deflation of steel products, you know, similar to the history we're used to seeing with Leggett when they see deflation?
Yeah, great question, Bobby. I'll take the easy part and then hand it over to Tyson. On the steel side, you know, think about the separation between where we're using, you know, flat products in home furniture, and we have seen some reduction there. Teams are managing that very, very well, managing our inventory and also, you know, managing our pricing. A little bit different on the rod side with increased other input costs there. Tyson, I'll hand it over to you on that one.
Sure. Yeah, it's a little bit of a complicated story, but you're right, Bobby. Even recently we have started to see some softening in rod pricing, but to a lesser extent than we've even seen some changes in scrap. Mitch started to hint at it, but I think some of that is just general industrial demand has remained relatively strong for steel products. Some of the conversion costs that have increased pretty substantially that I don't think get quite as much notice. Energy, just general utility usage, consumables that go into it have also, I think, helped support some of the higher pricing. We have seen it start to stabilize and also start to come down a bit.
We've been monitoring that closely on the way up and also do the same as things decrease. We have also, you know, a large part of our steel-based business is contractual, so we'll obviously see those things pass through as necessary.
Thank you. I appreciate the details. Best of luck here in the second half.
Thank you, Bobby.
Thank you. Our next question comes from the line of Susan Maklari with Goldman Sachs. Please proceed with your question.
Thank you. Good morning, everyone. My first question is, you know, talking a little bit about the consumer perhaps, you mentioned in your comments, Mitch, that you have seen bedding demand stabilize in the quarter. You expect it to hold flat. Can you talk in general just about the state of the consumer, the health of the consumer that you're hearing from your customers? Perhaps with that, any commentary on the elasticity of demand that you're seeing in bedding, especially as you're continuing to put price in to offset those inflationary pressures?
Yeah, sure. I'll take a shot at that. Good morning, Susan. Thanks for the good question. I think it's tough to predict, but I think the fact that we've seen demand being pretty stable is probably a good thing, right? It's tough in this type of inflationary environment with monetary policy tightening and all of the other macroeconomic disorders that are out there. I think that led to the step down. You know, I think that if we can see that inflation is starting to stabilize and then starting to gently come down, I really don't see it, you know, just dropping off very swiftly. If it starts to stabilize, I think that we will see the consumer, you know, hold in there for us, at least at decent levels.
Depending upon what happens going forward, you know, if we are able to avoid a severe recessionary cycle, I think that we should be in pretty good shape. We've certainly been planning in all of our businesses for this kind of uncertainty, and really starting last year, to make sure we're managing inventory closely, that we're, you know, managing our variable costs and our production levels so that we're really ready to move either way. If it gets a little bit softer, to be able to take a step back and control our costs or to be able to respond very quickly if we're able to see pickup. I think that's the really big question that's out there for the world, right? What's gonna happen with consumer demand and inflation out there.
I'm relatively optimistic with the trends that we're seeing. Tyson, what are you hearing?
Very similar, Mitch. You know, we've shared that we felt some of the slowdown earlier than a lot of others when it started happening in the fourth quarter of last year. You know, both I think from the lower end price points slowing first, but then also as it moved into some mid and even to a lesser extent, some of the higher price points, as we moved through the early part of this year. And also, you know, not just from the impacts of inflation, other things, but consumers shifting to spending on services, travel, and some other areas like that.
Like Mitch said, what gives us confidence, even as we watch consumer sentiment be at low levels, is that we've seen some step downs over the course of the last nine months or so, but it's been really consistent, especially as we move through the second quarter. One thing I think we'll be watching closely is we've watched some of the retail activity is just especially consumers on the lower end and how they react to the continued inflation or even prices staying at high levels. Overall, I think we feel pretty confident just in some consistency as we get to the back half of the year.
Tyson, maybe to add.
Yeah.
In the longer term, right, in this bedding side, really historically don't see, you know, multi-year, you know, downward trends. That's something that would be outside of the norm of what we see. Even if we think about, you know, the housing market softening a little bit even in places like our home furniture business, for example, maybe, you know, less impact in consumer sentiment and, you know, people. With all of the home traffic that has happened over the last couple of years, probably some, you know, return to that repurchasing cycle there. I will say that we've seen more negative impact on the home furniture side, particularly at the low end recently.
That's all very helpful color. You know, following up, obviously the macro environment has shifted in the quarter. There's a lot of debate about where we sort of are, you know, from a broader perspective there. As you think about the business, Mitch, how are you preparing for a shift in the macro landscape? You know, what is the playbook that you'll go to if we do see things deteriorate more than, you know, where we currently are at? You know, what are you watching in order to determine what needs to happen to the business to protect it in a weaker macro?
Yeah. Great question, Susan. Thank you. I guess, you know, we've kind of been through a similar K-shaped circumstance before, you know, when we were in 2020 with the downturn after the onset of the pandemic. I think that we learned some new skills that we certainly haven't forgotten them. First off, though, I would say I expect that we'll benefit from our portfolio diversity, right? We're seeing, you know, stronger demand hold up in our industrial and automotive businesses compared to our more consumer-facing businesses. I do think that that will continue to hold up. You know, we'll also regardless be able to continue aligning our variable costs and our inventories to demand.
I think the good news there, as I mentioned on the close up, we've been doing this since we first started to see demand slowing a little bit in the fourth quarter of last year in bedding, as well as across our other businesses. It's something frankly that we talk about on a regular basis across all of our businesses. In this environment, since we're well-positioned, we're already you know, we're not scrambling to catch up with what's happening in the macroeconomic circumstances. You know, we continue to drive strong free cash flow. We have really strong liquidity, so we'll be able to benefit from those things as well. You know, in 2020, we cut about $90 million of cost, right? Mainly overhead costs.
I never thought about that as something that was temporary, that we would take those costs out and we would bring them back. I did think about it as that we would make investments for our future, and we have been doing that. I think that our portfolio diversity and our strong cash flow and liquidity will allow us to continue to make those investments. You know, we'll have more capacity to implement those activities if demand is slower, and we'll benefit from the improved efficiencies, the capabilities, and be ready to take advantage of stronger demand when those conditions improve. You know, if it's worse than that, then we'll take those actions, and we'll go back to more radical cost cutting.
I really think that we're well-positioned to be able to invest in our future, and really benefit from the recovery as we come out of the cycle.
That's great, Mitch. Thank you for the color. I'll requeue and turn it over to someone else.
All right. Thanks, Susan.
Yeah.
Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Keith Hughes with Truist Securities. Please proceed with your question.
Thank you. First question, on one of the earlier comments, you talked about metal margins. I think they were particularly ticking down a little bit. I wanna make sure I heard that right. Kind of what have you assumed in the guidance for the second half of the year on those margins?
Tyson, you wanna take that one?
Sure. Keith, just to clear that up, what I was suggesting was that we're seeing some softening in rod pricing. Overall, I think we've seen actually, maybe take a quick step back. In the second quarter, metal margins actually expanded a bit beyond our expectations and some of the drivers there that kind of caught us a little bit by surprise. The invasion of Ukraine had an impact on scrap pricing as
As an input, people were trying to scramble around find scrap, which drove up the demand for scrap supply. We also saw a sharp increase in energy costs and then just general steel demand all put to some higher metal margin expansion in the second quarter. In the third quarter, we've seen rod start to soften a bit, scrap as well, as some of those things have backed off. Generally, we would still see overall metal margins being relatively consistent in the third quarter. Right now we're expecting some modest compression as we get into the fourth quarter, just with overall supply and demand. At this point, it's still tough to predict, but we would then, you know, think for the full year, we'd still be up year-over-year.
Okay. In the prepared comments, you talked about textiles and flooring. It kind of seems like they're moving in different directions right now. Just relative size, I think you kind of lump those together in the 10-K. Can you just talk about how what those two represent as a percentage of the FT segment?
Let me see here. If I can think about it that way.
At least roughly. I don't need an exact number.
Yeah. Okay. Steve, chime in if you have that handy. I think that textiles is about 35% or so of the business of the segment.
Okay.
Is that about right, Steve?
Yeah. Yeah.
And-
Textiles is about 35%. Flooring probably about 25%.
Yeah, about 20% or so.
20, 25. Yeah, 25.
I guess final question. You had the compression in specialized as you discussed earlier on the call and the kinda lag on pricing there. Would we continue to see the similar types of margin compression based on your revenue guidance the next couple of quarters? Or will that start to narrow as you get at least some more price?
Yeah. Great question, and Steve chimed in here. I think that we expect to see sequential improvement in the margins in specialized as we move through the back half of the year. We, you know, as I said, we've made progress on passing through some of the inflationary impacts in automotive, and the increase in volume will help us there. We have had a bit of a hit from exchange rates impacting margins, but we do expect to see meaningful improvement in the back half.
Okay. Thank you.
Yeah. Thank you, Keith.
Thank you. Our next question comes from line of Peter Keith with Piper Sandler. Please proceed with your question.
Hey. Thanks. Good morning, everyone. I did wanna focus this morning on the bedding business. I guess I'm just looking at the volume trends with the steady declines. My calculation, the bedding volumes are down about 22% on a three-year basis. I know we're waiting for, you know, macro headwinds to abate, and it's really anyone's guess to when that happens. I wanted to ask, what are sort of the strategic initiatives to really get the bedding volumes going and to put yourself in a position to be taking market share?
Yeah. Good morning, Peter. Great question. Tyson, I'll let you take that one.
Sure thing. Hi, Peter. I'll put it into some short, medium, and long-term buckets for you. In the short term, you know, it's been a chaotic two and a half years that we've been dealing with customer supply chain and high and low levels of demand. Our teams are working really hard on evaluating near-term opportunities with our customers. You know, what can we go do and what makes sense. There are things out there, even in a slow environment, that where we think we can provide some value to our customers. We are carefully balancing the economics of those opportunities, and also kind of as we look at the risk and economics of those.
We do expect to start to see some of the benefits, you know, even now and through the back half of the year. So we do see some opportunities for improvement there, even in the short run. In the medium term, you know, it's a tough time to do this, but we do have customers that are interested in new product developments, both from a VAVE standpoint and just differentiation, and we have some new things that we're working on with customers right now. Those will take some time to gain steam and actually gain a foothold in the market. So that would be more of a medium-term initiative.
Over the longer term, you know, we've been pretty public about our investments in bedding, and you can kind of see where we've been heading with our investments at ECS, Kayfoam. Also within our adjustable bed business, we've been investing in areas where we feel like we can increase our addressable market size. Although we're pretty specific about our position as a supply chain partner, also gives us still opportunities and segments of the market to increase our content as well. We've also continued to invest in our ability to supply our customers in our core components business. We're in a good place there as well. We've been investing even as we've gone through the downturn and positioning ourselves for the long run of being in a better place to grow again.
Okay. Great. Thanks for the summary. Then, we talk about the weak economy, but one area that does seem to be getting weaker for the foreseeable future is housing. I guess I wanna understand your views on housing and its impact on your guidance as home sales are slowing quite a bit here. Seems like it could have further negative impact on bedding and furniture, flooring, some various segments. Is that something that you're contemplating as you look out over the next 6-12 months?
Yeah, I think so. I think it's tough to predict exactly, Peter, but I mean, it is. You know, as we said, that's really the take on our guidance was understanding that there is this macroeconomic uncertainty out there, including the housing market and likely to have some impact. We think that, you know, consumer sentiment and other factors have a bigger impact and that, you know, that there's even with housing movement helps us and lasts over some period of time. I think that we factored in at least what we anticipate as the impact there.
Okay. Very good. Thanks so much.
Thank you.
Thank you. Our next question is a follow-up from the line of Susan Maklari with Goldman Sachs. Please proceed with your question.
Thank you. Hello again. My first question is, you know, we've talked a lot about the supply chains in production as it relates to auto within Specialized, but can you talk a little bit about the improvements or how you're thinking about the improvements coming through in aero as well as in hydraulic cylinders? I mean, obviously in aerospace, one of the big OEMs just got approval to start shipping one of their products. Are you seeing that there is some increase there, some improvements that are coming through? How are you thinking about that flowing in and contributing to that margin improvement in the back half and into 2023?
Yeah, great question, Susan. Thank you. Steve, I'll let you take that one, but I think it's a positive outlook for us.
Yeah, for sure. Good morning, Susan. Yeah, aerospace demand growth is tracking pretty much as we expected as the industry continues to recover, and as Mitch said, that we'll, you know, hit 2019 levels in about 2024. Aircraft backlogs are near their peak levels at this point, so the demand is there. We saw year-on-year sequential volume growth in Q2. We expect that to continue going forward. As Mitch also mentioned, you know, the assembly business has recovered quite quickly, and now we're starting to see that happen for the tubing side of the business. As that demand returns, the industry's starting to see, you know, some of the same things we saw in our automotive. You know, orders being pulled forward, expedited delivery, short lead times becoming the norms.
Also starting to see some extended lead times for raw materials, and we're taking that into consideration. Our team's doing a really good job of dealing with that situation as it goes forward. In hydraulics, you know, the end market for forklifts remains strong, particularly in North America. That market's sitting at about 22 months of backlog. We're also seeing that reflected in our orders, which we think positions the business well for the second half of the year. You know, that is if the, you know, the OEMs don't backtrack on their production capabilities.
Okay.
Steve, would you say in both those businesses we you know likely to see a little bit of you know hiccups as the production ramps up, but are really much more confident in that production ramp-up taking place and improving as we go in the back half?
Yeah, certainly.
Okay. That's very helpful. The other thing that I wanna go back to is the inflation question. We talked a lot about the metal margins, but can you talk to what you're seeing in terms of the inflationary pressures on, perhaps ECS, things that go back more to those oil sort of supply chains in there? You know, one, what is the availability of a lot of those key inputs? And two, what are you seeing in terms of the input cost side?
Yeah, another great question. Tyson, you wanna take that one?
Sure.
Yeah, Susan, from a supply standpoint at this point, things are good. We've gotten hesitant to say all clear, no problem, but we've really been in a stable place in terms of the supply chain there for a while now and feel good about it. We've taken some actions even beyond just our typical market supply that gives us some options to give us backup and insurance with some storage tanks and things that would allow us to stay covered even if there was a short-term supply constraint. In terms of pricing, you're right. Energy costs have had an impact, but we feel like where prices have been or our costs, they've been relatively stable.
I think as demand overall in the chemical market has softened, the energy costs have probably kept some of the pricing more stable. It's similar to some other things we've seen. We haven't seen an increasing trend overall with chemical pricing. They've been more stable.
Okay. That's helpful. I'm gonna squeeze one more in here, and maybe this one's more for Jeff. I'd be remiss if I didn't mention the $35 million of buybacks that you did this quarter. Can you talk a little bit about what drove that decision, how you're thinking about the willingness to continue to buy back the stock going forward? And perhaps with that, anything that you'd like to share with us in terms of a target for leverage or just the overall sort of capital structure of the business?
Great. Good morning, Susan, and thank you for noticing the $35 million of repurchases there. You know, I think it's important to start with the tremendous progress that the team has made around our deleveraging efforts over the past few years since the ECS acquisition, because I think that really has positioned us well as we think about our overall capital allocation strategy. You know, our priorities still remain funding organic growth, maintaining the flexibility around our strategic growth opportunities around M&A and supporting our dividend. As we've made that deleveraging progress, we've well positioned ourselves now to be more active from a share repurchase perspective. We were, you know, much more aggressive in the second quarter because of, you know, where we saw our share price during the period.
If you look year to date, we've repurchased 1.6 million shares and allocated about $57 million in that regard. As we look towards the future, Susan, you know, we're gonna continue to evaluate our share repurchases in the context of our other investment opportunities, while at the same time monitoring our cash flow from operations. It's one of those things we'll evaluate each and every quarter and compare it to our other opportunities that we have as we think about investments. In terms of your second question around our leverage target, you know, I think it's important there to think about the view that we have around an ideal target range for net debt to EBITDA. Which for us is to maintain a capital structure that we feel that allows us to do a couple of things.
One is to pursue strategic growth opportunities. Another is around returning cash to our shareholders. Thirdly, ensuring that we can maintain a solid investment-grade profile. If you rewind back to 2019 at the time of the ECS acquisition, that was the last time we stated publicly a target from a leverage standpoint of 2.5 times on a total debt basis to EBITDA. Fast-forward to May of 2020, we amended our covenant and our revolving credit facility to go from a total debt to a net debt metric. In September of 2021, we successfully amended our facility again and retained the net debt covenant as well from a metric standpoint with a maximum leverage of 3.5 times.
Now, we haven't formally updated what we feel is a leverage target moving forward, but it's safe to assume, Susan, that it will be something below, well below a Net Debt to EBITDA of 2.5x.
Okay, great. I appreciate all the color today, and good luck with the second half.
Thank you.
Thank you very much, Susan.
Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Ms. McCoy for any final comments.
Thank you for joining us today. We'll speak to you again on November first when we report third quarter results. As always, if you have questions, please contact us using the information in yesterday's press release. Hope everybody has a good day. Thanks.
Thank you. This concludes today's.