Leggett & Platt, Incorporated

Greetings and welcome to the Lincoln and Platt Fourth Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Cassie Branscom, Vice President, Investor Relations. Cassie, please go ahead.

Good morning, and welcome to Leggett & Platt's fourth quarter and full year 2024 earnings call. With me on the call today are Carl Glassman, CEO, Ben Burns, CFO, Tyson Hagel, President of the Bedding Products segment, Sam Smith, President of the Specialized Products and Furniture, Flooring, and Textile Products segment, and Collina Talbert, Manager of Investor Relations. The agenda for our call this morning is as follows. Carl will discuss highlights from 2024, including a restructuring update, demand trends, and our priorities for 2025. Ben will cover our operating results and additional financial details and our 2025 guidance. And the group will answer any questions you have. The conference call is being recorded for and is copyrighted material. This call may not be transcribed, recorded, or broadcast without our express permission. A replay will be available on the investor relations section of our website. We posted to the IR section of our website yesterday's press release and a set of slides that contain summary financial information along with segment details and a restructuring update. Those documents supplement the information we discuss on this call, including non-GAAP reconciliations. 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 obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the sections in our most recent 10-K and subsequent 10Q, entitled Risk Factors and Forward-Looking Statements. I'll now turn the call over to Carl.

Good morning, and thank you for joining our call today. First, I would like to congratulate Sam Smith, who has been promoted to President of the Specialized Products segment. Sam has been instrumental in driving operational efficiency improvement projects in specialized products since mid-2024, and is already well-versed in each of these businesses. Additionally, he will continue in his role as Executive Vice President and President of Furniture, Flooring, and Textile Products. 2024 was a year of significant change for our company, and I am deeply grateful for the hard work and dedication of our employees who continue to show resiliency and the drive to improve, even in a daunting macro environment. Last January, we announced a restructuring plan that primarily focused on our bedding product segment with smaller actions in home furniture and flooring products. We later expanded the plan to include restructuring activity in hydraulic cylinders and improvements in our general and administrative cost structures. Throughout the year, our teams did an excellent job advancing the plan and consistently driving results that met or exceeded our expectations. We realized a total of $22 million of EVIT benefit, including $3 million from G&A actions we initiated in the fourth quarter, and exceeded our expectation of $10 to $15 million. We incurred $48 million of restructuring costs within our expected range of $40 to $50 million. We had $15 million of sales attrition in line with our latest expectations and well below our initial estimate of $40 million. We realized $20 million of cash proceeds in restructuring-related real estate sales in line with our latest expectations but above our initial estimate of $0 to $10 million. We reduced our bedding footprint by 14 locations. We successfully consolidated our U.S. Interspring manufacturing facilities with zero customer interruptions. We closed one facility in home furniture and shifted production to other locations. We closed one facility in flooring products and substantially completed phase one of restructuring activity in that business and we made solid progress on restructuring initiatives in hydraulic cylinders. As expected, restructuring activities will continue throughout 2025. In bedding, all innerspring restructuring is complete, but we continue to work through other initiatives, primarily in specialty foam. In flooring products, we are finalizing phase one of restructuring activity and still expect the facility consolidations of phase two will be completed by year end. In hydraulic cylinders, manufacturing efficiency improvement activities are expected to be fully implemented by year end. Despite demand challenges and the extensive effort required to execute a complex restructuring plan, product innovation remains a core strength and deep focus. We have healthy product pipelines across our businesses. I'd like to recognize our teams on a few areas of outstanding product development and sales growth from last year. In bedding products, we saw continued OEM adoption of our semi-finished products, including CombiCore, EcoBase, and our recently launched pre-foam encased ComfortCore unit, reflecting the value these products provide our customers. We also partnered with multiple leading mattress OEMs as they incorporated innerspring and specialty foam technologies in innovative product line refreshes. Our home furniture team continued to see success with their focused partnership and innovation strategy, which focuses on new product introductions with trend-setting customers. In flooring products, our team partnered with the Make-A-Wish Foundation to launch branded carpet cushion products that will be sold through the end of 2025. A portion of these product sales will be used to support the organization and its missions. Finally, our geocomponents business generated robust project pipeline growth year over year in our fabric converting business achieved modest growth in markets including filtration, building products, and hospitality, which helped to partially offset weakness in core residential markets. Looking at the year ahead, we expect our demand to remain under pressure as existing home sales remain near multi-decade lows and consumers face ongoing affordability issues and further uncertainty about inflation. In the long term, we believe sustained improvement in these macro drivers will eventually lead to multi-year recovery for our residential businesses, which have been most impacted by these factors in recent years. Turning to market trends and demand expectations. The US mattress market was likely down low single digits in 2024, with domestic production down mid-single digits and consumption of imported mattresses up low single digits. In the last few years, the mattress market has become increasingly bifurcated. High-volume cheap imports have dominated online sales and pressured opening and mid-tier price points for traditional domestic OEMs. In 2025, we expect market volume will be flat with domestic production down low to mid single digits as a result of continued import pressure. Demand in our bedding product segment is expected to be down mid single digits at the midpoint of our guidance this year, primarily from restructuring related sales attrition, lapping the exit of a specialty foam customer, and lower volume in adjustable bed. The industry forecast for global automotive production assumes major markets will be down low single digits in 2025. Volatility related to the growth of Chinese EV manufacturers and multinational OEM market share challenges will likely continue to impact the industry. Delays in EV programs in Europe and changing expectations for internal combustion engines to EV program transitions in North America add an additional layer of uncertainty to OEM demand. Our specialized product segment demand is expected to be down mid-single digits at the midpoint of guidance this year. In automotive, we expect lower volume year over year as industry softness is further compounded by our customer mix and product trade downs related to consumer affordability issues. Additionally, annual revenue from new programs awarded in recent years is below the revenue levels of older programs being phased out. Hydraulic Cylinders is expected to continue to experience weak demand Headwinds in automotive and hydraulic cylinders should be partially offset by continued growth in aerospace. In our furniture, flooring, and textiles product segments, we expect demand to be down low single digits at the midpoint of guidance in 2025. We anticipate that our residential businesses in this segment will continue to face soft demand, but demand in our textiles business will be stable. As we plan to navigate another year of demand pressure, we continue to prioritize balance sheet strength, operational efficiency and margin improvement, and changes that position the company for profitable long-term growth. Activities to support these initiatives include continuing our portfolio review work, including the exploration of a sale of our aerospace business, driving strong cash flow and using cash from real estate sales and any divestitures to accelerate debt reduction, pursuing operational improvement and automation activities across our businesses, cultivating strong customer relationships and driving product innovation to solve customer and consumer needs, and proactively identifying risk and mitigation plans related to tariff threats. We are encouraged by the significant progress that we made in 2024 and are confident in the ability of our teams to continue driving progress in 2025 and beyond. I'll now turn the call over to Ben.