Q4 2023 Leggett & Platt Inc Earnings Call

Operator: Greetings and welcome to the Leggett & Platt 4th Quarter and Full Year 2023 Webcast and Earnings Conference Call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Leggett <unk> Platt fourth quarter, and full year 2023, Webcasts and earnings call 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.

Operator: 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, Cassie Branscom, Vice President of Investor Relations for Leggett & Platt. Please go ahead.

It's now my pleasure to introduce your host Cassie Branscum, Vice President of Investor Relations for Leggett and Platt. Please go ahead.

Cassie Branscom: Good morning and welcome to Leggett & Platt's fourth quarter and full year 2023 earnings call. With me on the call today are Mitch Dulles, President and CEO; Ben Burns, Executive Vice President and CFO; and Steve Henderson, Executive Vice President and President of the Specialized Products and Furniture, Flooring, and Textile Product Segment. Tyson Hagel, Executive Vice President and President of the Betting Products Segment Susan McCoy, Director of IR Special Projects, and Kalena Talbert, Manager of Investor Relations. The agenda for our call this morning is as follows. Mitch will start with a summary of the main points we made in yesterday's press release and discuss operating results and demand trends. Then we'll cover financial details and address our outlook for 2024, 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.

Cassie Branscum: Good morning, and welcome to Leggett, <unk> Platt fourth quarter and full year 2023 earnings call.

Cassie Branscum: With me on the call today are Mitch Dolloff, President and CEO, Ben Burns Executive Vice President and CFO, Steve Henderson Executive Vice President and President of the specialized products and furniture flooring and textile products segments.

Speaker Change: Nice and Hegel Executive Vice President and President of the bedding products segments, Susan Mccoy director of IR special projects and Colina Talbert manager of Investor Relations.

Speaker Change: The agenda for our call. This morning is as follows.

Mitch Dolloff: Mitch will start with a summary of the main points, we made in yesterday's press release and discuss operating results and demand trends.

Mitch Dolloff: Then we will cover financial details and address our outlook for 'twenty 'twenty four and the group will answer any questions you have.

Mitch Dolloff: This conference call is being recorded for Leggett <unk> Platt and is copyrighted material. This call may not be transcribed recorded or broadcast without our expressed permission.

Cassie Branscom: A replay will be available on the Investor Relations section of our website. We posted yesterday's press release on the IR section of our website and a set of slides that contain summary financial information along with segment details. Those documents supplement the information we discussed on this call, including non-GAAP reconciliation. 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 TIN-K and subsequent TIN-Q entitled Risk Factors and Forward-Looking Situations. I'll now turn the call over to Mitch.

Mitch Dolloff: A replay will be available on the Investor Relations section of our website.

Mitch Dolloff: 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 those documents supplement the information we discuss on this call, including non-GAAP reconciliations.

Mitch Dolloff: 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.

Mitch Dolloff: These risk factors and additional information please refer to yesterday's press release and 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.

Mitch Dulles: Good morning, and thank you for participating in our call. First, I would like to recognize Susan McCoy on what will be her final earnings call. She is retiring at the end of March after 38 years with the company, including 22 years in investor relations. Susan has made enormous contributions to Leggett, including developing an outstanding IR function that has benefited both Leggett and the investment community over the past two decades. Susan, thank you so much for your service and congratulations on your retirement. In what has been a long-planned succession, Cassie Branscom stepped into the lead role as Vice President of Investor Relations effective at the beginning of 2024. Cassie joined the IR team in 2018 after serving in various roles across the company since 2005.

Mitch Dolloff: Good morning, and thank you for participating in our call.

Mitch Dolloff: First I would like to recognize Susan Mccoy and what will be her final earnings call. She is retiring at the end of March after 38 years with the company, including 22 years in Investor Relations.

Mitch Dolloff: Susan has made enormous contributions to like including developing an outstanding IR function that has benefited both legacy and the investment community over the past two decades.

Speaker Change: Susan Thank you so much for your service and congratulations on your retirement.

Speaker Change: And what has been a long planned succession Cassie branscum stepped into the lead role as Vice President of Investor Relations effect at the beginning of 2024.

Speaker Change: Yeah. She joined the IR team in 2018 after serving in various roles across the company since 2005.

Mitch Dulles: She has tremendous financial skills and deep industry knowledge that will continue to serve us well as she leads the IR function going forward. 2023 was another challenging year, particularly within our residential end market. Our employees once again persevered to accomplish some notable achievements, including preparing a restructuring plan for a bedding products and furniture flooring and textile product segment. These efforts will drive improved operating efficiency and profitability while maintaining high-quality products and services for our customers, driving strong cash flow with a continued focus on working capital management, and advancing our sustainability data collection efforts to establish baseline metrics and goals that we plan to share in our 2024 report. Thank you for your continued dedication to each other and to Leggett & Platt. We have made some difficult but necessary decisions to support the company's long-term success. I sincerely appreciate your ongoing support, and thank you for your efforts each and every day.

She has tremendous financial skills and deep legacy knowledge that will continue to serve us well as she leads the IR function going forward.

Speaker Change: Yeah.

Speaker Change: 2023 it was another challenging year, particularly within our residential end markets.

Speaker Change: Our employees once again persevere to accomplish some notable achievements, including preparing a restructuring plan for our bedding products and furniture flooring and textile products segment. These efforts will drive improved operating efficiency and profitability, while maintaining high quality products and services for our customers draw.

Speaker Change: Driving strong cash flow with a continued focus on working capital management and advancing our sustainability data collection efforts to establish baseline metrics and goals that we plan to sharing our 2024 reports.

Speaker Change: Thank you for your continued dedication to each other and they get them flat, we have made some difficult but necessary decisions to support the company's long term success I sincerely appreciate your ongoing support and thank you for your efforts each and every day.

Speaker Change: Before we move on to our fourth quarter and full year 2023 financial results I would like to walk through the restructuring plan, we announced on January 16th that primarily impacts our bedding product segment.

Mitch Dulles: Before we move on to our fourth quarter and full year 2023 financial results, I would like to walk through the restructuring plan we announced on January 16th that primarily impacts our betting products. We're taking actions to create a more focused, agile organization with a portfolio of products that are most in demand and an operating footprint aligned with the markets we serve. These actions build upon work already underway to better position our betting business for the future. Optimizing the bedding manufacturing and distribution footprint will drive most of the one-time cost and future EBIT benefits from the plan.

Speaker Change: We're taking actions to create a more focused agile organization with a portfolio of products that are most in demand and an operating footprint aligned with the markets we serve.

Speaker Change: These actions built upon work already underway to better position, our bedding business for the future.

Speaker Change: Optimizing the bedding manufacturing and distribution footprint will drive most of the one time cost in future EBIT benefits from the plant.

Mitch Dulles: The majority of betting actions will be within our U.S. Spring and Specially Foamed business. We will be winding down operations at our smaller U.S. Spring distribution locations over the next few months and expect to shift innerspring production to four higher output facilities over the course of 2024. Within Specialty Foam, we will be consolidating several manufacturing operations and driving more product synergies across Specialty Foam and Intersprings, including private label and OEM hybrid mattress production over approximately the next 18 months.

Speaker Change: The majority of betting actions will be within our U S spring, especially phone businesses.

Speaker Change: We will be winding down operations at our smaller U S spring distribution locations over the next few months and expect to ship innerspring production before higher output facilities over the course of 2024.

Speaker Change: Within specialty foam will be consolidated several manufacturing operations and driving more product synergies across specialty foam and inner springs, including private label and OEM hybrid mattress production over approximately the next 18 months.

Mitch Dulles: Fewer but higher output manufacturing facilities combined with an improved distribution network will allow us to manufacture and distribute our products more efficiently and serve our customers more effectively. While we are reducing capacity in certain product categories to align with consumer preferences that have shifted over time, we are maintaining sufficient capacity to serve our customers with the products they desire most as market demand returns to more normalized levels in the future. Sales attrition from these initiatives is primarily due to discontinuing production of certain commodity bedding products in certain geographies. We are also consolidating a small number of production facilities in our home furniture and flooring products businesses within the furniture, flooring, and textile products segment. The Home Furniture Consolidation activity is underway and is expected to be completed in the first half of 2024.

Speaker Change: Fewer but higher output manufacturing facilities combined with an improved distribution network will allow us to manufacture and distribute our products more efficiently and serve our customers more effectively.

Speaker Change: Well, we are reducing capacity in certain product categories to align with consumer preferences that have shifted over time, we are maintaining sufficient capacity to service our customers with the products. They desire most as market demand returns to more normalized levels in the future.

Sales attrition from these initiatives is primarily due to discontinuing production of certain commodity bedding products in certain geographies.

Speaker Change: We are also consolidating a small number of production facilities in our home furniture and flooring products businesses within the furniture flooring and textile products segment.

Speaker Change: The home furniture consolidation activity is underway and is expected to be completed in the first half of 2024.

Mitch Dulles: The flooring products efforts are also underway, but will likely extend into 2025 as multiple product lines are being shifted among locations. These actions are being taken to better align capacity with regional demand and drive operating efficiency. In connection with the restructuring plan, we stepped away from our total shareholder return goal and financial targets, including revenue growth, EBIT margin, and dividend payout ratios. We will issue revised financial targets in the future when our restructuring initiatives are implemented, and we have better visibility of further opportunities that could impact our long-term performance. Now moving on to fourth quarter and full year 2023 results. Fourth quarter sales were $1.1 billion, down 7% versus the fourth quarter of 2022. Continued weak demand in residential markets was partially offset by demand strength in our automotive, aerospace, and hydraulic cylinder businesses. Fourth quarter EBIT was a loss of $367 million resulting from a $444 million non-cash intangible asset impairment charge. This impairment was associated with the ECS and KFOM acquisitions and primarily related to customer relationship, technology, and trademark intangible assets.

Speaker Change: The flooring products efforts are also underway, but will likely extend into 2025, there's multiple products lines are being shifted among locations.

Speaker Change: These actions are being taken to better align capacity with regional demand and drive operating efficiencies.

In connection with the restructuring plan, we stepped away from our total shareholder return goal and financial targets, including revenue growth EBIT margin and dividend payout ratio.

Speaker Change: We will issue revised financial targets in the future when our restructuring initiatives are implemented and we had better visibility further opportunities that could impact our long term performance.

Speaker Change: Now moving onto fourth quarter and full year 2023 results.

Speaker Change: Fourth quarter sales were $1 $1 billion down 7% versus the fourth quarter of 2022.

Speaker Change: Weak demand in residential end markets was partially offset by demand strength in our automotive aerospace and hydraulic cylinders businesses.

Speaker Change: Fourth quarter, EBIT was a loss of $367 million, resulting from a $444 million noncash intangible asset impairment charge.

This impairment was associated with the E C S and K film acquisitions, and primarily related to customer relationships technology and trademark intangible assets.

Mitch Dulles: Prolonged weak demand and changing market dynamics have created disruption and financial instability for some of our customers. As such, recent efforts by certain customers to improve their financial position are expected to reduce our future sales and earnings. This triggered an evaluation of intangible assets and resulted in the impairment charge in the fourth quarter of 2023. Adjusted EBIT was $66 million in the quarter, down $25 million versus the fourth quarter of 2022, primarily due to lower metal margins in our steel rod business and lower volume in our residential end market. Fourth quarter earnings per share was a loss of $2.18 due to the items discussed in yesterday's press release.

Speaker Change: Prolonged weak demand and changing market dynamics have created disruption and financial instability for some of our customers.

Speaker Change: As such recent efforts by certain customers to improve their financial position are expected to reduce our future sales and earnings this.

Speaker Change: This triggered an evaluation of intangible assets and resulted in the impairment charge in the fourth quarter of 2023.

Speaker Change: Adjusted EBIT was $66 million in the quarter down $25 million versus fourth quarter 2022, primarily due to lower metal margins in our steel rod business and lower volume in our residential end markets.

Speaker Change: Fourth quarter earnings per share was a loss of $2.18 due to the items discussed in yesterday's press release, excluding these items adjusted fourth quarter EPS was <unk> 26 cents, a 33% decrease from fourth quarter 2020 to EPS of <unk> 39.

Mitch Dulles: Excluding these items, adjusted fourth-quarter EPS was $0.26, a 33% decrease from fourth-quarter 2022 EPS of $0.39. For the full year, 2023 sales decreased 8% to $4.7 billion primarily from weak residential in-market demand and raw material-related selling price decreases, partially offset by acquisitions and demand strength in the industrial in-market. EBIT decreased $575 million, primarily due to the $444 million intangible asset impairment.

Speaker Change: For the full year 2023 sales decreased 8% to $4 $7 billion, primarily from weak residential end market demand and raw material related selling price decreases partially offset by acquisitions and demand strength in industrial end markets.

Speaker Change: EBIT decreased $575 million, primarily from the $444 million intangible asset impairments.

Mitch Dulles: Adjusted EVIT decreased $151 million to $334 million, primarily due to metal margin compression and lower volume in our residential in-market. Full year EPS was a loss of $1, and adjusted EPS was $1.39, a 39% decrease from 2022 EPS of $2.27. Cash flow from operations was $497 million, a $56 million increase versus 2022. Moving on to the segment,

Adjusted EBIT decreased to 151 million to $334 million, primarily for metal margin compression and lower volume in our residential end markets.

Speaker Change: Full year EPS was a loss of one dollar and adjusted EPS was $1, 39% to 39% decrease from 2022 EPS of $2 27 sets.

Speaker Change: Cash flow from operations was $497 million, a $56 million increase versus 2022.

Speaker Change: Moving on to the segments.

Mitch Dulles: The US bedding market continues to be in a deep recession with mattress consumption at levels comparable to 2016. We believe 2023 US mattress consumption will be down high single digits versus 2022 and expect mattress demand in 2024 to be flat to down slightly versus last year. Imported finished mattresses are putting additional pressure on U.S. production in this low-demand environment.

Speaker Change: The U S betting market continues to be in a deep recession with mattress consumption at levels comparable to 2016, we believe 2023 U S. Mattress consumption was down high single digits versus 2022, and expect mattress demand in 'twenty 'twenty four to be flat to down slightly versus last year.

Speaker Change: Imported finished mattresses are putting additional pressure on U S production in this low demand environment.

Mitch Dulles: Sales in our betting product segment were down 14% versus the fourth quarter of 2022 and decreased 17% for the full year. While volume in US spring was down 12% in 2023, comfort core performance was consistent with the overall mattress market trend. We expect 2024 volume in U.S. spring to be down modestly, primarily due to anticipated sales attrition from the restructuring and further declines in lower-value open-coil innersprings and wired grids. These declines are expected to be partially offset by growth in Comfort Core Interspring units, including growth in our new Combination Pocket and EcoBase. The metal margin declined slightly more than expected in 2023, primarily due to mix. We anticipate further modest declines in 2024. To stay competitive with global steel costs, both contract and non-contract innerspring pricing was adjusted in the back half of 2023. Pricing impacts began in the fourth quarter but will be fully realized in 2024. Specialty phone volume in 2024 is expected to be down high single to low double digits, primarily as a result of customer actions that led to the impairment charge we discussed earlier.

Speaker Change: Sales in our bedding products segment were down 14% versus the fourth quarter of 2022 and decreased 17% for the full year well.

Speaker Change: While volume in U S spring was down 12% in 2023 comfort core performance was consistent with the overall mattress market trends.

Speaker Change: We expect 2020 for volume in U S spring to be down modestly primarily due to anticipated sales attrition from the restructuring plan and further declines in lower value open coil inner springs and wire grit.

Speaker Change: These declines are expected to be partially offset by growth in comfort core innerspring units, including growth in our new combination pocket and eco based products.

Speaker Change: Metal margin declined slightly more than expected in 2023, primarily due to mix.

We anticipate further modest declines in 2020 four.

Speaker Change: To stay competitive as global steel cost both contract and non contract inner spring pricing was adjusted in the back half of 2023.

Speaker Change: Pricing impacts began in the fourth quarter, but will be fully realized in 2024.

Speaker Change: Specialty foam volume in 'twenty 'twenty four is expected to be down high single to low double digits, primarily as a result of customer actions that led to the impairment charge, we discussed earlier.

Mitch Dulles: These impacts are anticipated to be realized as we move through the course of the year. For example, we expect 2024 Adjusted Segment EBIT to be modestly lower year-over-year from lower-volume pricing responses related to global seal cost differentials and modest metal margin compression, partially offset by approximately $45 million of lower amortization from the intangible asset impairment taken in the fourth quarter of 2023. Despite current challenging market dynamics, the actions we are taking aim to position our betting business for long-term success as we improve operating efficiencies and continue to drive valuable product solutions for our customers. Sales in our specialized product segment increased 5% versus the fourth quarter of 2022, and we're up 14% for the full year. In our automotive business, the UAW strike impact on fourth-quarter sales was approximately $5 million, and we do not expect any follow-on impacts from the strike in 2024.

Speaker Change: These impacts are anticipated to be realized as we move through the course of the year.

Speaker Change: We expect 2024 adjusted segment EBIT to be modestly lower year over year from lower volume pricing responses related to global C. O cost differentials and modest metal margin compression, partially offset by approximately $45 million of lower amortization from the intangible asset impairment taken in the fourth quarter of 2023.

Speaker Change: Hi.

Speaker Change: Despite current challenging market dynamics. The actions, we are taking aim to position our bedding business for long term success as we improve operating efficiencies and continue to drive valuable parallax solutions for our customers.

Speaker Change: Sales in our specialized products segment increased 5% versus fourth quarter of 2022 and were up 14% for the full year.

Speaker Change: In our automotive business the UAW strike impact on fourth quarter sales was approximately $5 million and we do not expect any follow on impacts from the strike in 2024, we continue to see volatility in certain regions due to geopolitical and supply chain impacts we.

Mitch Dulles: We continue to see volatility in certain regions due to geopolitical and supply chain impacts. We anticipate growth in 2024 and expect to outperform global automotive production, primarily due to new programs initiated throughout the year. We expect continued strong demand in our aerospace business in 2024, with commercial aerospace backlogs at historic highs. In 2024, industry production is anticipated to be modestly above pre-pandemic levels. In hydraulic cylinders, U.S. demand continues to be strong, with backlogs driving growth through at least the first half of 2024. However, domestic growth is expected to be mostly offset by softening demand in Europe.

Speaker Change: We anticipate growth in 'twenty 'twenty, four and expect to outperform global automotive production, primarily due to new programs initiated production throughout the year.

Speaker Change: We expect continued strong demand in our aerospace business in 'twenty 'twenty four with commercial aerospace backlogs at historic highs 20.

Speaker Change: 'twenty 'twenty four industry production is anticipated to be modestly above pre pandemic levels.

Speaker Change: In hydraulic cylinders U S demand continues to be strong with backlogs driving growth through at least the first half of 2024.

Speaker Change: Domestic growth is expected to be mostly offset by softening demand in Europe.

Mitch Dulles: In 2024, we expect segment EBIT to be flat with 2023 as volume growth is anticipated to be offset by less benefit from a reduction to a contingent purchase price liability associated with a prior year acquisition. Sales in our Furniture, Flooring, & Textile Products segment were down 6% versus Q4 2022 and down 11% for the full year. Demand for home furniture continues to be soft. We expect 2024 to be similar to last year, with improvements in low-end market demand offset by continued weakness in mid to high-end market demand. Work Furniture Demand remains low in both contract and residential.

Speaker Change: In 'twenty 'twenty four we expect the segment EBIT to be flat with 2023 as volume growth is anticipated to be offset by less benefit from a reduction to a contingent purchase price liability associated with a prior year acquisition.

Speaker Change: Sales in our furniture flooring and textile products segment were down 6% versus fourth quarter, 2022, and down 11% for the full year.

Speaker Change: Demand at home furniture continues to be soft, we expect 2024 to be similar to last year with improvements in low end market demand offset by continued weakness in mid to high end market demand.

Speaker Change: Work furniture demand remains low in both contract and residential markets. We expect 2020 for demand to be in line with 2023.

Mitch Dulles: We expect 2024 demand to be in line with 2023. For flooring products, we are anticipating another year of lower residential demand due to low existing home sales and renovation activity. Hospitality demand continues to slowly improve, but remains well below pre-pandemic levels.

Speaker Change: In flooring products, we're anticipating another year of lower residential demand due to low existing home sales and renovation activity.

Hospitality demand continues to slowly improve but remains well below pre pandemic levels.

Mitch Dulles: After weaker than expected demand in 2023, we anticipate geocomponents demand to improve through the course of the year in infrastructure and commercial spending and civil construction markets, while retail sales are expected to be flat. In 2024, we expect adjusted segment EBIT to be down modestly year over year from lower volume and moderate pricing pressure from deflation. The largest headwind to earnings continues to be low volume levels in our residential in-market.

Speaker Change: After a weaker than expected demand in 2023, we anticipate geo components demand to improve through the course of the year infrastructure and commercial spending and civil construction markets, while retail sales are expected to be flat.

Speaker Change: In 'twenty 'twenty four we expect adjusted segment EBIT to be down modestly year over year from lower volume and moderate pricing pressure from deflation.

Speaker Change: The largest headwind to earnings continues to be low volume levels in our residential end markets in the near term, we're focused on improving operating efficiency across our businesses driving cash flow and executing a restructuring plan.

Mitch Dulles: In the near term, we are focused on improving operating efficiency across our businesses, driving cash flow, and executing our restructuring plan. Additionally, we believe the longer-term benefits from our refocused spending strategy will advance key product growth, improve profitability, and drive enhanced value for our customers and shareholders. I'll now turn the call over to Ben.

Speaker Change: Additionally, we believe the longer term benefits from our refocused betting strategy will advance key product growth improve profitability and drive enhanced value for our customers and shareholders.

Speaker Change: Now I'll turn the call over to Ben.

Ben Burns: Thank you, Mitch, and good morning, everyone. In 2023, we generated cash from operations of $497 million, $56 million higher than the $441 million we generated in 2020. This increase reflects a continued focus on working capital management, partially offset by lower earnings. We ended the year with adjusted working capital as a percentage of annualized sales of 13.9%, a notable improvement from 2022. Consistent with our near-term priorities of managing cash and reducing debt, we did not complete any acquisitions and had minimal share repurchases in 2023. Our major uses of cash in 2023 were $114 million of capital expenditures, reflecting a balance of investing for the future while controlling our spending. $239 million for dividend payments, extending our record of consecutive annual dividend increases to 52 years, and $107 million to reduce... We ended the year with total debt of $2 billion, including $186 million of commercial paper outstanding.

Ben Burns: Thank you Mitch and good morning, everyone. In 2023, we generated cash from operations of $497 million $56 million higher than the 441 million. We generated in 2022. This increase reflects our continued focus on working capital management, partially offset by lower earnings we ended the year with adjusted working.

Ben Burns: Capital as a percentage of annualized sales of 13.9% a notable improvement from 2022.

Speaker Change: Consistent with our near term priorities are managing cash and reducing debt. We did not complete any acquisitions and had minimal share repurchases in 2023.

Speaker Change: Major uses of cash in 2023 were $114 million of capital expenditures, reflecting a balance of investing for the future while controlling our spending $239 million for dividend payments extending our record of consecutive annual dividend increases to 52 years and $107 million to reduce debt.

Speaker Change: Ed.

Speaker Change: We ended the year with total debt of $2 billion, including $186 million of commercial paper outstanding net debt to trailing 12 month adjusted EBITDA was $3. One six times at year end in line with the third quarter and consistent with our expectations.

Ben Burns: Net debt to trailing 12-month adjusted EBITDA was 3.16 times at year-end, in line with the third quarter and consistent with our expectations. We monitor our debt leverage and liquidity close. As a reminder, our covenant calculation is more favorable than our publicly reported leverage ratio, and we expect that favorable difference to expand in 2020. Total liquidity was $697 million at year end, comprised of $365 million of cash on hand and $332 million in capacity remaining under our revolving credit facility.

Speaker Change: We monitor our debt leverage and liquidity closely as a reminder, our covenant calculation is more favorable than our publicly reported leverage ratio and we expect that favorable difference to expand in 2024.

Total liquidity was $697 million at year end comprised of $365 million of cash on hand, and $332 million in capacity remaining under our revolving credit facility.

Ben Burns: As we anticipate weak residential in-market demand again this year, we are focused on maintaining our investment grade credit rating and managing debt leverage while balancing continued investment in our business for future growth and our dividend track record. We continue to focus on managing working capital and identifying other opportunities to generate cash. In 2024, we expect pre-tax proceeds of $20 to $30 million from real estate sales, consisting of Iowa real estate we are actively marketing, and to a lesser extent, real estate that we will be exiting as a result of our restructuring initiative. We expect to predominantly use our commercial paper program to repay $300 million of 3.8% 10-year notes maturing in November.

Speaker Change: As we anticipate weak residential end market demand again. This year, we are focused on maintaining our investment grade credit rating and managing debt leverage while balancing continued investment in our business for future growth and our dividend track record.

Speaker Change: We continue to focus on managing working capital and identifying other opportunities to generate cash and.

Speaker Change: In 'twenty 'twenty four we expect pretax proceeds of $20 million to $30 million from real estate sales consisting of our real estate, we are actively marketing and to a lesser extent real estate that we will be exiting as a result of our restructuring initiatives.

Speaker Change: We expect to predominantly use our commercial paper program to repay $300 million of three 8% 10 year notes maturing in November.

Ben Burns: Now moving to the 2024 full-year guidance. 2024 sales are expected to be $4.35 billion to $4.65 billion, or down 2% to 8% versus 2023, reflecting continued weak demand in our residential end markets, partially offset by growth in automotive and our industrial end markets. Volume is expected to be down low to mid-single digits, with volume at the midpoint down high single digits in bedding products, up low single digits in specialized products, and down low single digits in furniture, flooring, and textile products. Deflation and currency combined are expected to reduce sales. 2024 earnings per share are expected to be in the range of $0.95 to $1.25, including approximately $0.20 to $0.25 per Full-year adjusted earnings per share are expected to be $1.05 to $1.35, primarily reflecting lower volume.

Speaker Change: Now moving to the 'twenty 'twenty, four or full year guidance.

Speaker Change: 'twenty 'twenty four sales are expected to be 4.35 billion to $4 six $5 billion or down 2% to 8% versus 20 twenty-three reflecting continued weak demand in our residential end markets, partially offset by growth in automotive and our industrial end markets.

Speaker Change: Volume is expected to be down low to mid single digits with volume at the midpoint down high single digits and bedding products up low single digits in specialized products and download a single digits in furniture flooring and textile products.

Speaker Change: Deflation and currency combined is expected to reduce sales low single digits.

Speaker Change: 2024 earnings per share are expected to be in the range of 95 cents to $1 25, including approximately 20 to 25 cents per share of negative impact from restructuring costs and 10 to 15 cents per share gain from the sale of real estate.

Speaker Change: Full year adjusted earnings per share are expected to be a dollar five to $1.35, primarily reflecting lower volume pricing responses related to global steel cost differentials modest metal margin compression and several expense items that were abnormally low in 2023 and are expected to normalize in 2024.

Ben Burns: The pricing response is related to global steel cost differentials, modest metal margin compression, and several expense items that were abnormally low in 2023 and are expected to normalize in 2024, including bad debt expense, a reduction to a contingent purchase price liability associated with a prior year acquisition, and incentive compensation. These decreases are partially offset by lower amortization from the 2023 Intangible Asset Amendment. Based upon this guidance framework, our 2024 full-year adjusted EBIT margin range is expected to be 6.4% to 7.2%. EPS guidance assumes a full-year effective tax rate of 25% versus an adjusted rate of 24% in 2023, depreciation, and amortization of approximately $135 million, which is approximately $45 million lower as a result of the impairment taken last year. Net interest expense of approximately $85 million, and fully diluted shares of $138 million.

Speaker Change: Including bad debt expense, a reduction to a contingent purchase price liability associated with a prior year acquisition and incentive compensation.

Speaker Change: These decreases are partially offset by lower amortization from the 2023 intangible asset impairment.

Speaker Change: Based upon this guidance framework, our 2020 for full year adjusted EBIT margin range is expected to be six 4% to 7.2%.

Speaker Change: EPS guidance assumes a full year effective tax rate of 25% versus an adjusted rate of 24% in 2023, depreciation and amortization of approximately $135 million, which is approximately $45 million lower as a result of the impairment taken last year.

Speaker Change: Net interest expense of approximately $85 million and fully diluted shares of $138 million.

Operator: Cash from operations is expected to be $325 million to $375 million in 2020, as we expect fewer opportunities for working capital improvement year over year. We will continue to closely manage all elements of. For the full year 2024, we assume capital expenditures of $100 million to $120 million, dividends of approximately $245 million, indicating a $1.84 annual dividend in 2024 versus a $1.82 in 2023, and minimal spending for acquisitions and shareholder purchases as we focus on managing. In closing, I would like to thank our employees. Your continued efforts to drive value for our customers and shareholders while supporting Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker Change: Cash from operations is expected to be 325 million to $375 million in 'twenty 'twenty four as we expect fewer opportunities for working capital improvement year over year.

Speaker Change: We will continue to closely manage all elements of working capital for the full year 2024, we assume capital expenditures of $100 million to $120 million dividends of approximately $245 million, indicating $1.84 annual dividend in 2024 versus $1 82 in 2023 and <unk>.

Speaker Change: Spending for acquisitions and share repurchases as we focus on managing cash.

Speaker Change: In closing I would like to thank our employees. Your continued efforts to drive value for our customers and shareholders, while supporting and keeping each other safe is very much appreciated.

Speaker Change: With those comments I'll turn the call back over to Kathy.

Speaker Change: Ben Operator, we're ready to begin Q&A.

Kathy: Thank you we will now be conducting the question answer session if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from Nicky them for participants using speaker equipment. It may be necessary to pick up your handset before pressing the starkey.

Susan Maklari: You may press star 2 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 Susan Maklari on behalf of Goldman Sachs. Please proceed with your question. Thank you. Good morning, everyone.

Kathy: Yes.

Kathy: Our first question comes from the line of Susan Mcclary with Goldman Sachs. Please proceed with your question.

Susan R. McCoy: Good morning, everyone.

Susan Maklari: I first want to congratulate Susan, it's been great working with you all these years, and you are going to be very missed, so congratulations and best of luck in your retirement. Thanks, Susan. I appreciate that, and we will definitely stay in touch. Yeah. So moving on to my questions, I've got a couple of them related to the restructuring that you've announced. And maybe to start with, can you talk a bit about what you think of the long-term dynamics of the betting industry with all the different moves we've seen in the last three or four years or so? How did you determine the level of demand that you need to be sized at? How are those coming together?

Susan R. McCoy: I first want to congratulate Susan it's been great working with you. All these years and you are going to be very mess. So congrats and best of luck in your retirement.

Susan R. McCoy: Thanks, Steve and I appreciate that and we will definitely stay in touch yes.

Susan R. McCoy: So moving on to my questions I've got a couple of them related to the restructuring that you've announced and maybe to start with can you talk a bit about how you think of the long term dynamics of the bedding industry with all the different moves we've seen in the last three or four years or so.

Susan R. McCoy: So how did you determine the level of demand that you need to be size too how are those coming together and what are the sort of nuances of you know what you keep versus what you restructure out of the business and how do you think about the go forward I guess of of that operation.

Mitch Dulles: And what are the sort of nuances of what you keep versus what you restructure out of the business? And how do you think about the future, I guess, of that operation? Yeah, good morning, Susan.

Speaker Change: Yeah. Good morning, Susan Thanks for the question.

Mitch Dulles: Thanks for the question. You know, I think the big picture for me is the restructuring is more than just thinking about our capacity. But Tyson, let me turn it over to you to share your thoughts. Sure, sure thing. Good morning, Susan.

Speaker Change: The Big picture for me is the restructuring is more than just thinking about our capacity, but Tyson, let me turn it over to you to share your thoughts sure sure thing.

Tyson Hagel: You know, I'll start by saying, I know this is pretty obvious, but these are really difficult decisions, and we didn't take them lightly. And part of that is what Mitch said, too. It goes beyond just capacity. If you think about how our business has been changing over several years, you know, we've been changing our product lineup with the acquisition of specialty foam, how we've been pivoting to more semi-finished products, incorporating foam into our innerspring products as well, and a continued long-term shift from open coil to comfort core. So we've seen our product mix and what we're offering our customers change quite a lot over the last several years. So as we thought about the manufacturing part of the restructuring plan, you know, also over the last several years, you know, even during the pandemic, we've invested heavily in comfort core productive capacity and really efficient capacity. We've done the same thing at ECS after acquisition.

Tyson: Morning, Susan.

Tyson: I'll start by saying I know this is pretty obvious but these are really difficult decisions and we didn't take them lightly.

Tyson: And part of it is what they've said to it goes beyond just capacity I mean really if you think about how our business has been changing over several years you know what we've been changing our product lineup with the acquisition of specialty foam, how we'd been activity into more semi finished products incorporating film into our inner spring products as well and a continued long term ship.

Tyson: <unk> from open coil to comfort core so we've seen our product mix and what we're offering our customers changed quite a lot over the last several years and.

Tyson: So as we thought about the manufacturing part of the restructuring plan and also over the last several years, even during the pandemic, we've invested heavily in comfort core productive capacity and really efficient capacity and we've done the same thing at ECS. After acquisition, we've been making investments there as well so as we look at where the.

Tyson Hagel: We've been making investments there as well. So as we look at where the market's headed and what our customers really want in their products, we also still have some longer-term legacy capacity still in place from open coil in our innerspring business. So we'd added the comfort core capacity and hadn't necessarily taken off as much open coil capacity as we needed to. So looking at that, we're not looking at today's market environment. You know, we're at a really, really low point for U.S. mattress manufacturing.

Tyson: The market is headed and what our customers really want and their products are we also still had some longer term legacy capacity is still in place from open coil and our innerspring business.

Tyson: So we've added the comfort core capacity and hadn't necessarily taken off as much capacity as we needed to so looking at that we're not looking at today's market environment. You know, we're in a really really low point for.

Tyson: For U S mattress manufacturing so we're not we're not looking at today is the long term need and we were looking at what we think to be the long term trajectory of the overall market and more of a move towards comfort core and semi finished products. So.

Tyson Hagel: So we're not looking at today as the long-term need. We really are looking at what we think to be the long-term trajectory of the overall market and more of a move towards comfort core and semi-finished products. So as we looked at just our overall footprint and our manufacturing capacity with what we've put in place, we saw an opportunity to go through the consolidations and still maintain our capacity and ability to flex up to whatever the market needs might be with our customers with just a smaller footprint, higher output facilities, and then also adjusting our distribution network to have a fewer number of larger regional sites that will support our customers in a better way. So it's a Okay, that's a great color, Tyson.

Tyson: And as we look at just our overall footprint and our manufacturing capacity and with what we've put into place we saw an opportunity to.

Tyson: Go through the consolidations and still maintain our capacity.

Tyson: And the ability to flex up to whatever the market needs might be with our customers with just a smaller footprint higher out their facilities and then also adjusting our distribution network to have a fewer number of larger regional Si.

Tyson: It will support our customers in a better way to go.

Tyson: A long winded answer, but really taking a lot of things into account and not necessarily walking away from active capacity, but more where we think the market is headed.

Speaker Change: Okay. That's great color Tyson. Thank you and then you know.

Susan Maklari: And then, you know, I know that with the release a couple of weeks ago, you walked away from the long-term margin guide. But I guess as you think about coming through this restructuring and being on the other side of it, how do we think about what that could mean for the margins, both within betting and then within Leggett just as a total, relative to where we are today? Anything that you can sort of give us in terms of a general path there? Yeah, I'll take that one, Susan.

Speaker Change: I know that with the release a couple of weeks ago, you walked away from the long term margin guide, but I guess as you think about coming through this restructuring and being on the other side of it how do we think about what that could mean for the margins both within betting and then within lug. It just as a total relative.

Speaker Change: To where we are today anything that you can sort of give us in terms of a general path there.

Speaker Change: Yeah, I'll take that one and Susan.

Mitch Dulles: So, great question. Yeah, I think the restructuring is certainly important for us. I think it resets us for sort of the more forward-looking market environment. And I don't mean that from a capacity standpoint, as Tyson said, we're really looking at, you know, sort of the normalized growth that we would achieve in betting over the longer term. But beyond that, I think we have other actions that we can take or that we are taking. The biggest one, of course, is volume.

Susan: So great question, Yeah, I think the the restructuring is certainly important for US I think it reached resets that's for sort of the more forward looking market environment and I don't mean that from a capacity standpoint as Tyson said, we're really looking at you know sort of a normalized growth that we would achieve in embedding over the longer term, but beyond that I think we.

Susan: Have other actions that we can take and we are taking the biggest one of course is volume. So its markets. Our residential end market start to come back with volume that has a huge huge impact on the EBIT margins for the company overall, but beyond the restructuring I think we have opportunities to continue to optimize our operating efficiency.

Mitch Dulles: So when markets or residential end markets start to come back with volume, that has a huge, huge impact on the EBIT margins for the company overall. But beyond the restructuring, I think we have opportunities to continue to optimize our operating efficiency, making sure that we are, you know, being as effective as we can and that we are, you know, producing products and even in certain lines that are value-added to us. Continuing to recover cost impacts outside of just raw materials, and whether that's through pricing actions or continuous improvement activities or just new product introductions that give us those opportunities as well. And then, I think it's always been a priority for us, but to continue to closely manage our corporate costs and make sure that they're aligned with services that are providing value and improving efficiency. As we always say, continuing to drive innovation and provide solutions for our customers to enhance our partnership with those key customers as well.

Susan: Making sure that we are bead as effective as we can and that we are you know.

Susan: Producing products and even in certain lines that are value added to us continuing to recover cost impacts them outside of just raw materials, and whether that's through pricing actions or continuous improvement activities or just new product introductions, they gave us those opportunities as well.

Susan: And then I think it's always been a priority for us but to continue to closely manage our corporate cost to make sure that they're aligned with them with services that are providing value and improving efficiency.

Susan: It's as we always say continuing to drive innovation and providing solutions for our customers to enhance our partnership with those key customers as well and then finally continuing to assess our portfolio management. So we see that there's opportunity for us to continue to drive improvement for the longer term across the company beyond just the.

Mitch Dulles: And then finally, continuing to assess our portfolio management. So we see that there's opportunity for us to continue to drive improvement for the longer term across the company beyond just the restructuring. There's restructuring certainly important. It's a near-term focus, but I think we need to get some visibility about volume recovery, get more progress going on the restructuring, and get some more insights into the benefits of some of these other items I mentioned, and then we'll get those targets back on the table. But certainly, we believe it's something that's important, and we're focused on that. Okay, okay. That's helpful. And then maybe I'll sneak one last one in for Ben.

Susan: Restructuring, there's restructuring certainly important.

Susan: Our near term focus.

Susan: On these things so you know I think we need to get.

Susan: To some visibility about the volume recovery.

Susan: Get more progress going on the restructuring and get some more insights into the benefits from some of these other items I mentioned and then we will get those targets back on the table, but certainly we believe it's something that's important and we're focused on it. Okay. Okay. That's helpful. And then maybe I'll sneak one last one in for Ben everyone will get one this morning.

Speaker Change: [laughter], which is then can you walk us through.

Susan Maklari: Everyone will get one this morning, which is, Ben, can you walk us through the change when we think about $500 million of operating cash flows from 23 relative to the 325 to 375 that you guided us to for this year? And then, too, when you think about the long-term cash generation of Leggett, where can that come together? And how should we think about, again, what these changes will mean for the cash flow of the business? Yeah, good morning, Susan, and thanks for the question. I appreciate it.

Speaker Change: On the the change when we think about the $500 million of operating cash flows from 'twenty three relative to the $3 25 to 375 that you've guided us to for this year and then I guess with that too when you think about the long term cash generation of luggage where cannot come to.

Speaker Change: Gather and how do we think about again, what these changes will mean for the cash flow of the business.

Speaker Change: Yeah, Good morning, Susan and thanks for the question appreciate it yeah.

Ben Burns: Yeah, so our guidance for this year is between $325 and 375 as compared to roughly $500 million in 2023. So, you know, I'd say the biggest drivers there are the contribution that we had from improvements and working capital in 2023 was really outstanding. I mean, our teams did a great job, and we drove over $100 million of working capital improvements.

Speaker Change: Yeah. So our guidance for this year at $3 25 to 375 as compared to roughly $500 million. In 2023. So you know I'd say the biggest drivers there are the contribution that we had from improvements in working capital in 2023 were really outstanding our teams did a great job and we drove over 100 million.

Speaker Change: Working capital improvements, so that will be a contributor to cash flow in 2024, but it'll be a you know a much lower contributor because we've done such a great job in just those opportunities are still there. We still think we have some pockets, but it'll be a little bit more smaller in nature and then the second thing I'd mention is just the low.

Ben Burns: So that will be a contributor to cash flow in 2024, but it'll be a, you know, a much lower contributor because, you know, we've done such a great job. And just those opportunities are still there. We still think we have some pockets, but they'll be a little bit smaller in nature.

Ben Burns: And then the 2nd thing I'd mentioned is just the lower earnings, you know, with the volumes continuing to be lower. That's going to be, you know, another contributor to the lower cash flow this year. And then the last thing is there's a little bit of a drag from the cash costs associated with our restructuring plan, which will be a bit of a drag on cash flow. But if we think about it from a longer-term perspective, you know, I think it kind of goes back to the things Mitch and Tyson were just talking about with, you know, the actions that we're taking through the restructuring and just other opportunities to drive operational And especially if those volumes come back, you know, I think Mitch just said it, but it's such a huge benefit to us with those incremental margins when those volumes are back to just normal levels or somewhere close to normal levels. So those are the biggest drivers.

Our earnings you know with the volumes continuing to be lower that's going to be another contributor to the lower cash flow. This year and then the last thing is there's a little bit of a drag from the cash costs associated with our restructuring plan that will will be a bit of a drag again on on cash flow.

Speaker Change: If we think about it from a longer term perspective.

Speaker Change: I think it kind of goes back to the things mentioned, we're just talking about with you know the actions that we're taking through our restructuring and and just other opportunities to drive operational efficiencies you know those will really benefit us and especially as those volumes come back I.

Speaker Change: I think Mitch just said it but.

Speaker Change: It's such a huge benefit to us with those incremental margins when those volumes are back to just normal levels or somewhere close to a normal level. So those are the biggest drivers.

Ben Burns: But I'd mention, you know, we'll continue to manage our working capital really tightly and look for those opportunities to drive out costs and lower-value items as well. But over the long run, I think, you know, that's kind of how I think about it. Okay. All right. Well, that's helpful, Collar. Thank you all. Our next question comes from the line of Bobby Griffin with Raymond James. Good morning, buddy.

Speaker Change: But I had mentioned you know, we'll continue to manage our working capital really tightly and look for those opportunities to drive out costs and lower value items as well, but over the long run I think you know that's kind of how I think about it okay, alright, well that's helpful color. Thank you all and I'll turn it over.

Speaker Change: Thank you. Our next question comes from the line of Bobby Griffin with Raymond James. Please proceed with your question.

Bobby Griffin: Thanks for taking my questions. And let me also echo a big thank you and congratulations to Susan on your retirement. It's been great working with and getting to know you for the last 10 years. Thanks, Bobby. I appreciate you too.

Bobby Griffin: Good morning, everybody. Thanks for taking my questions and let me also echo a big Thank you and congratulations to Susan on the retirement, it's been a great working and getting to know you offer the last 10 years.

Speaker Change: Thanks, Bobby I appreciate your time.

Bobby Griffin: Yeah, I guess first, maybe we should start off in the betting segment. Obviously, there is a lot going on here to unpack with the restructuring stuff. I guess the first thing I wanted to talk about is just the difference in the performance of Comfort Core and, I guess, the open coil part of the business. And I'm asking it more in kind of the context of, by my math, it looks like, you know, betting interspring volumes for Leggett versus 2019 are down, call it mid to high 30s. And the industry collectively is down maybe mid-20s to high 20s, right? So, there's a fairly big gap there in Leggett volumes versus industry volumes. And so I'm asking, are the open coil customers going elsewhere, you know, sourcing differently, like what is driving that gap?

Bobby Griffin: I guess first maybe let's start off and on the bedding segment, obviously, a lot going on here to unpack within restructuring stuff.

Speaker Change: The first aspect I wanted to talk about is just the difference in the performance of comfort core and I guess, the open coil part of the business and I'm asking more in front of the contacts are by my math. It looks like you know betting their spring volume for Leggett versus 2019 are down call it mid to high Thirty's.

Speaker Change: And the industry collectively is down maybe mid Twenty's to high Twenty's right. So there's a fairly big gap, there and leg at volumes versus industry volumes.

Speaker Change: And so I'm asking are the open coil customers going elsewhere, you know sourcing differently like what what is driving that gap and then you know kind of when we look at the go forward. How do we think about you know this restructuring and how it impacts the business with your vertically integrated steel mill, you know cause I think volumes really need to run through.

Bobby Griffin: And then, you know, kind of when we look at the go forward, how do we think about, you know, this restructuring and how it impacts the business with your vertically integrated steel mill? You know, because I think volumes really need to run through that to make that profitable. So just kind of connecting all that aspect is the question. I'm happy to hand that over to you.

Speaker Change: That can make that profitable so just kind of connecting all of that aspect of it is the question.

Speaker Change: First I'm happy to hand, it over here.

Tyson Hagel: Thanks for the question, Bobby. So I'll start just a bit with the open coil part. You know, we have seen just a long-term trend down in that category. Some of it has been just a shift from our customers from open coil to Comfort Core. So there has been, you know, some of that drag on open coil has just been a shift.

Speaker Change: Sure thing.

Speaker Change: Thanks for the question Bobby.

Speaker Change: So I'll start just with the open coil apart.

Speaker Change: We have seen just a long term trend down in that category. Some of it has been just a shift from our customers from open coil to comfort core.

Speaker Change: So there has been you know some of that that drag on it because there's been a shift there has been some different sourcing options, especially during the pandemic when things where we're short and then there's also been some some differences between U S steel cost versus Europe. So we have seen some growth in imported inner springs, especially on the lower end and in an open coil.

Tyson Hagel: There have been some different sourcing options, especially during the pandemic when things were short. And then there's also been some differences in U.S. steel costs versus Europe. So we have seen some growth in imported innersprings, especially on the lower end in an open coil. The other part you didn't mention but does get wrapped up in our volume around innersprings is wire grids.

Speaker Change: The other part you Didnt mentioned that does get wrapped up in our volume run inner springs as wire grids and that's been a significant decline in overall volume and that's more of just a shift in consumer preference and type of foundations and so that also is impactful and overall volume in our inner spring business.

Tyson Hagel: And that's been a significant decline in overall volume, and that's more of just a shift in consumer preference and type of foundations. So that also is impactful on overall volume in our innerspring business. Uh, the other part of it, back to our rod mill, you're absolutely right. I mean, volume is a critical part.

Speaker Change:

Speaker Change: The other part of it that Rod mill, you're absolutely right in volume is a critical part and you know as we have seen the open coil declining wire grids. A you know a lot of our products that go into kind of a core also consume more wire because we have products that go fully to the edge, replacing some phone components. So there is still an offset even with fewer units.

Tyson Hagel: You know, as we have seen the open coil decline in wire grids, a lot of our products that go into the comfort core also consume more wire because we have products that go fully to the edge, replacing some foam components. So there is still an offset; even with fewer units, we are still driving tons. Right now, it is a big drag because, overall, in the market where we are, we do have open capacity at the rod mill, but between market recovery and some of our efforts just to diversify out and sell in some industrial markets, we still feel good about the overall capacity utilization of sterling. I guess two faults on that Tyson.

Speaker Change: We are still driving tons. It right now it is a big drag because overall with the market where we are we do have open capacity at the Rod mill.

Speaker Change: A tween market recovery and some of our efforts just to diversify out and selling them. Some downstream markets. We still feel good about the overall capacity utilization is Germany.

Speaker Change: I guess two follow ups on that Tyson I mean, the different sourcing options that are popping up I've noticed as well kind of just checking with the industry.

Bobby Griffin: I mean, the different sourcing options that are popping up, I've noticed as well, kind of just checking the industry. You know, is there a way to compete better against those, you know, do we need to have lower pricing, or do we need to have some type of different product offering to compete against the different sourcing options to maintain those customer relations? And then just more of a financial question, you know, hypothetically, if the rod mill, or I guess not hypothetically, the rod mill goes back to full capacity, what does that benefit? You know, what is the drag on segment profitability from the rod mill running at partial capacity? Sure.

Speaker Change: Are those is there a way to compete better against those you know the do we need to have lower pricing or do you mean, you have some type of different product offering to compete against the different sourcing options to maintain those customer relations and then there's more of a financial question you know hypothetically if the rock Rguest not hypothetically you know the Rod mill goes back to full capacity.

Speaker Change: What does that benefit you know what is the drag on segment profitability from the Rod mill running at partial capacity today.

Tyson Hagel: So to your first question, yes, I mean, you know, our biggest job is to help our customers succeed. And so we want to make sure that we're giving them options to compete with, especially just low-priced goods. So we will help them with VAV opportunities, even on the low end, but also offer them different product options that help them compete there. I mean, our restructuring effort is a big part of that as well.

Speaker Change: Sure Yeah. So to your first question, yes, I mean, our biggest job is to help our customers succeed and so we want to make sure that we're giving them options to compete with especially just low priced goods. So.

Speaker Change: We will help them with D. A V opportunities even on the low end, but also offering a different product options that help them compete there I mean, our restructuring effort is a big part of that as well I mean, you know us becoming more efficient utilizing our assets in a more efficient way and distribution is in large part to serve our customer better and help them.

Tyson Hagel: I mean, you know, us becoming more efficient, utilizing our assets in a more efficient way, and distribution is, in a large part, to serve our customers better and help them succeed. So all of those things factor in, I mean, definitely around the innovation, trying to do the VAV work, and just giving them different options is a way to help offset some of those low price options. And then, overall, not just in the rod mill, but running all the way through our vertically integrated rod bar spring value chain and also at ECS, volume has by far the most significant impact on our margin profile. So that would be the biggest driver of recovery overall for the vending system. I said maybe just to add on there, you know, a little bit of what you talked about is refocusing our strategy and not just focusing on volume.

Speaker Change: Succeed so all of those things factor in I mean definitely around the innovation and trying to do the V. Working just forgive me even different options as a way to help offset some of those low priced options.

Speaker Change: And then overall I mean, not just in the Rod mill, but running all the way through our vertically integrated drawbar spring value chain and also D. C. S and the volume has by far the most significant impact to our our margin profile. So that would be the biggest driver of recovery overall for the dining segment.

Speaker Change: Hi, So maybe just to add on there.

Speaker Change: A little bit and you talked about is refocusing our strategy and not just focusing on volume. So if we talk about you know the open coil opportunities that are out there today, we could go chase pricing, but that comes with a risk right.

Tyson Hagel: So if we talk about, you know, the open coil opportunities that are out there today, we could chase pricing, but that comes with a risk, right? Absolutely, in terms of some of the financial stability, some of the participation in the market today, and just what the margins are. We agree with that. Perfect. And I guess, Mitch, you know, switching gears here, and sorry, just to kind of zero in on margins, but I think that is the, you know, kind of the debate over the next couple years, a lot of news about the betting products and getting that restructured differently specialized, roughly a 10 ish percent EBIT margin versus historical high teens levels, auto production globally is coming back, you know, what are the other aspects Yeah, thanks, Bobby.

Speaker Change: Definitely in terms of some of this to financial stability.

Participates in the market today, and just what that margin profiles of those products would look like.

Speaker Change: Do you agree with that.

Speaker Change: Perfect and I guess Mitch.

Speaker Change: Switching gears here and sorry, just to kind of zero in on margins, but I think that is the kind of the debate over the next couple of years a lot of news in the bedding products and getting that restructure differently specialized you know roughly a 10 ish percent EBIT margin versus historical high teens levels.

Auto production globally is coming back you know what is the other aspects that need to happen there to rebuild the margin profile of that business over the next call. It one two and three years.

Mitch Dulles: Yeah, you know, I think that we have been making progress as we've gone through the last couple years. We've seen, you know, still a lot of dynamics in the automotive industry, but we definitely see volume coming back, and that's helping. And we see improved margins in the automotive industry. We still have work to do and room to make those improvements, but we're definitely on the right path. I think similarly, although it's smaller in aerospace, there are very strong backlogs in the industry. So that volume will continue to come back.

Speaker Change: Yeah. Thanks, David Yeah, Yeah, I think that we have been making progress as we've gone through the last couple of years, we've seen still a lot of dynamics in the automotive industry, but we definitely see volume coming back and that is helping and we see improved margins in a hurry, we still have work to do and room to make those improvements, but we're definitely on the right path.

Speaker Change: A similarly, although it's smaller in in aerospace very strong backlogs in the industry. So that our volume will continue to come back he had not as just as large of an impact as automotive, but it certainly will help and then we've seen a little bit of a challenge in the year in this.

Mitch Dulles: Again, not as large of an impact as automotive, but it certainly will help. And then we're seeing a little bit of a challenge this year on hydraulics, where there are really strong backlogs, both in material handling and heavy construction markets. And we see strong backlogs, at least through the first half in the US on that part of the market. But the heavy construction side in Europe, particularly in Germany, seems like it may be a little bit more challenging demand.

Speaker Change: Year on hydraulics, where there's really strong backlog both.

Speaker Change: In material handling and heavy construction markets and we're seeing the strong backlog at least through the first half in the U S on that on the Oh.

Speaker Change: And that's part of the market, but the heavy construction side in Europe, particularly in Germany. It seems like it may be a little bit more challenge in demand. So we'll see some of the debt. So does that I think that the progress that we've made over the last couple of years and specialized I think demonstrates that our confidence in the ability to.

Mitch Dulles: So we'll see some ups and downs. But I think that the progress that we've made over the last couple of years in specialized, I think, demonstrates our confidence in the ability to, you know, return to, you know, higher margin profiles, certainly. Maybe it doesn't go back to the peak margins that we had, but certainly back to a higher margin profile that will provide a lot of. Okay, I appreciate the details. Best of luck here in the first quarter.

Speaker Change: You know returned back to a.

Speaker Change: Higher margin profile, certainly maybe it doesn't go back to the peak margins that we had but certainly back to a higher.

Speaker Change: Margin profile that will provide a lot of benefit to the company.

Speaker Change: Okay. I appreciate the details are best of luck here in the first quarter.

Bobby Griffin: All right, thank you, Bobby. Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question. Hi, good morning, this is Alexia Morgan on behalf of Peter Keith.

Speaker Change: Thank you Bobby.

Speaker Change: 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.

Speaker Change: Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question.

Speaker Change: Hi, Good morning. This is Alexia Morgan on for Peter Keith My question is on anti dumping scenarios I know, we're expecting a decision later this month.

Alexia Morgan: My question is on anti-dumping scenarios. I know we're expecting a decision later this month. Can you give us an update on anti-dumping legislation and then what are the best and worst case outcomes that you're thinking about once there's a ruling? Sure, this is Tyson.

Alexia Morgan: Can you give us an update on antidumping legislation and then what are the best and worst case outcome that you're thinking about what they're doing.

Alexia Morgan: Sure. This is Tyson I'll jump in and tackle that one and so yes, we are.

Tyson Hagel: I'll jump in and tackle that one. So, yes, we're a party to that, and like we've said in past cases, the U.S. industry just needs a level playing field, and that's really what the industry is after. No matter which scenario we think might play out, we fully expect to see some level of imported mattress activity. It may move around to some different countries. There may be some shoring in the U.S. from former importers, but we still see that dynamic playing out, regardless of the scenario. It really is difficult to say how much will come back to U.S. producers, just given potential moves to other regions. Also, right now, things are a little muddy just because, ahead of a potential decision, we have seen a higher level of imports over the last couple of quarters, just, I think, with some of the importers attempting to get in ahead of any imposed duties.

We're a party to that and kind of what we said in past cases, the U S industry just needs a level playing field and that's really what our what the industry is after no matter, which scenario we think.

Tyson: Might play out we fully expect to see some level of imported mattresses activity. It may move around assume different countries. There may be some shoring in the U S from former importers, but we still see that dynamic playing out regardless of a scenario. It. It really is difficult to say how much will come back to U S producers.

Tyson: I've just given potential moves to other regions are also right now things are a little muddy just because ahead of a potential decision we have seen a higher level of imports over the last couple of quarters.

Tyson: Just I think with some of the importers attempting to get in ahead of any any.

Tyson: Imposed duties, so that will take some time to work through especially in a really soft market. So we'll see what kind of overhang there isn't kind of the near term.

Tyson Hagel: So that will take some time to work through, especially in a really soft market, so we'll see what kind of overhang there is in the near term. But overall, I think we would see just that kind of helps support the continued health of the industry. So overall, I think we'd say it's still to be determined how much impact it would have on U.S. producers.

But overall I think we would see just that's you know kind of helps support the continued health of the industry.

Tyson: So overall I think we'd say, it's still to be determined.

Tyson: How much impact would come back to the U S producers.

Alexia Morgan: Okay, thank you. And then my next question is related to spring and foam pricing. Is there any deflation within those categories, and then any deflation baked into the sales outlook? Sure, I'll take that one as well.

Tyson: Okay. Thank you and then my next question is related to screening some pricing is there any deflation within those categories and then any deflation baked into that outlook.

Speaker Change: Sure I'll take that one as well, yes, we've seen commodities prices, both chemicals and steel moderate over the last year. So you know in the last year, we've seen our pricing in our specialty foam business decline.

Tyson Hagel: Yes, we've seen commodities prices for both chemicals and steel moderate over the last year. So, you know, in the last year, we've seen pricing in our specialty phone business decline, as we've been trying to compensate for those quantity declines and giving that back to our customers. In our steel business, we've seen the same. Last year, we saw metal margins decline overall. We also mentioned in the prepared remarks that we've also adjusted interspring pricing just relative to the overall competitive global steel market. In the past, we've seen Europe and U.S. steel be in a pretty tight range, but we've seen a divergence of that over the last year, so we have adjusted pricing just to fairly compensate for that with our customers. As far as 2024 is concerned, since most of the steel impact came in the back part of 2023, the full-year annualization of those price changes would be reflected in our account.

Tyson: Ben.

Ben: Trying to compensate for those commodity declines of giving that back to our customers.

Ben: In our steel business. We've seen the same you know last year, we saw middle margins decline overall and we also mentioned in the prepared remarks that we've also adjusted inner spring pricing just relative to overall competitive.

Ben: Global steel market you know in the past, we've seen a Europe and U S steel being a pretty tight range, but we've seen a divergence of that and over the last year. So we have adjusted pricing just to to fairly compensates for that with with our customers as far as 2024.

Ben: There is since most of the steel impact came in the back part of 2023. The first full year in the utilization of those price changes would be reflected in our guidance.

Tyson Hagel: Great, thank you. Thank you. Thank you for joining us this morning and for your interest in Leggett. Have a great weekend. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Ms. Branscom for any final comments.

Ms. Branscom: Thank you for joining us this morning, and your interest in like it and have a great weekend.

Ms. Branscom: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.