Leggett & Platt, Incorporated Q1 FY2025 earnings call

• Restructuring progress: Divested a small U.S. machinery business in bedding, launched Phase 2 of consolidation in flooring, and made progress in hydraulic cylinders; restructuring expected to be substantially complete by year-end.
• Strategic business: Signed agreement to sell aerospace business, expecting ~$240M after-tax cash proceeds, a step towards a focused portfolio.
• Tariff discussion: Adjustable bed business in bedding has tariff exposure, especially in Mexico and U.S. automotive business has indirect exposure; home furniture affected by tariffs, Textiles proactively sourcing outside China.

Bedding Products: Strong trade rod sales and steady trade wire sales partially offset continued demand softness in mattresses and adjustable bases. U.S. mattress production was down low double digits in Q1, with the market expected to be down mid-single digits in 2025. Specialized Products: Automotive business likely has the largest indirect tariff exposure; Geo Components had better-than-expected growth in civil construction despite early weather disruption. Furniture, Flooring & Textile Products: Home furniture Chinese operations affected, with some sourcing moved to other countries; Textiles proactively sourcing outside China to avoid direct tariff exposure.

• Maintaining sales and adjusted earnings guidance but modifying assumptions; lower volume in domestic bedding due to softer U.S. mattress production offset by rod and wire pricing from steel tariffs.
• 2025 sales expected $4.0B-$4.3B (down 2%-9% vs 2024).
• 2025 adjusted EPS expected $0.85-$1.26 (including restructuring costs and real estate sales impact).
• Full-year adjusted EPS expected $1-$1.2; focus on deleveraging, targeting long-term leverage ratio of 2x.

• Tariffs driving inflation, hurting consumer confidence, and pressuring demand.
• Wide-ranging tariffs impacting segments differently, e.g., domestic adjustable bed production disadvantaged vs import competitors.
• Global auto parts tariffs disrupting North American auto supply chain indirectly.

Q: Susan Maklari asks about how restructuring benefits will roll through the year and potential upside.

A: Karl Glassman and Ben Burns respond that restructuring benefits will continue, with upside potential as demand recovers in residential markets. Cassie Branscum adds about annualized run rate of benefits. Ben Burns also mentions progress on real estate sales.

Q: Susan Maklari asks about consumer pull forward and channel inventories in bedding.

A: Karl Glassman states no significant pull forward identified; Tyson Hagale adds imported components/finished mattresses may have come in ahead of tariffs affecting inventory flow.

Q: Susan Maklari asks about aerospace segment post-divestiture.

A: Ben Burns says no specific guidance until sale closes, but notes Aerospace business in Q1 2025 had sales of $53M and EBIT of $7M (excluding corporate overhead).

Q: Bobby Griffin asks about capital allocation and commercial paper.

A: Ben Burns says there's a scenario to be out of commercial paper by year-end, targeting long-term leverage ratio of 2x; Karl Glassman mentions current covenant position is comfortable.

Q: Keith Hughes asks about automotive tariffs.

A: Sam Smith explains automotive business is region for region, USMCA-compliant products are exempt, indirect impact could be from price inflation but EDI signals from OEMs/Tier 1s remain intact.

Q: Peter Keith asks about mattress vs furniture volume trends and tariffs impact.

A: Tyson Hagale talks about bedding volume drop due to sales attrition, restructuring, and finished imports gaining share; Sam Smith notes home furniture and flooring affected by tariff impact but textiles and work furniture performing well.

Q: Peter Keith asks about steel prices, rod/wire pricing, and foam margins.

A: Tyson Hagale says trade rod and wire demand is strong, offsetting residential weakness; tariff impact on springs and foam margins discussed with different drivers for contractual vs non-contractual business.

Q: Peter Keith asks about ongoing business review.

A: Karl Glassman states the business review is ongoing, continuing to evaluate each business for focus.