Leggett & Platt, Incorporated Q4 FY2025 earnings call

• Substantially completed the restructuring plan launched in early 2024, with strong execution and disciplined follow-through, delivering greater EBIT benefit at lower cost than originally expected.
• Divested the Aerospace business in the third quarter, using after-tax proceeds to retire commercial paper and accelerate deleveraging towards the long-term leverage target of 2x.
• Highlights include growth in semi-finished products like Eco-Base and pre-foam-encased ComfortCore in Bedding, progress in Automotive innovation pipeline and customer intimacy, opening a facility in Vietnam for Home Furniture, penetration of new specialty markets in Textiles, and growth in retail business for Geo Components.
• Residential markets remain in a multiyear depression, but the company is positioned to capitalize on demand recovery when it materializes.

Fourth quarter sales were $939 million. Bedding products decreased 11% compared to the fourth quarter of 2024. Specialized Products declined 21%, mostly due to the Aerospace divestiture. Sales in Furniture, Flooring and Textile products were down 3%. For the full year 2025, sales decreased 7% to $4.05 billion. Bedding Products segment saw a decrease, Specialized Products had declines due to divestitures, and Furniture, Flooring and Textile Products also experienced sales decreases. In terms of revenue contribution, residential markets account for roughly half of the company's revenue, but specific segments had varying performance in absolute and percentage terms.

• 2026 sales are expected to be $3.8 billion to $4.0 billion or down 1% to 6% versus 2025. Volume is expected to be flat to down low single digits with volume at the midpoint, down low single digits in Bedding Products, down low single digits in Specialized Products and flat in Furniture, Flooring and Textile Products. Inflation and currency benefit combined are expected to increase sales low single digits.
• 2026 earnings per share are expected to be $0.92 to $1.38, including restructuring costs, Somnigroup offer impact, and real estate sales gain. Full year adjusted earnings per share are expected to be $1 to $1.20. 2026 full year adjusted EBIT margin range is expected to be 6.3% to 7.0%. Cash from operations is expected to be $225 million to $275 million in 2026. CapEx is expected to be $100 million to $115 million in 2026.

• Residential markets, accounting for roughly half of revenue, remain in a multiyear depression with demand well below average cycle levels. Uncertainty in timing of demand recovery.
• Bedding segment faced soft demand in mattress-related businesses and specific customer challenges. Specialized segment affected by challenging industry backdrop in automotive with regional sourcing tensions and macroeconomic uncertainties. Furniture, Flooring and Textile Products faced soft demand in residential-focused businesses and raw material issues.
• Supply chain disruptions in Automotive and currency impacts on financials.

Q: On the restructuring, how are they coming through to segment margins and where are additional cost structure improvement opportunities?

A: Good benefits from restructuring efforts in 2025, $63 million of benefits flowing through, expected ~$5 million in 2026. No divestitures of BUs contemplated, but looking at operational improvement opportunities in all BUs with some analyzed but not yet announced.

Q: On Bedding segment, U.S. Spring volumes decreased in 4Q vs 3Q, what's the driver?

A: Primary delta was customer consolidation mentioned, otherwise generally performed in line with market, normal seasonality and tough comparison against last year 4Q also contributed.

Q: On Auto, customer supply chain disruptions in quarter, impact and lingering issues?

A: Supply chain issues included Dutch semiconductor company dispute, North American aluminum manufacturer fire, European OEM cyber attack and inventory issues. All those issues are behind us now.

Q: On capital allocation, debt tick down, capital allocation priorities?

A: Long-term priorities are fund organic growth, small strategic complementary acquisitions, return excess to shareholders via repurchases or dividends. Near term goal is to move closer to 2x leverage target, likely to be there by end of calendar year.

Q: On Bedding segment, 2026 EPS growth drivers, favorable sales mix and metal margin expansion?

A: Metal margin expansion assumed to continue through full year based on data. Favorable sales mix from trade rod and wire and improving mix in U.S. Spring business. Operational efficiency improvements and additional restructuring benefit contribute to higher EPS.

Q: On FF&T margin drop in 4Q, path to guide and specific causes?

A: Factors included pricing adjustments in Flooring and Textiles, weak consumer demand in Flooring, raw material issues in Textiles, currency impact, lower consumer demand in Home Furniture and Flooring, and greenfield home furniture site in Vietnam costs. Team working to drive productivity and alleviate issues going forward.

Q: On global footprint and trade, shifting production to align with customers?

A: In Automotive, there's a push for more regional sourcing, and the company is addressing relocation of product as needed. Rest of businesses are well positioned geographically.