Q4 2020 Leggett & Platt Inc Earnings Call
Greetings and welcome to the Leggett and Platt fourth quarter 'twenty 'twenty earnings Conference call.
At this time all participants are in a listen only mode of.
Brief question and answer session will follow the formal presentation.
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As a reminder of this conference is being recorded.
It is now my pleasure to introduce your host Susan Mccoy Senior Vice President of Investor Relations. Thank you Ms. Mccullough you may begin.
Good morning, and thank you for taking part and well I guess, what's fourth quarter conference call.
We are conducting the call from different locations again this quarter. Please bear with US if you experience right.
The rise of it makes the audio quality.
On the call today on our Karl Glassman, Chairman and CEO.
The President and C O O, Jeff Tate Executive Vice President and CFO.
Steve Henderson, EVP, and president of the specialized products and furniture flooring and types of products segments.
Cassie Branscum senior director of IR, and chair of Sherwood director of IR.
The agenda for our call. This morning is as follows.
We'll start with the summary of the main points, we made in yesterday's press release.
Mitch will discuss operating results and Jeff will cover financial details and the address our outlook for 'twenty 'twenty one.
This call is being recorded for Leggett <unk> Platt, Inc is copyrighted material.
Call. It may not be transcribed recorded or broadcast without our express permission. A replay is available from the IR portion of like its web site.
We posted to the Investor relations portion of the website yesterday's press release and the <unk>.
Net of Powerpoint slides that contain summary financial information along the 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 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 section in our most recent 10-K and subsequent 10-Q entitled risk factors and forward looking statements on.
Now I'll turn the call over to Karl.
Good morning, and thank you for joining us today.
First thank you to our employees for your dedication ingenuity and tenacity in what was a very challenging year as a result of the COVID-19 pandemic and.
In 2020, our employees came together across our corporate functions and businesses to develop highly effective protocols to manage the crisis.
Submitted to not only keeping each other safe and healthy while serving our customers, but also found in many ways to give back and help their communities.
Redesign the way that they work, while maintaining and even increasing productivity.
The amended the financial covenants in our revolving credit facility to provide additional liquidity all while having a sharp focus on managing working capital and reducing capital expenditure investments.
Continuing our deleveraging efforts and.
And delivering our 49th consecutive annual dividend increase.
Extremely proud of all of that the team has accomplished.
We finished 2020 as a stronger company as a result of their extraordinary efforts.
As we reported yesterday fourth quarter sales were $1.182 billion.
3% versus the fourth quarter of 2019.
Continued strong demand in the residential end markets and growth in automotive was partially offset by continued weakness in the aerospace and work furniture.
Fourth quarter, EBIT was $150 million EBIT increased $15 million in the quarter versus fourth quarter of 2019, primarily due to lower fixed cost and the non recurrence of 2019 restructuring related charges, partially offset by a change.
And LIFO impact.
EBIT margin increased 90 basis points to 12, 7% and increased 50 basis points versus the adjusted fourth quarter 2019, EBIT margin of 12, 2%.
Fourth quarter EBIT margin was 16, 8% compared to 2019 fourth quarter adjusted EBITDA margin of 16, 4%.
Earnings per share were of fourth quarter record 76 cents.
Fourth quarter 2019, EPS was 64 cents and included four cents per share of restructuring related charges, excluding those charges fourth quarter EPS increased eight <unk>.
Or 12% versus fourth quarter of 2019, adjusted EPS of <unk> 68 cents.
For the full year 2020 sales decreased 10% to $4 billion to $8 billion, primarily from Covid related demand declines across most of our businesses.
The EBIT decreased $113 million and adjusted EBIT decreased $83 million to $446 million, primarily from the impacts of lower sales and the change of LIFO, partially offset by fixed cost reductions.
Full year EPS was $1 82.
And adjusted EPS was $2 13, a 17% decrease from 2019 adjusted EPS of $2 57.
In addition, we generated operating cash flow of $633 million.
During 2020, we divested two businesses in our bedding segment.
Small specialty wire operation and our drawn wire business with annual sales of $30 million and a small operation in our former fashion bed business with annual sales of $15 million.
We also reported yesterday that our board of directors declared a <unk> 40 per.
Per share first quarter dividend at Friday's closing price of $43 to.
The current yield is three 7%, which is one of the higher yields among the S&P 500 dividend aristocrats, we remain committed to our position as of dividend aristocrat.
Our enduring fundamentals gives us confidence in our ability to create long term value for our shareholders. We are leaders in most of our markets focused on innovation and working closely with our customers to provide more of what they need to be successful we continue to invest in businesses.
With sustainable competitive advantages in large addressable markets with opportunities to grow and add value over time.
Consistent with that objective on January 30 of 2021, we acquired an aerospace business located in the U K debt specializes in metallic ducting systems flexible joints and components for space military and commercial applications.
$27 million annual sales of approximately $17 million. This acquisition acquisition expands our aerospace product offering to include key components, such as flexible hoses and bellows that are frequently used in fluid conveyance systems.
I'll now turn the call over to Mitch.
Thank you Karl and good morning to everyone.
I'd like to Echo Karl's comments and thank our employees for their tremendous efforts. This past year your flexibility ingenuity commitment and endurance made all of the difference as we navigated 2020.
We are well positioned to tackle 2021, and the years ahead, and I am honored and proud to be on your team.
Hmm.
We're making progress with many of the challenges we faced this past year and we ended the year with fourth quarter sales growth and margin improvement in all three segments.
Sales of our bedding products segment increased 3% in the fourth quarter.
And the global bedding market drove sales growth in ECS European spring in U S spring.
This growth was partially offset by lower volume and adjustable bed and exited volume of in fashion bed in drawn wire.
Mattress consumption in the fourth quarter was well above historic levels driven by the continued focus on home related products by consumers. However.
However, supply remained constrained across the market by shortages of fabric chemicals and labor with each of these factors, having varying degrees of impact throughout the quarter.
In addition, COVID-19 related restrictions constrained some retail channels and drove continued strong growth of online sales.
These factors impacted our primary market channel in very different ways.
We estimate the mattress sales in the U S betting market increased by roughly 1 million units or 13% in the fourth quarter.
Imported mattresses increased by about 350000 units of domestically produced mattresses increased by about 650000 units.
Of the domestically produced mattresses, we estimate that foam and other non spring based mattresses increased by roughly 600000 units and spring mattresses increased by about 50000 units or 1%.
Our fourth quarter sales growth mirrored these trends with the U S spring sales up 2% year over year, and ECS sales up 8% year over year.
We believe that our overall share of the domestic bedding market is fairly consistent year over year, perhaps down slightly considering the growth of mattress imports this year.
The volatility in demand market share shifts and supply chain constraints that the overall industry experienced in 2020 likely created some minor ups and downs quarter by quarter, but we believe our share is fairly steady overall.
As the quarter progressed, we secured nonwoven fabrics from alternative suppliers around the globe, improving our production efficiency of fabric inventory position.
Supply of the primary chemicals used in our specialty film operations, TDI MDI and polyol, we're restricted through the quarter as producers declared force majeure share and implemented customer allocations due to reported production disruptions.
We expect the chemical of constraints to persist through at least mid 2021.
We continue to add labor in our U S spring facilities, but also the must manage inefficiencies as we trained new employees and experienced some of the absenteeism related to COVID-19.
As we move through 2021, we plan to continue to add staffing on our comfort core lines and will add additional machine capacity to accommodate demand for these products.
The combination of labor and machinery additions should add about 25 per cent to our current capacity for comfort core once fully in place later this year.
Sales in our specialized products segment were up 1% in the fourth quarter with growth in automotive, mostly offset by continued weak demand in aerospace and on.
Aerospace and our automotive business volume for the quarter was up 6% driven by strength in our Asia operations.
We expect the aerospace industry to remain challenge over the next few years, given the disruption in the air travel and resulting buildup of aircraft and supply chain inventories.
In our aerospace business, we're seeing recovery in the fabricated duct assemblies to near pre COVID-19 demand levels, but our welded and seamless to production continued to be challenged as customers deplete their inventories.
Yeah.
Sales in our furniture flooring and textile products segment increased 5% in the fourth quarter driven by continued strong demand in fabric converting geotextile components and home furniture.
In flooring products growth in residential sales were more than offset by weak hospitality sales.
Recovery in work furniture continues to lag the other businesses in the segment as the industry has been heavily impacted by the effects of the pandemic.
The fixed cost actions, we took earlier in the year reduced fourth quarter costs by approximately 25 million and full year costs by approximately $90 million as.
As we move into 2021, we will continue to focus on controlling our costs by keeping our variable cost structure aligned with the current demand levels and only adding fixed costs as necessary to support higher volumes and future and support future growth opportunities on.
I'll now turn the call over to Jeff.
Thank you Mitch and good morning, everyone.
Most of 2020, our primary financial focus was on maximizing liquidity generating cash and disciplined uses of cash.
Cash from operations was 200 of $19 million in the fourth quarter of decrease of $33 million versus very strong results in the same quarter of 2019, primarily due to working capital investment to replenish inventory levels in certain businesses.
For the full year, we generated cash from operations of $603 million, the third highest level in our company's history.
This compares to a record of $668 million and 2019.
On the $65 million decrease was driven by lower earnings.
We ended the year with adjusted working capital as a percentage of annualized sales out of notable seven 4%, reflecting our continued priority on closely controlling all elements of working capital.
Total capital expenditures for 2020 were $66 million, 54% lower than prior year, reflecting our sharp focus on optimizing cash flow as we navigated the effects of the pandemic.
Our balance sheet remains strong and we ended the year with total liquidity of $1 $5 billion comprised.
Comprised of $349 million on cash on hand, and $1 $2 billion in available capacity under the $1 $2 billion revolving credit facility.
In addition, we brought back $36 million of offshore cash in the fourth quarter, bringing our full year total to $188 million.
As of December 31 of our net debt to trailing 12 month EBITDA was 244 times.
In 2020, we reduced debt by $228 million.
Including $108 million prepayment of a portion of our term loan a.
Now moving to <unk> 'twenty 'twenty one guidance.
We expect continued recovery into 2021 as a result of strong consumer demand for home related items and global automotive.
Progress with supply chain constraints and modest improvement in our businesses and industries that have been negatively impacted by the effects of COVID-19.
We also expect continued inflation in commodity costs and recovery of those higher costs through selling price increases.
2021 sales are expected to be in the range of $4 6 billion to $4 $9 billion.
We're up 7% to 14% over 2020.
The resulting from mid single digit volume growth raw material related price increase increases and currency benefit.
The aerospace acquisition, which Karl mentioned earlier will be offset by divestitures completed in 2020.
2021 earnings per share are expected to be in the range of $2 30 to $2 60.
Primarily reflecting her of volume, partially offset by increasing steel chemical and other raw material costs as low as the pricing lag associated with passing along these costs, particularly in the first quarter.
This guidance also assumes the fixed cost savings as the result of actions taken in 2020 to be approximately $70 million.
As compared to approximately $90 million in 2020.
This guidance assumes no LIFO impact in 2021.
Earnings per share guidance assumes the full year effective tax rate of 23%.
We expect 2021, depreciation and amortization to approximate $195 million net.
Net interest expense of approximately $75 million and fully diluted shares of $137 million.
Based upon this guidance framework, our 2021 full year EBIT margin should be in the range of pinpoint five per cent to 11%.
Okay.
Additionally, we anticipate operating cash flow to approximate $450 million capital expenditures to approximate of $150 million.
Dividends of approximately $220 million debt.
Debt repayments of at least $51 million.
And controlled acquisition spending and the continued suspension of share repurchases as we prioritize debt repayment after organic growth and dividends.
In summary, our focus on the balance sheet strength funding organic growth commitment to deleveraging and investment grade debt ratings and maintaining our position as the dividend aristocrat has not changed this.
This discipline allows us to withstand uncertain times and capture of both near and long term investment opportunities.
With those comments I'll now turn the call back over to Susan.
That concludes our prepared remarks, we thank you for your attention and we'll be glad to answer your questions Karl will direct our questions Q&A session on the grateful answering your questions.
Brock we're ready to begin the Q&A.
Thank you.
If you would like to ask a question. Please press star one on your telephone keypad.
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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question today comes from Bobby Griffin of Raymond James. Please proceed with your question.
Good morning, everybody I hope everyone's doing well on staying healthy and thank you for taking my questions and congrats on navigating a very challenging year.
On Splunk as Bobby.
I guess Karl first I wanted to maybe talk about high level about the business today, and how it's positioned for inflation and maybe compare it to the last time, we went through a pretty big bout of inflation, which I believe it was in 2018. There are some businesses you guys have sold so maybe we can just walk through you know either you know by the segment level or whatnot, whatever it might be easiest of.
Of just how leggett is positioned to attack and inflationary environment today.
Yes. Thank you Bobby it's a really a good question I'll start and then ask of the others. The Jive N and Youre right. The complexity of the business or the makeup of the business is very different today than it was just three short years ago debt.
In 2018, you'll remember we had a hard time passing through steel commodity inflation.
The fashion bed business, what we no longer participate in fashion bed with the last divestiture last little piece of debt taking place on the in the fourth quarter. We also had a home furniture business that was probably too focused on commodity products. So the team did a great job of kind of pure.
We refine that business, focusing on innovation and customer needs higher value products and as.
More of upholstered furniture manufacturer of moved offshore we've heavy weighted our manufacturing capacity offshore for what becomes.
From an internal perspective, the domestic consumption that is then exported to the north American to Europe. So the makeup of the business is certainly healthier incrementally there's been a.
A few divestitures that have taken place that are just they they.
They become material when you add them up, but they're really kind of small, but they tend to be more commodity oriented the other.
The main change since 2018 as the acquisition of ECS. So we acquired D. C. S E T S.
Does a really good job of producing specialized so it gives them pricing power. They have agreements in place they have the ability to pass through commodity inflation actually probably more effectively and efficiently than we have on our historic spring businesses were in those business.
As you'll recall, we have a 90 day lag so just a better mix of businesses and the 2018 timeframe was a learning opportunities of our teams learn from but.
Mitch anything that you want to add to that rambling answer.
Does it get it get answer Karl I would just add a couple of small points I think you're right on the ECS. They think that our ability to pass the chemical increases that we're seeing along as even.
We're able to do that even faster than we had over the last year or so so I think that's very helpful. And then the other thing I would add is that we struggled a little bit of getting some robin Taylor inflation through ph the before and I think we have a better position to do that now as well. So overall I think the at the high level by the it is of good question and I think that.
We're on a much firmer footing, passing along inflation than we've ever had been really.
Alright. Thank you I appreciate the detail very helpful. And then when we think about the year and it's obviously very impossible to predict you know raw materials of when they move but I say, we just flatten out from here is the headwind mostly in <unk>.
And then is there any type of sizing or can you put some range around what the raw material headwind is for us to maybe tuned up our <unk> models of how big of a headwind we need of flow in because you did call out some pretty noticeable cost savings of $70 million. So that makes me believe the raw material headwinds pretty big.
Given kind of where the earnings are moving around too.
Bobby as you said, it's really really difficult to forecast.
You'll remember on.
On the call the third quarter call in November of last year, we talked the.
Really oddly in 2020, if there was anything that was welcome. It was the fact that the steel input costs, primarily scrap had been really pretty flat for the year.
I should've never made that comment because the scrap jumped pretty aggressively and December, forcing us to actually book some LIFO expense that we didn't anticipate when we spoke in less book as a group in November so.
Yeah, it's so difficult to forecast scrap went up significantly the steel by the way the steel scrap market went up significantly in January.
We had $100 a ton.
<unk> like the early forecast February scrap won't set settled probably until the end of this week.
But it looks like there'll be a regression of that inflation by probably 40 to $50 of Tom.
It's difficult.
You know what happens for the rest of the year in ability or inability to call you know make the call on LIFO was also with challenge.
Yeah.
Frankly, we don't know it will impact the lag impact will be most severe in <unk> based on what we know today ECS is a different set of circumstances at ECS. The chemical input cost inflation is much more significant than in the steel side of the business.
It will probably have a longer duration moving into second quarter, We've announced three price increases, we'll probably announce the fourth relatively soon.
More difficult to forecast the timing of that but the good news to Mitch as earlier point is that we get recovery really pretty quickly so.
Mitch anything that you want of ads all of that.
No I think he covered it Karl I think on the chemicals, it's really dynamic the.
The price and you started surging in the fourth quarter see continued increases in Q1 and as you said I think we'll have some disruption there both from availability of them from pricing through the first half of the year, but youre right. We are able to I think so far passed that on pretty quickly.
Yeah. Thanks, Mitch Bobby if you don't mind can we talk about LIFO for just the second I know that some of the the.
The the sell siders have ask about and some of the investors of asking about LIFO.
As Jeff said in his prepared comments, we are forecasting low LIFO expense in 2021 as we typically do early in the year because to your good point, we lack of visibility but.
LIFO is really a byproduct of the calculation that's done on December 31st of every year.
Related to the amount and the value of inventory on hand, so the way that I think about the LIFO expense for Q debt. It was probably a pull forward because overtime LIFO and FIFO match.
Uh-huh don't perfectly match at the end of the year so late year.
On the inflation related resulted in LIFO expense with no FIFO recovery ability Intel one into Q. So that's kind of the challenge that we have you know at this point, it's pretty easy to call that there won't be a LIFO expense of.
Size and 2021, but the who the heck knows.
Okay I appreciate it.
Oh I'm sorry, one more thing just to make sure. We're clear on the fixed cost savings are the 70 million that Jeff spoke of that's not an incremental $70 million. That's the amount we expect to retain as we move into 'twenty. One that was the result of the activity.
These that we undertook in 2020 just wanted to make sure that was clear.
So is the is the right way to think about that maybe if we just look at 2019 day to think about the fixed cost structure of the business. The in the 19, and then basically things. Okay. Incrementally you guys would reduce that fixed cost structure by $70 million and then of course, there's been some investments having to come on given the demand level that we've seen in some of the.
Your end markets is that fair.
Yeah, I think thats, the fair way to think about the Bobby.
Okay, Okay, well I appreciate all the details. Thank you for taking my question on I'll jump back in the queue.
Thanks Robby.
The next question is from Susan Mcclary of Goldman Sachs. Please proceed with your question.
Thank you good morning, everyone.
Hi, Susan.
My first question is you know I wanted to talk a little bit about the margin outlook and you know certainly understanding some of the near term pressures around inflation and some of the issues that youre dealing with with the supply chain, but as we kind of look past some of that and we think about the volumes in some of the changes that you have made from the cost prospect.
On an operational perspective across the whole business, how should we think of about the margin profile and especially maybe as we think about this for the back half of 'twenty, one and maybe you know even further out from there where the business can operate and and how you can kind of achieve that.
Yeah. Thanks, Susan on a longer term basis, which I think is the Genesis of your question. We still are very comfortable with our expectation that EBIT margins will be in a range of 11 five to 12, 5%. It's really the short term issues the that.
Debt, we've spoken about the lag impact.
And not really getting the margin on the the pass through is a percentage we get the recovery from a dollar perspective. So yeah. We're we're very comfortable with the 11 in the house of 12% long term target.
Yeah.
Okay, Alright, that's helpful. Karl and then my next question as you mentioned in your remarks that you are adding staffing in comfort core you are expanding that business in terms of of capacity for this year and when we kind of think about that for 'twenty. One I guess can you give us some color on I know that you kind of.
It's the only wanted to share of exact.
Percentages on it but give us some color around how comfort core has performed over the last couple of quarters and how we should be thinking about that as we look forward and think about its contribution to the bedding segment.
Mitch you want to grab that yeah.
Yes sure.
Hi, Susan.
Right, we continue to add staffing will add additional equipment. This year. It will come on line at various points of through the year, which combined should be able to increase our capacity by about 25 per set we.
We have been increasing our production sequentially in the.
From the downturn of the second quarter to the third quarter two of the fourth quarter as well and we continue to see really strong demand for our higher end products out of giving us those content gains. So I think that if we look back over time.
The comfort core as the percentage of our total innerspring reduction was about 58% and two in the fourth quarter of 19. It was about 60% in the third quarter of 'twenty and about 62% in the fourth quarter of 'twenty. So continue to see gains there and similarly continue to see the percentage of our cash.
The core units that also have quantum edge to continue to increase as well up to about 56% in the fourth quarter of 'twenty. So we're happy and excited to make those capacity expansions at the continue to drive higher content gains across our product line.
Okay, Alright, that's very helpful and if I can just sneak one line here you know one of the things one of the questions that we've been getting is around you know some of the issues in the auto industry in general as it relates to the semiconductors and the shortages that that industry, you're seeing can you just comment on whether that's had any impact on you.
Your backlog or your supply chain and how you are.
Thinking about that or anything that we should be aware of there.
Steve.
Yeah sure good morning, Susan.
First.
So I want to acknowledge the automotive team everything went through last year now carrying over into 2021 and to some extent.
On the chip shortage, it's an industry wide issue and each OEM is taking their own approach based on on their situations where.
We're reading a lot just like you are but the situation is still very fluid with with limited visibility at this point and we have some ancillary exposure to supply chain constraints on our in our motor production, but we think the majority of the impact will probably come from restrictions on OEM production.
<unk>.
We've seen GM Ford Chrysler, Volkswagen, others announced temporary reductions of one sort or another but we are seeing.
Not seeing that impact in our orders yet so there's a bit of a disconnect.
But that being said based on the predictions from IHS, they're saying approximately 858000 units.
Could be lost in the first quarter.
They are saying you could make the they can make that up in the in the second half of the year. If it doesn't continue to increase so based on that we would see a slight negative sales impact in Q1, but it's still too early to tell.
Okay, Alright, that's very helpful. Thanks, everyone.
As a reminder, if you would like to ask a question. Please press star one on your telephone. Our next question is from Peter Keith Piper Sandler. Please proceed with your question.
Hi, Thank the good morning, everyone and hope everyone. There is doing well.
I wanted to just dig into again some of the the planned price increases and the I think you gave some good context on how the business compares the 2018.
But looking specifically at your inner spring business and the steel inflation, that's going on right now because of the supply chain challenges that you guys of experienced in recent months or do you still have the same pricing capabilities of the pass through to your major bedding customers in the coming months.
<unk>.
Mitch why don't you grab that one.
Okay sure Karl Thanks, and Hi, Peter.
Yeah. The short answer is absolutely.
We have <unk>.
The actual.
Terms that allow us to pass through the steel inflation that we see is as you've seen over the years that has a bit of of lag, but that's comes through and we're certainly able to do that for our noncontract customers as well in fact went out with the increase in January and May well can get given the continued inflation to have another one coming after that so I don't think.
Debt our ability of pass on the inflation in the inner spring business has been impacted at all.
Okay, great and.
So I know, there's a lot of new inner spring product that's coming into the market. This year, we have not been able to see it because of the Las Vegas market Covid dynamic have you guys gained content with some of your major bedding customers. This year with these planned launches.
Yeah, I think the answer to that is yes, we see it we just talked about the increase in our comfort core in quantum edge share. There. It's you know it's been a scramble throughout 2020 and continuing here just supply everybody's need and I think that strong demand continues.
Okay, then maybe last day just to round out on the bedding. So it does seem like the really strong demand is continuing in Q1 may be poised for even the industry acceleration versus Q4.
When we look at you.
Your your U S spring business I think we and some of the investors. We talked to you were expecting some acceleration in Q4 sequentially as the supply chain the delays moderated.
And maybe looking forward to Q1 is that something that you know now with further moderation of strong industry backdrop and also with the anti dumping duties that the that U S. Spring is poised for a portion of the healthy reacceleration here.
Yeah, I think so I think we continue to make improvements in our production I think that there is you know as I talked about in my comments I.
I think disruption as their share shifts across the industry and other constraints like chemicals and film availability that impact some of our customers. So I think that creates some cloudiness, but I think from our standpoint, we have the capability to continue to increase our sales in Q1.
Okay very good thanks, so much guys and good luck.
Thanks Peter.
The next question is from Keith Hughes of Truest. Please proceed with your question.
Thank you that's going on on a little late I hope, it's not a repeat of that.
On the drawn wire sales were down 4%.
In the quarter.
Hum.
Does that have something to do with what's going on with some of the inflation coming in or sort of any kind of commentary on what you're seeing in that business.
Keith.
The good question then the interesting observation in that all of that was a signal of the is that in.
From our drawn wire of business, what's most important is.
They're set up the supply inter company. So we with the increased demand in springs that we focused more of that volume internally, which has a much higher value to us than the external trade business. So that's the primary driver and we did divest of small business.
It was a combination.
Okay that definitely.
The the productive capacity of the Sterling Rod mill did not change.
Okay, all right I think I understand what you're I think I understand what you're saying there.
And adjustables were down as well in the quarter I know you had at the.
Big promotions with the retailer of the anniversary of is that still the the driver of the <unk>.
The decline there.
Yeah, just remember we were up against the comp in <unk> of 19 of 22% growth. So it was just a tough comp.
That business is really good.
Okay, and I don't know if you said this earlier, but just overall embedding the.
Organic sales of about 5% in total.
Some of the divestitures coming off.
You would anticipate that number to increase notably, particularly with the tariff in the first half of 'twenty one.
Go ahead Mitch.
Thanks Karl.
Keith Yeah.
Yeah, I mean, I think that that's set up to the really strong year potentially I think we don't know exactly what's going to happen as the tariff continues to have the strong impact we saw November imports dropped significantly, but yeah I think the overall industry.
Can you this consumer focus on the home I think that we are well positioned to see continued strong growth.
Okay. Thank you.
Yeah.
There are no further questions at this time I would like to turn the floor back over to Susan Mccoy for closing comments.
Thank you for joining us again today and well talk to you next quarter.
This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.
Okay.
Yeah.
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Yeah.
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