Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.06pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.08pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.04pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
negatively+7
adversely+7
impairment+5
harm+3
unable+3
Positive rising
progress+3
successfully+1
best+1
profitability+1
gaining+1
Risk Factors (Item 1A)
9,145 words
Item 1A. Risk Factors.
Investing in our securities involves risk. Set forth below and elsewhere in this report are risk factors that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. We may amend or supplement these risk factors from time to time by other reports we file with the SEC.
Strategic Risk Factor
We cannot be certain that our strategic review of any potential transaction with Somnigroup or any other strategic alternative will result in any particular outcome. The strategic review process or its conclusion may adversely affect our business and/or our stock price.
In December 2025, we announced the Company received an unsolicited proposal from Somnigroup International Inc. (Somnigroup) to acquire the Company in an all-stock transaction. In January 2026, our Board of Directors, in consultation with its financial and legal advisors, announced that it had determined that the Somnigroup offer undervalues the Company and publicly declined the Somnigroup proposal. Our Board also publicly announced that it has entered into a customary non-disclosure agreement and six month standstill with Somnigroup to facilitate customary due diligence and to determine if a transaction can be reached that delivers appropriate value and certainty to the Company and its shareholders.
No assurance can be given as to the timeline or outcome of the process, including whether the process will result in a transaction, and, if there is a transaction, the price, form of consideration, or other terms and conditions of any such transaction. Entry into or completion of any potential transaction or other strategic alternative would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, regulatory approvals, and the availability of financing for a potential transaction, which may extend timelines, impose conditions, or prevent completion entirely. Our Board of Directors may also determine that no transaction is in the interest of our shareholders.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
restructuring+16
divestiture+11
divested+6
impairment+4
unfair+3
Positive rising
gain+15
profitability+4
efficiency+3
opportunities+3
improvements+3
MD&A (Item 7)
14,605 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Page No.
Highlights
Introduction
Results of Operations 2025 vs 2024
Results of Operations 2024 vs 2023
Liquidity and Capitalization
Critical Accounting Policies and Estimates
Contingencies
New Accounting Standards
HIGHLIGHTS
(Dollar amounts in millions, except for per share data)
Net trade sales
Earnings (loss) before interest and taxes (EBIT)
Cash from operations
Total debt
Trade sales decreased 7% in 2025. Divestitures reduced sales 2%. Organic sales decreased 5%, with volume declines of 6% partially offset by raw material-related selling price increases and currency benefit of 1%. 2024 trade sales decreased 7%. Organic sales decreased 7% with volume declines of 4% and raw material-related price decreases of 3%.
Earnings in 2025 increased primarily due to the year-over-year changes from the items listed below, as well as and metal margin expansion, partially offset by lower volume. 2024 earnings decreased primarily due to the year-over-year changes from the items listed below, as well as lower volume and sales mix, raw material-related pricing adjustments (primarily in our Bedding Products segment), metal margin compression in our Steel Rod business, and other higher expense items, such as debt and medical, partially offset by operational .
We have incurred, and may continue to incur, substantial expenses associated with identifying and evaluating a potential transaction with Somnigroup and other strategic alternatives. The process of evaluating a potential transaction with Somnigroup and other strategic alternatives has been, and may continue to be, time-consuming, distracting, and disruptive to our business. The process may delay key initiatives, capital projects, and other business activities due to the diversion of management's time and resources. Uncertainty surrounding the process could also affect customer and supplier relationships, including Somnigroup, potentially resulting in altered purchasing patterns or reconsideration of existing commercial arrangements. In addition, we may be subject to costly and time-consuming litigation related to the process. Moreover, the process may have a negative effect on the market price and volatility of our common stock, as well as our ability to recruit and retain qualified employees.
Operational Risk Factors
Supply chain disruptions and shortages impacting our ability to timely receive competitively priced raw materials and parts used in our products, or impacting our ability to timely deliver our finished products to customers, may adversely affect our manufacturing processes, financial condition, results of operations, and cash flows.
We have manufacturing facilities in 18 countries, primarily located in North America, Europe, and Asia. In our manufacturing processes, we source raw materials and parts from a global supply chain. We sell and deliver our finished products to customers all over the world. We rely on third parties to supply certain raw materials, components, and packaging and deliver our finished products. Any interruption or failure by our suppliers to meet their obligations on schedule could adversely affect our business and financial results. In past years, we have experienced supply chain disruptions related to foam chemical shortages, semiconductor shortages, labor availability, and freight challenges, as well as higher costs associated with each of these issues. We have also experienced delays in delivery of materials, parts, and finished goods because of inclement weather, trucking constraints, and delivery port disruptions. At times, this has resulted in reduced
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volume and higher costs in many of our businesses, primarily those within our Specialized Products and Bedding Products segments.
We also bear the risk of delays or non-delivery from our suppliers or reduced demand from our customers because of natural disasters, fires, explosions, terrorism, pandemics, labor strikes, foreign government action including asset seizure, changed licensing, or land use requirements which restrict operations, or other reasons beyond our control or the control of our suppliers, some of which have impaired and could continue to impair our ability to timely manufacture and deliver our products.
Labor strikes or shutdowns at delivery ports, loss of or damage to raw materials, parts, or finished products while they are in transit or storage, losses due to tampering, third-party vendor issues with quality, failure by our suppliers to comply with applicable laws and regulations, tariffs or other trade restrictions, or similar problems, have and could continue to restrict or delay the supply of raw materials, parts, or finished products, resulting in harm to our business.
In addition, our business has been and may continue to be adversely impacted by disruptions in our customers’ production schedules resulting from supply chain disruptions. In 2025, a key supplier of aluminum components to multiple automotive OEM manufacturers experienced operational challenges that negatively impacted the automotive OEM manufacturers' production schedules. As a result, our Automotive Group's U.S. sales were adversely affected. If such disruptions continue or expand to other suppliers or customers, our business, financial condition, and results of operations could continue to be adversely impacted.
The aforementioned supply chain risks can materially adversely affect our manufacturing processes, financial condition, results of operations, and cash flows.
Our 2024 Restructuring Plan may result in higher than expected sales attrition, lower than expected earnings improvement, and lower than expected proceeds from the sale of real estate.
In 2024, we committed to a restructuring plan (the 2024 Restructuring Plan or 2024 Plan). The 2024 Plan was primarily associated with our Bedding Products segment and included, to a lesser extent, our Furniture, Flooring & Textile Products segment, our Specialized Products segment, and general and administrative cost structure initiatives. Over the course of the restructuring timeline, we have consolidated 17 production and distribution facilities in the Bedding Products segment and four production facilities in the Furniture, Flooring & Textile Products segment. The 2024 Plan costs were substantially complete at the end of 2025.
Proceeds from the Sale of Real Estate:
We expect pretax net cash from the sale of real estate associated with the 2024 Plan of $70 to $80 million, of which $48 million has been realized in 2024 and 2025. The remaining real estate proceeds are expected to be received during 2026 due to timing of listing of properties.
EBIT Benefit:
We realized annualized EBIT benefit of $63 million in 2025 and expect approximately $5 million of incremental EBIT benefit in 2026.
Because of certain risks and uncertainties, EBIT benefit and the proceeds from the sale of real estate associated with the 2024 Plan may change. We may not be able to dispose of the remaining real estate pursuant to the 2024 Plan or obtain the expected proceeds in a timely manner. Any failure to achieve the intended outcomes could materially adversely affect our business, financial condition, results of operations, cash flows, and liquidity.
Although the 2024 Plan is substantially complete, we continue to identify opportunities to improve our cost structure and profitability across our businesses. The execution of any of these opportunities may result in additional material restructuring costs, restructuring-related costs, or impairments.
Business disruptions to our steel rod mill or wire drawing mills, and/or an inability to purchase an adequate or timely supply of quality steel rod from alternative sources, could have a material negative impact on our Bedding Products segment and the Company's results of operations.
We purchase steel scrap from third-party suppliers and convert it into steel rod in our mill in Sterling, Illinois. Our steel rod mill has historically had annual output of approximately 500,000 tons, approximately half of which has been used internally by our wire drawing mills. Our two wire drawing mills, located in Carthage,
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Missouri and Kouts, Indiana, convert steel rod into drawn steel wire, which is used in the production of mattress innersprings and other products.
A disruption to the operation of, or supply of steel scrap to, our steel rod mill could require us to purchase steel rod from alternative supply sources at higher costs, subject to market availability. Ongoing trade action by the U.S. government, along with the existence of antidumping and countervailing duty orders against multiple countries, could result in reduced market availability and/or higher cost of steel rod.
Any disruption to our steel rod production, any reduction in adequate or timely supply of quality steel rod from alternative market sources, or any inability to obtain such alternative supply at competitive prices, could materially negatively impact our Bedding Products segment and the Company’s results of operations.
The physical effects of climate change could adversely affect our business, results of operations, and financial condition.
Direct Physical Effects
The acute and chronic physical effects of severe weather-related events, natural disasters, and/or significant changes in climate patterns, could have an increasingly adverse impact on our business and customers. At December 31, 2025, we had 104 manufacturing facilities in 18 countries, primarily located in North America, Europe, and Asia. We serve thousands of customers worldwide. In 2025, our customers were located in approximately 100 countries.
Our steel rod mill in Sterling, Illinois, is energy intensive and depends on electricity and other utilities at commercially reasonable rates. Periods of extreme weather, including prolonged hot or cold weather events, have increased and may continue to increase overall electricity and natural gas demand, place stress on regional power grids, and contribute to higher or more volatile utility rates, impacting our utility costs. Such conditions may also increase the risk of service interruptions.
The increased frequency and severity of weather-related events could damage our physical assets, local infrastructure, transportation systems, water delivery systems, and our customers' or suppliers' operations, and disrupt our manufacturing operations (including our steel rod mill and wire drawing mills), all of which could harm our business, results of operations, and financial condition.
Indirect Physical Effects
The physical effects of climate change could continue to adversely impact our supply chain. In the past, we experienced (due, in part, to severe weather-related impacts) supply shortages in chemicals, which restricted foam supply and constrained overall mattress production in the bedding industry. This reduced our production levels and increased our cost of chemicals and foam. Severe weather impacts could also reduce the supply of other products in our supply chain, resulting in higher prices for our products and the resources needed to produce them. If we are unable to secure an adequate and timely supply of raw materials and products in our supply chain, or the cost of these raw materials or products materially increases, it could negatively impact our business, results of operations, and financial condition.
In recent years, drought conditions lowered the water levels of the Mississippi River and Panama Canal, reducing traffic through these waterways and impacting some of our shipments. Although these issues did not materially impact our results of operations, additional logistical disruptions could result in additional costs and delays in our ability to deliver products timely to certain customers.
In addition, although the cost has not been material to our business, results of operations, and financial condition, severe weather-related incidents have resulted and may, in the future, result in increased costs of our property insurance.
The market transition risks related to climate change could adversely affect our business, results of operations, and financial condition.
We are engaged in the manufacture of various automotive components, including lumbar supports and massage systems for seating, seat suspension systems, motors and actuators, and cables.
For several decades, automotive manufacturers have sought lightweight components designed to increase fuel efficiency in the automobiles they manufacture. Replacing traditional steel components with lightweight alternatives can directly reduce the weight of a vehicle's body and chassis and therefore reduce a vehicle's fuel consumption. This increased fuel efficiency also indirectly reduces greenhouse gas (GHG) emissions. If we are
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unable to respond effectively to these evolving market dynamics, continue to react to changes in technology, successfully develop new and innovative products, or successfully respond to evolving business trends, including continuing to produce comparatively lightweight and EV-compatible components, our share in these markets could be materially negatively impacted.
Driven in part by climate change legislation, the global automotive industry has experienced a rapid acceleration in the transition from internal combustion engine vehicles to electric vehicles (EVs). China has emerged as a global leader in EV adoption, with Chinese EV manufacturers gaining market share at the expense of our multinational automotive OEM customer base. This shift has intensified competitive pressures across traditional automotive supply chains and has begun to impact our market share, particularly in regions where Chinese EV manufacturers have seen success in competing on price. If our multinational automotive OEM customers are unable to compete effectively with the Chinese EV manufacturers, their market share could continue to be further reduced, which could continue to negatively impact the demand for our Automotive products and adverselyharm our business, financial condition, and results of operations.
Global economic, political, legal, and business factors could adversely impact our business.
We operate in global markets. Approximately 41% of our sales in 2025 were generated outside the United States. In addition, as of December 31, 2025, 43 manufacturing facilities and approximately one-third of our tangible long-lived assets were located outside the United States. Our reliance on sales and manufacturing facilities outside the United States exposes us to a number of risks, including price and currency controls; sanctions, export controls or trade restrictions, including import and export tariffs; extraterritorial effects of U.S. laws; expropriation of assets; war; civil uprisings; political instability; nationalization of manufacturing facilities or private enterprises; hyperinflationary conditions; the necessity of governmental approvals for products and operations; currency conversion; cash repatriation; and laws and regulations that may be arbitrarily applied.
We have 12 manufacturing facilities in China as of December 31, 2025 that contribute significantly to our earnings (through both trade sales and as intercompany suppliers to our operating locations outside of China), primarily within our Specialized Products segment. We also have third-party suppliers who are located in China. China presents unique risks due to ongoing tensions in U.S.-China relations, China’s distinct regulatory landscape, tariffs and counter-tariffs specific to China, China’s level of integration with key components in our global supply chain, and the limited availability of various components and materials, including certain rare earth elements, that are largely unique to China, among other risks.
These factors have resulted in, and could continue to result in, among other things, supply chain or production disruptions, lower consumer demand, compressed profit margins, unfavorable foreign currency exchange rates, and laws, regulations (including tax laws and regulations), restrictions, and tariffs, any of which could materially negatively impact our business, results of operations, financial condition, and cash flows.
Geopolitical Risk Factors
Geopolitical conflicts or export restrictions have negatively impacted, and could continue to negatively impact, the availability of semiconductors and/or other automotive products, and restrictions on semi-conductor manufacturing equipment could contribute to reduced semiconductor supply, impacting our operations globally.
Our OEM and Tier 1 manufacturer customers use semiconductors, or components containing semiconductors, and other automotive components, such as electric and hybrid vehicle motors, batteries, etc., in their manufacture of automotive components and/or vehicles. This supply is currently challenged and could continue to be challenged. According to certain market reports, Taiwan and, to a lesser extent, China are leading manufacturers of the world’s semiconductor supply, and Europe is a key manufacturer of semiconductor-manufacturing equipment and sub-systems and related components. Conflict between China and Taiwan has led, and could continue to lead, to trade sanctions, export controls, technology disputes, or supply chain disruptions, which has affected and could continue to affect the semiconductor industry. In addition, China has implemented export restrictions on several critical minerals, including rare earth elements like dysprosium, terbium, and samarium, as well as tungsten, tellurium, bismuth, indium, and molybdenum. These minerals are crucial for semiconductors, electric and hybrid vehicle motors, batteries, and other automotive components. Geopolitical conflicts, export restrictions, and tariffs have led and could continue to
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lead to decreased availability of these components, negatively impacting our OEM and Tier 1 manufacturer customers' supply chains and production schedules.
In September 2025, a Chinese-owned chip maker, who is a key supplier of basic automotive semiconductors, halted shipments following the Dutch government's seizure of the company's Netherlands operations. This supply chain disruption, coupled with Chinese export restrictions targeting the company's Chinese operations, has led, and could continue to lead, to reduced availability of these components. Potential reinstatement or expansion of export controls, as well as the risk of further governmental intervention, create the risk of further supply chain disruptions.
If our OEM and Tier 1 manufacturer customers are unable to obtain appropriate amounts of these components for vehicle production, then demand for our Automotive products could be reduced, which could adverselyharm our business, financial condition, and results of operations. In addition, any outbreak of hostilities or conflict between China and Taiwan, or conflict arising in U.S.-EU relations, including retaliatory responses connected to actions related to Greenland, could harm our operations globally and the operations of our customers and suppliers.
Financial Risk Factors
Our borrowing costs have been and may continue to be, and access to liquidity could be, impacted by lower credit ratings.
Independent rating agencies evaluate our credit profile and have assigned ratings for our debt, which are reevaluated from time to time. In the past, rating downgrades have resulted in, and could continue to result in, higher interest rates. Lower credit ratings could adversely affect our sources of borrowing and our financial arrangements, including access to the capital markets, commercial paper market, our lending agreements, and supply chain financing arrangements. If our ability to access and raise debt in the capital markets or meet our short-term borrowing needs in the commercial paper market is limited, we may be required to borrow under our credit facility to fund our liquidity needs. Lower credit ratings have resulted in, and could continue to result in, increased borrowing costs.
Our customers' inability to pay us and take delivery of previously ordered inventory in accordance with their terms could negatively impact our earnings, liquidity, cash flow, and financial condition.
Some of our customers have suffered financial difficulty. As a result, some of our customers have been unable to pay their debts to us, have exhibited slow payments, have rejected their contractual obligations to us under bankruptcy laws or otherwise, or we have had to negotiate significant discounts and/or extend financing terms with these parties. In addition, we have had to write down inventory related to these customers. These issues may continue.
We monitor our receivables and inventory closely and make reserve decisions based upon individual customer risk reviews, aging of customer accounts, historical loss experience, and general macroeconomic and industry trends that could impact the expected collectability of all customers or pools of customers with similar risks.
Our bad debt expense has fluctuated over the last three years: $7 million and $6 million expense in 2025 and 2024, respectively, and $7 million benefit in 2023. Inventory write-downs were $13 million, $36 million, and $9 million in 2025, 2024, and 2023, respectively. Reserves increased in 2024 primarily due to 2024 Restructuring Plan impacts and write-downs of selected products primarily in our Bedding Products segment. If our customers are unable to pay us and take delivery of previously ordered inventory on a timely basis, larger reserves may be required and may result in a negative impact on our earnings, liquidity, cash flow, and financial condition.
Our goodwill and other long-lived assets have been, and could be, subject to impairment which could negatively impact our earnings.
A significant portion of our assets consists of goodwill and other long-lived assets, the carrying value of which would be reduced if we determine that those assets are impaired. At December 31, 2025, goodwill and other intangible assets represented $843 million, or 24% of our total assets. In addition, net property, plant, and equipment, operating lease right-of-use assets, and other noncurrent assets totaled $950 million, or 27% of total assets.
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Goodwill Impairment
We test goodwill for impairment at the reporting unit level (the business groups that are one level below the operating segments) when triggering events occur or at least annually in the second quarter. We conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations. In addition, our long-lived assets are reviewed for recoverability at year end and whenever events or changes in circumstances indicate carrying values may not be recoverable.
The annual goodwill impairment testing in the second quarter of 2025 indicated no impairments. As of June 30, 2025, the fair values of all reporting units exceeded their respective carrying amounts by less than 100% in part due to ongoing macroeconomic uncertainties, including uncertainty surrounding tariffs. The fair values of our reporting units were reconciled to our consolidated market capitalization, which decreased due to the decline in the stock price compared to the prior year. Fair value exceeded carrying value by less than 50% at June 30, 2025 for the reporting units summarized in the table below, which excludes the Aerospace Products Group divested in August 2025 as discussed in Note S to the Consolidated Financial Statements on page 121.
Reporting Unit
(Dollar amounts in millions)
December 31, 2025 Goodwill Value
Fair value in excess of carrying value as of June 30, 2025
Bedding
Home Furniture
Work Furniture
If expectations are not met in future quarters, additional goodwill impairment(s) may be required. In evaluating the potential for impairment of goodwill and other long-lived assets, we make assumptions and estimates regarding future operating performance, business trends, and market and economic performance, including future sales, operating margins, growth rates, and discount rates.
We are continuing to monitor all factors impacting these reporting units. If actual results or the long-term outlook of any of our reporting units materially differ from the assumptions and estimates used in the goodwill and other long-lived assets valuation calculations, or there is a sustained decrease in our stock price, we could incur future non-cash impairment charges, which would have a material negative impact on our earnings.
The annual goodwill impairment testing in the second quarter of 2024 indicated that fair value had fallen below carrying value for three reporting units. We had non-cash impairments in 2024 of $587 million, $44 million, and $44 million in our Bedding, Work Furniture, and Hydraulic Cylinders reporting units, respectively. After this impairment, the Hydraulic Cylinders reporting unit did not have any goodwill remaining. In addition, we had an impairment of $1 million related to a small U.S. machinery business within the Bedding Products segment that reached held-for-sale status in the fourth quarter of 2024 and was associated with the 2024 Plan.
Long-lived Asset Impairment
As discussed in Note E to the Consolidated Financial Statements on page 94, impairment charges of $19 million in 2025 were related to the 2024 Plan and were primarily related to lease impairments. We had $6 million of long-lived asset impairment charges in 2024, of which $4 million were associated with the 2024 Plan.
Late in the fourth quarter of 2023, we had a triggering event to review long-lived assets and test for impairment when certain of our Elite Comfort Solutions and Kayfoam customers notified us of efforts to improve their financial position by moving their business to or exploring alternative suppliers, which adversely impacted our future cash flow forecast. Although estimated undiscounted cash flows had previously exceeded carrying values, updated sales and earnings forecasts completed in early January 2024 indicated reduced expected cash flows. As a result, we performed recoverability and impairment testing, which led to a non-cash pretax charge of $444 million for long-lived asset impairments (primarily customer relationships, technology, and trademarks) in the Bedding Products segment for the fourth quarter of 2023. This impairment was unrelated to the 2024 Restructuring Plan.
We regularly evaluate long-lived assets for indicators of impairment, such as market conditions, operating performance, strategic decisions, or technical obsolescence. While we believe our current asset valuations are appropriate, future assessments may result in non-cash charges, which would have a material negative impact to our earnings.
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If we do not comply with the restrictive covenants in our credit facility, we may not be able to borrow in the commercial paper market or under our credit facility and our outstanding debt instruments may default, all of which would adversely impact our liquidity.
Our multi-currency credit facility was amended in July 2025 and matures on July 24, 2030. It provides us the ability, from time to time, subject to certain restrictive covenants and customary conditions, to borrow, repay, and re-borrow up to $1 billion (previous to the amendment was $1.2 billion). At December 31, 2025, we were in compliance with all of our debt covenants. Capitalized terms used in this section but not defined herein have the meanings set forth in the Credit Agreement.
Our credit facility contains restrictive covenants, which include: (a) a Leverage Ratio requiring us to maintain, as of the last day of each fiscal quarter, (i) Consolidated Funded Indebtedness minus the lesser of: (A) Unrestricted Cash, or (B) $750 million to (ii) Consolidated EBITDA for the four consecutive trailing quarters most recently ended on or prior to such date, such ratio not being greater than 3.50 to 1.00; provided however, subject to certain limitations, if we make a Material Acquisition, at our election, the maximum Leverage Ratio shall be 4.00 to 1.00 for the fiscal quarter during which such Material Acquisition is consummated and the next three consecutive fiscal quarters; (b) a limitation of the amount of total secured obligations to 15% of our total consolidated assets; and (c) a limitation on our ability to sell, lease, transfer, or dispose of all or substantially all of our assets and the assets of our subsidiaries, taken as a whole (other than accounts receivable sold in a Permitted Securitization Transaction, products sold in the ordinary course of business and our ability to sell, lease, transfer, or dispose of any of our assets or the assets of one of our subsidiaries to us or one of our subsidiaries, as applicable) at any given point in time.
For more information about long-term debt, please see Note J on page 101 of the Notes to Consolidated Financial Statements.
At December 31, 2025, we had no commercial paper outstanding and had no borrowing under the credit facility. Based on our trailing 12-month Consolidated EBITDA, Unrestricted Cash, debt levels, and a leverage ratio covenant of 3.50 to 1.00 at December 31, 2025, our borrowing capacity under the credit facility was $709 million. This may not be indicative of the actual borrowing capacity moving forward, which may be materially different depending on our Consolidated EBITDA, Unrestricted Cash, debt levels at the time, and leverage ratio requirements. As our trailing 12-month Consolidated EBITDA, Unrestricted Cash, debt levels, and leverage ratio requirements change, our borrowing capacity increases or decreases.
If our earnings are reduced, the covenants in the credit facility will continue to limit our borrowing capacity, both under the credit facility or through commercial paper issuances. Depending on the degree of earnings reduction, our liquidity could be materially negatively impacted. This covenant may also restrict our current and future operations, including (i) our flexibility to plan for, or react to, changes in our businesses and industries; and (ii) our ability to use our cash flows, or obtain additional financing, for future working capital, capital expenditures, acquisitions, or other general corporate purposes. If we are not in compliance with the restrictive covenants in our credit facility, and are unable to negotiate more lenient terms, we may not be able to access the commercial paper market or borrow under the credit facility.
Also, if we fail to comply with the covenants specified in the credit facility, we may trigger an event of default, in which case the lenders would have the right to: (i) terminate their commitment to provide loans under the credit facility; and (ii) declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. Additionally, our senior notes contain cross-default provisions which could make outstanding amounts under the senior notes immediately payable in the event of an acceleration of amounts due under the credit facility following a material uncured default. If debt under the credit facility or senior notes were to be accelerated, we may not have sufficient cash to repay this debt, which would have an immediate material adverse effect on our business, results of operations, and financial condition.
We may not be able to realize deferred tax assets on our balance sheet, depending upon the amount and source of future taxable income.
Our ability to realize deferred tax assets on our balance sheet is dependent upon the amount and source of future taxable income. As discussed in Note O of the Consolidated Financial Statements, we had $153 million of deferred tax assets (net of a $21 million valuation allowance) as of December 31, 2025. It is possible the amount and source of our taxable income could materially change in the future. This change may impact our underlying assumptions on which valuation allowances are established and negatively affect future period
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earnings and balance sheets. As a result, we may not be able to realize deferred tax assets on our balance sheet.
Market Risk Factors
Costs of raw materials have negatively affected, and could continue to negatively affect, our profit margins and earnings.
Raw material cost increases, whether from inflation or otherwise (and our ability to respond to cost increases through selling price increases), can significantly impact our earnings. We typically have short-term commitments from our suppliers; accordingly, our raw material costs generally move with the market. When we experience significant increases in raw material costs, we typically implement price increases to recover the higher costs. Inability to recover cost increases (or a delay in the recovery time) can negatively impact our earnings. Conversely, if raw material costs decrease, we generally pass through reduced selling prices to our customers. The timing of lower selling prices, combined with turnover rate of the higher-cost inventory on hand prior to the cost reduction, may reduce our profit margins and earnings.
Steel is our principal raw material. The global steel markets are cyclical in nature and have been volatile in recent years. This volatility can result in large swings in pricing and margins from year to year. As a producer of steel rod, we are also impacted by volatility in metal margins (the difference between the cost of steel scrap and the market price for steel rod). If market conditions cause scrap costs and rod pricing to change at different rates (both in terms of timing and amount), metal margins could again become compressed as they have in the past and this would negatively impact our results of operations.
We import certain chemicals to supplement domestic supply, but port delays and logistics issues could limit access to those products. We have exposure to the cost of chemicals, including TDI, MDI, and polyol. The cost of these chemicals has fluctuated at times, but we have generally passed the changes through to our customers. If we are unable to obtain the chemicals or pass the cost along to our customers, our results of operations may be negatively impacted.
Higher raw material costs could lead some of our customers to modify their product designs, causing a change in the quantity and mix of our components in their finished goods (replacing higher-cost with lower-cost components). If this were to occur, it could negatively impact our results of operations.
Mattress and innerspring imports from foreign manufacturers have affected, and could continue to adversely affect, our market share, sales, profit margins, and earnings.
We continue to face pressure from foreign competitors, as some of our customers source a portion of their components and finished products offshore. We have experienced some reduced sales and lower earnings related to lower-priced imports of mattresses and innersprings. Continued lower-priced mattress and innerspring imports could further negatively impact our market share, sales, profit margins, and earnings.
Unfair competition could adversely affect our market share, sales, profit margins, and earnings.
We manufacture innersprings, steel wire rod, and finished mattresses. Our products have been subject to competition from foreign manufacturers alleged to be selling at less than fair value or benefiting from unfair subsidies. In response to petitions filed with the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC), antidumping and countervailing duties have been imposed on imports of innersprings, steel wire rod, and mattresses from certain countries.
Some of these orders remain subject to appeal. In February 2025, the DOC determined that revoking the 2019 antidumping duty order on mattresses from China would likely lead to continued dumping. The ITC extended the order, and duties of up to 1,732% will remain in effect through May 2030. Also in 2025, the DOC and ITC extended antidumping duty orders on uncovered innersprings from China, Vietnam, and South Africa through April 2030, with duties ranging from 116% to 234%.
Currently, sunset reviews are being conducted by the ITC regarding existing duties on imports of steel rod wire from Brazil, Indonesia, Mexico, Moldova and Trinidad & Tobago. The current anti-dumping and countervailing duty orders range from 3% to 369%. If the ITC and DOC rule favorably, the duties will be extended another five years. If the ITC rules against the Company, it could negatively impact our results of operations.
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Also, if any of these duties are overturned on appeal, allowed to expire, or circumvented through transshipment or other means, and dumping or subsidization resumes, our competitive position and financial results could be materially and adversely affected. For more information on antidumping and/or countervailing duties regarding innersprings, steel wire rod and mattresses, please refer to the Competition section on page 42 in Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations, and Item 3. Legal Proceedings on page 30.
We operate in a highly competitive automotive industry and efforts by our competitors, as well as new entrants to the industry, to gain market share could negatively impact our business, results of operations, and financial condition.
The automotive component industry is highly competitive. The evolving automotive market, including the growth of hybrid and electric vehicles, has attracted, and may continue to attract, new OEM entrants to the industry, resulting in market share losses for our existing customers. We have also experienced increased competition from Chinese-based component suppliers who are growing market share in China, particularly with Chinese-based OEMs, which may adversely affect sales and profit margins of our products.
In Europe, economic softness and consumer affordability issues have given Chinese electric vehicle (EV) manufacturers opportunities to supply lower price electric vehicles, leading to production declines and program launch delays for our customers. In North America, consumer affordability issues and uncertainty around EV transition timelines are resulting in program launch delays and our customers replacing higher cost components with lower cost components.
If we are unable to differentiate existing or create new innovative products, adapt to new technologies or evolving customer requirements, maintain a low-cost footprint, or compete effectively, we may lose market share or be forced to reduce prices, thereby lowering our margins. Any such occurrences could adversely affect our business, results of operations, and financial condition.
We are exposed to foreign currency exchange rate risk which may negatively impact our competitiveness, profit margins, and earnings.
In 2025, 41% of our sales were generated by international operations, primarily in Europe, China, Canada, and Mexico. As of December 31, 2025, 43 of our manufacturing facilities were located outside the United States. We are exposed to currency exchange rate fluctuations by our purchase of raw materials and component parts from suppliers in multiple countries. We experience currency-related gains and losses where sales or purchases are denominated in currencies other than the functional currency. We also have balance sheet, cash flow, and net investment risk associated with foreign currency exchange rates. If the applicable foreign currency exchange rates devalue the currency we receive for the sale of our products or the currency we use to purchase raw materials or component parts from our suppliers, it may have a material adverse effect on our competitiveness, profit margins, and earnings.
Information Technology and Cybersecurity Risk Factors
Information technology failures, cybersecurity incidents, or technology disruptions could have a material adverse effect on our operations.
We rely on information systems to obtain, process, analyze, and manage data and critical financial activities, as well as to facilitate the manufacture and distribution of inventory to and from our facilities. We receive, process, and ship orders and manage our accounting and financial records, including invoicing and collecting from our customers and paying our vendors. We also manage our production processes with certain industrial control systems. Consequently, we are subject to cybersecurity risk. We face risks associated with network connectivity and systems for consolidated reporting. Technology failures or security breaches of our infrastructure, including our industrial control systems, could impede normal operations, create system disruptions, or create unauthorized disclosure or alteration of confidential information.
From time to time, we have experienced immaterial cybersecurity threats and incidents. When these threats and incidents occur, we have taken appropriate remediation steps and, through investigation, determined that the threats or incidents did not have a material effect on our business, results of operations, or financial results. Although we are not aware of any material cybersecurity incidents, because of past immaterial
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cybersecurity threats and what we have learned in responding to those threats, we have improved cybersecurity efforts, including stronger protective processes and controls.
Although we have purchased broad form cyber insurance coverage and strive to provide a balanced level of cybersecurity protections, cybersecurity risk has increased due to growing sophistication of cybersecurity adversaries, as well as the increased frequency of cybersecurity attacks, including malware. As such, information technology failures or cybersecurity breaches could still create system disruptions or unauthorized disclosure or alterations of confidential information and disruptions to the systems of our third-party suppliers and providers. We cannot be certain that the attacker’s capabilities will not compromise our technology protecting information systems or bypass our detection capabilities, including those resulting from ransomware attached to our industrial control systems. If these systems are materially interrupted or damaged by any incident or fail for any extended period of time, then our results of operations could be adversely affected. We may incur remediation costs, increased cybersecurity protection costs, ransom payments, lost revenues resulting from unauthorized use of proprietary information, litigation and legal costs, increased insurance premiums, reputational damage, damage to our competitiveness, and negative impact on our stock price and long-term shareholder value. We may also be required to devote significant management resources and expend significant additional resources to address problems created by any such interruption, damage, or failure.
Challenges in managing the use of artificial intelligence could result in legal liability, reputational harm, competitive harm, and adversely affect our results of operations.
We currently use artificial intelligence (AI) technologies, including those offered by third parties, on a limited basis, and take a measured approach to expansion of uses where it can create value. While we prohibit the use of unauthorized AI technologies, our employees may use AI in an unauthorized manner. While improper or unauthorized use of AI technologies increases the risk of exposing sensitive data, violating third-party intellectual property rights or privacy laws, the use of authorized AI also carries certain inherent risks, including inaccurate or biased responses, all of which could lead to errors in our business activities and harm our reputation. Our ability to mitigate these risks will depend on our continued effective maintenance, training, monitoring, and enforcement of appropriate policies governing the use of AI technologies, and the results of any such use, by us. The legal and regulatory landscape relating to AI and its use is uncertain and rapidly evolving. These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance. In addition, if we fail to adapt or are unable to deploy AI successfully, or if our competitors and other third parties adopt AI into their operations and processes more rapidly or effectively than us, we could be placed at a competitive disadvantage and our ability to compete could be negatively impacted. If any of these risks are realized, it could adversely impact our results of operations, cash flow, financial condition, and stock price.
Trade Risk Factors
Tariffs by the United States and counter-tariffs by other countries could result in materially lower margins, lost sales, and an overall adverse effect on our results of operations.
The United States has imposed, and could impose in the future, broad-ranging tariffs on imports. Certain tariffs imposed by the United States have been judicially invalidated by a recent Supreme Court ruling, but may be replaced under other statutory authority. In retaliation, many countries have imposed, and could impose in the future, counter-tariffs on U.S.-produced items. Tariffs have spurred, and could continue to spur, additional retaliatory moves by affected countries, including by Canada, China, India, and Mexico.
We import into the United States various raw materials, components, or finished goods across all segments, with our Bedding Products and Furniture, Flooring & Textile Products segments being the most impacted. We are indirectly impacted by tariffs when our customers import our products or sell their foreign-produced products containing our foreign-produced components from our Specialized Products and Furniture, Flooring & Textile Products segments into the United States. We also export various products to countries outside the United States, some of which may be impacted by tariffs.
We expect tariffs to present both positive and negative impacts across our businesses. It is possible that wide-ranging tariffs could drive inflation, weaken consumer confidence, and ultimately reduce consumer demand for our products and negatively impact our consolidated results of operations. Also, if we are unable to pass through additional costs created by current or new tariffs, it could result in materially lower margins, lost
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sales, and an overall adverse effect on our results of operations. Tariffs could also negatively impact our customers' demand for our products, as they may face significantly increased costs from importing our products or from selling their foreign-produced products containing our foreign-produced components into the United States. If tariffs are further invalidated, modified or expanded, additional tariffs are implemented, or our information is incorrect, our consolidated results of operations could be materially negatively impacted.
U.S. export controls against China could contribute to a global semiconductor shortage and negatively impact (i) our ability to manufacture and timely deliver our products, (ii) our OEM and Tier 1 customers’ production schedules, and (iii) the demand for our products.
Our Automotive Group uses semiconductors in seat comfort products and, to a lesser extent, in motors and actuators. Our OEM and Tier 1 customers also use semiconductors, or components containing semiconductors, in their manufacture of automotive components and/or vehicles. According to certain market reports, China is a significant manufacturer of semiconductors. The U.S. government has imposed export controls regarding certain advanced semiconductor chips and semiconductor manufacturing equipment which restrict U.S. companies’ ability to export these products to China without a license. The Netherlands and Japan have also moved forward with more restrictive export controls related to specific equipment used for the manufacture of semiconductors. The controls may contribute to a global semiconductor shortage and negatively impact our ability to source an adequate supply of semiconductors used in our manufacturing processes. If so, any resulting shortage could endanger our ability to manufacture and timely deliver our products. It also could negatively impact our OEM and Tier 1 customers’ production schedules and the demand for our products. Additionally, China has imposed export controls on certain critical minerals used in semiconductors and may adopt additional retaliatory trade restrictions against U.S. companies. Such measures could affect not only our China-based operations, but also our operations in the United States and other regions. Any of these risks, if realized, could negatively impact our business, results of operations, and financial condition.
Regulatory Risk Factors
Privacy and data protection regulations are complex and could harm our business, reputation, financial condition, and operating results.
As a multinational company with personal data and business contact information from individuals in many countries, we are subject to numerous complex and evolving data protection laws. These include the federal and state-specific laws in the United States as well as the laws of other jurisdictions where we operate, such as those in Europe, China, India, and Brazil. If our operations are found to violate these broad-ranging data protection laws, we may incur substantial fines, face reputational harm, and be required to change our business practices, any of which could have an adverse effect on our business.
As a U.S. company, the ability to manage aspects of our operation and workforce centrally and the ability to make decisions based on complete and accurate global data are important and require the ability to transfer and access personal data. The adequacy of the laws of the data-importing country are of increasing importance under various international laws. The validity of data transfer mechanisms remains subject to legal, regulatory, and political developments in many countries and could have an adverse impact on our ability to process and transfer personal data. This may inhibit our ability to transfer our employee personal data from our other operations, such as in Europe, China, and Brazil, to our headquarters in the United States or elsewhere, making it much more difficult to effectively manage our global human capital. These evolving privacy and data protection requirements create uncertainty and add compliance obligations that could harm our business, reputation, financial condition, and operating results.
Environmental regulatory compliance costs, additional potential related liabilities and climate change transition risks, including new treaties, laws, and regulations, could negatively impact our business, capital expenditures, compliance costs, results of operations, financial condition, competitive position, and reputation.
Increased focus by the United States and other governmental authorities on climate change and other environmental matters has led to enhanced regulation in these areas, which is expected to result in increased compliance costs and could subject us to potential liabilities. The extent of these costs and risks is difficult to
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predict and will depend, in large part, on the extent of final regulations and the ways in which those regulations are enforced.
As of December 31, 2025, we had 104 manufacturing facilities in 18 countries, primarily in North America, Europe, and Asia. Most of our facilities are engaged in manufacturing processes that produce GHG emissions, including carbon dioxide. We also maintain a fleet of over-the-road tractor trailers that emit GHG emissions when providing freight services to many of our U.S.-based manufacturing locations. Certain transition risks, or risks related to the process of reducing our carbon footprint, could materially affect our business, capital expenditures, results of operations, financial condition, competitive position, and reputation. One transition risk is the change in laws, regulations, and policies that could impose significant operational and compliance burdens. Also, if our customers incur additional costs to comply with such laws, regulations, and policies, impacting their ability to operate at the same or similar levels, the demand for our products could be adversely affected.
In addition, overall, there continues to be a lack of consistent climate legislation in the jurisdictions in which we operate, which creates economic and regulatory uncertainty. If these laws or regulations impose significant operational restrictions and compliance requirements on us, they could increase costs associated with our operations, including costs for raw materials and transportation. Non-compliance with climate change treaties or legislative and regulatory requirements could also lead to significant fines and penalties and negatively impact our reputation. To date, we have not experienced a material impact from such legislative and regulatory efforts. The ultimate impact and associated cost of these legislative and regulatory developments cannot be predicted at this time. In addition, we have developed preliminary estimates of the capital expenditures or operating and administrative costs that may be required to implement our GHG reduction strategy, and these costs and expenses are not expected to materially impact our results of operation, cash flow from operations, or financial condition.
Increased scrutiny from stakeholders regarding our sustainability responsibilities and financial performance could expose us to additional costs or risks, including, but not limited to, shareholder activism, and could adversely impact our liquidity, results of operations, reputation, employee retention, and stock price.
Investor advocacy groups, certain institutional investors, investment funds, lenders, market participants, shareholders, customers, and other stakeholders have increasingly focused on the sustainability practices of companies. These parties have placed increased importance on the social cost implications of their investments. If our sustainability practices do not meet these stakeholder expectations and standards, which continue to evolve, our access to capital may be negatively impacted based on an assessment of our sustainability practices. These limitations, in both the debt and equity markets, may materially negatively affect our ability to manage our liquidity, refinance existing debt, grow our businesses, and implement our strategies, as well as adversely impact our results of operations and the price of our common stock.
Our Sustainability Progress Report details how we seek to manage our operations responsibly and ethically. It includes our sustainability policies and practices on a variety of matters, including, but not limited to, Board and management sustainability oversight, governance and ethics, environmental sustainability, greenhouse gas emissions reduction, employee health, safety, product stewardship, quality and safety management, and supply chain social standards and compliance. The Board’s Nominating, Governance and Sustainability Committee oversees our sustainability programs and related risks. However, it is possible that stakeholders may not be satisfied with our sustainability practices or the speed of their adoption. We could also incur additional costs and require more resources to monitor, report, and comply with various sustainability practices. Furthermore, our failure, or perceived failure, to meet the standards set forth in the Sustainability Progress Report could negatively impact our reputation, employee retention, and the willingness of our customers and suppliers to do business with us. Our Sustainability Progress Report can be found at www.leggett.com. Our website does not constitute part of this Form 10-K.
Publicly traded companies are increasingly subject to campaigns by activist shareholders regarding sustainability and other financial matters. The actions of activist shareholders may cause fluctuations in our stock price based upon speculation about our future. Such speculation can harm relationships with investors, customers, suppliers, and employees and can be costly and time consuming, disrupting our business and diverting the attention of our Board of Directors and management from pursuing our business strategies. In addition, decreases in our stock price make us more susceptible to unwarranted shareholder activism. Shareholder activism could adversely affect our business, results of operations, and stock price.
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Changes in tax laws or challenges to our tax positions pursuant to ongoing tax reviews and/or audits could negatively impact our earnings and cash flows.
We are subject to the tax laws and reporting rules of the United States (federal, state, and local) and several foreign jurisdictions. Current economic and political conditions make these tax rules (and governmental interpretation of these rules) subject to significant change and uncertainty. There are proposals by the Organization for Economic Co-operation and Development, the European Union, and other tax jurisdictions, some of which have already been adopted in various countries, to reform tax laws or change interpretations of existing tax rules. These proposals generally center around global base erosion and profit shifting (BEPS) concepts, and, as they are adopted, could continue to impact how our earnings and transactions are taxed as a multinational corporation. Whether, or in what form, these proposals become law in various countries around the world, or how such laws might be interpreted, could impact our assumptions related to the taxation of certain foreign earnings and have an adverse effect on our earnings and cash flows.
We are subject to reviews and/or audits by taxing authorities in the countries where we operate and are currently in various stages of examination in several jurisdictions. China has recently intensified its review of tax compliance among foreign enterprises. We underwent reviews in 2023 and 2024 resulting in no material findings, while in 2025 and early 2026, we have seen an increased number of these reviews initiated by Chinese tax authorities.
Although the outcome is uncertain, we believe we have valid defenses and intend to rigorously contest the reviews initiated by the China authorities and have not recorded any impact associated with these matters. We have established liabilities for other matters we believe are appropriate, with such amounts representing what we believe is a reasonable provision for taxes that we ultimately might be required to pay. However, our exposure could increase over time as more information becomes known relative to the resolution of these reviews and/or audits, as governmental tax positions may be sustained, or we may agree to certain tax adjustments. We could incur additional tax expense if we have adjustments higher than the liabilities recorded that could have a material negative effect on our results of operations or financial condition.
Legal Risk Factors
We are exposed to legal contingencies that, if realized, could have a material negative impact on our financial condition, results of operations, and cash flows.
Although we deny liability in all currently threatened or pending legal proceedings, we have recorded an immaterial aggregate contingency accrual at December 31, 2025. Based on current known facts, aggregate reasonably possible (but not probable, and therefore not accrued) losses in excess of the accruals for legal contingencies are estimated to be $26 million. If our assumptions or analyses regarding any of our contingencies are incorrect, or if facts change or future litigation arises, we could realize losses in excess of the recorded accruals (including losses in excess of the $26 million referenced above), which could have a material negative impact on our financial condition, results of operations, and cash flows. For more information regarding our legal contingencies, please see Item 3 Legal Proceedings on page 30 and Note T on page 122 of the Notes to Consolidated Financial Statements.
restructuring
benefit
unfavorable
bad
efficiency
improvements
(Income)/expense, pretax (Dollar amounts in millions)
Gain on sale of Aerospace Products Group
Net gain from insurance proceeds
Gain on sale of real estate
Restructuring, restructuring-related, and impairment charges ($23 and $17 non-cash in 2025 and 2024, respectively)
Pension settlement (non-cash)
Somnigroup unsolicited offer evaluation costs
Goodwill impairment (non-cash)
CEO transition compensation costs
Long-lived asset impairment (non-cash)
Total 1
1 Calculations impacted by rounding
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In 2025, we generated $338 million in cash from operations compared to $306 million in 2024. The increase was driven primarily by working capital improvements. Cash from operations in 2024 decreased primarily from lower earnings and less benefit from working capital.
In July 2025, we amended our credit agreement to extend the maturity date to 2030 and reduce the lending commitments from $1.2 billion to $1.0 billion.
On August 29, 2025, we divested our Aerospace Products Group (within our Specialized Products segment) for net cash proceeds of $280 million and recognized a pretax gain of $91 million after final adjustments for working capital were completed in December 2025. We collected the final working capital adjustment of $4 million in January 2026.
These topics are discussed in more detail in the sections that follow.
INTRODUCTION
Somnigroup Discussions
In December 2025, we announced the Company received an unsolicited proposal from Somnigroup International Inc. (Somnigroup) to acquire the Company in an all-stock transaction. In January 2026, our Board of Directors, in consultation with its financial and legal advisors, announced that it had determined that the Somnigroup offer undervalues the Company and publicly declined the Somnigroup proposal. Our Board also publicly announced that it has entered into a customary non-disclosure agreement and six month standstill with Somnigroup to facilitate customary due diligence and to determine if a transaction can be reached that delivers appropriate value and certainty to the Company and its shareholders. There can be no assurance that the Board's evaluation will result in a transaction and, if there is a transaction, the price, form of consideration, or other terms and conditions of any such transaction. We incurred $3 million of professional costs associated with this activity through December 31, 2025.
Customers
We serve a broad suite of customers, with our largest customer representing approximately 7% of our trade sales in 2025. Many are companies whose names are widely recognized. They include bedding brands and manufacturers, residential and office furniture producers, automotive OEM and Tier 1 manufacturers, big box retailers, and a variety of other companies.
Organic Sales
We calculate organic sales as trade sales excluding sales attributable to acquisitions and divestitures consummated within the last twelve months. Management uses the metric, and it is useful to investors, as supplemental information to analyze our underlying sales performance from period to period in our legacy businesses.
Major Factors That Impact Our Business
Tariffs Impacting our Business
We continue to monitor and evaluate policy changes impacting global trade, including tariff regulations, the effects of announced tariffs, the judicial invalidation of certain tariffs, and the potential imposition of modified or additional tariffs. These policy changes create uncertainty regarding the scope, duration, and financial impact of tariffs, as well as the potential refund of duties previously paid for invalidated tariffs. It is possible that wide-ranging tariffs could drive inflation, weaken consumer confidence, and ultimately reduce consumer demand for our products and negatively impact our consolidated results of operations.
Tariffs present both positive and negative impacts across our businesses and we continue to be actively engaged with customers and suppliers to mitigate the impact of tariffs. Our efforts include leveraging our global footprint to shift production and sourcing to less-impacted regions, implementing pricing actions where appropriate, and pursuing increased demand opportunities domestically.
In Bedding Products, Section 232 steel tariffs have had the largest impact on our business and have led to expanded metal margins and increased demand for our Steel Rod and Drawn Wire operations, but we have yet to see noticeable improvement in our innerspring demand. Section 232 steel tariffs were not impacted by the
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recent Supreme Court ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act.
In late 2025, we consolidated our Kentucky Adjustable Bed manufacturing operation into our Mexico operation. This decision was driven by lower volume and tariffs on imported components, which resulted in a cost disadvantage for domestic production in a category that primarily competes with imported products. We expect our Mexican Adjustable Bed operation to remain cost competitive, assuming that the reciprocal tariff exemption for USMCA compliant products remains in place.
In Furniture, Flooring & Textile Products, our Home Furniture operations in China primarily sell components to Asian customers who export finished furniture to the United States. Our Chinese operations experienced meaningful disruptions early in the second quarter of 2025, including shipment delays, order cancellations, and customer shutdowns, which began to normalize later in the quarter with the postponement of tariffs. Additionally, we sell components to U.S. customers and maintain some intercompany supply from our Chinese operations. To help mitigate our tariff exposure, we set up production in Vietnam and began production late in the third quarter. Within Work Furniture, our teams are pursuing new opportunities with customers who are seeking regionally-supplied finished furniture and components. Finally, our Textile business continues to mitigate most tariff exposure by shifting to alternative sources in countries with lower tariff rates.
We continue to actively evaluate the potential impact of tariffs and counter-tariffs on our results of operations and financial condition, while also exploring possible opportunities to mitigate their impact. Although our analysis is based on limited and changing information, we currently do not expect tariffs, as presently implemented or anticipated, to have a material adverse effect on our consolidated results of operations. However, if tariffs are further invalidated, modified or expanded, additional tariffs are implemented, or our information is incorrect, our consolidated results of operations could be materially negatively impacted. Moreover, tariffs may decrease demand for our products which may negatively impact our sales and results of operations.
Sale of the Aerospace Products Group
Late in the first quarter 2025, the Aerospace Products Group (within our Specialized Products segment) met the criteria to be classified as held for sale, but did not meet the criteria for discontinued operations because it did not represent a strategic shift that would have a major effect on our financial results.
On August 29, 2025, we divested the Aerospace Products Group for a cash price, net of selling expenses and cash sold, of $280 million and recognized a pretax gain of $91 million after final adjustments for working capital were completed in December 2025. We collected the final working capital adjustment of $4 million in January 2026. The proceeds from the sale were primarily used to reduce debt. Our Aerospace Products Group was a supplier of complex, highly-engineered tube and duct assemblies for use primarily in commercial and military aircraft platforms and space launch vehicles. The business was comprised of seven manufacturing facilities located in the United States, the United Kingdom, and France, with approximately 700 employees at the time of the sale.
For the Aerospace Products Group sales and pre-tax earnings through the divestiture date, see Note S to the Consolidated Financial Statements on page 121.
Goodwill and Long-Lived Asset Impairment Testing
Goodwill Impairment Testing
A significant portion of our assets consists of goodwill and other long-lived assets, the carrying value of which may be reduced if we determine that those assets are impaired. At December 31, 2025, goodwill and other intangible assets represented $843 million, or 24% of our total assets. In addition, net property, plant and equipment, operating lease right-of-use assets, and other noncurrent assets assets totaled $950 million, or 27% of total assets.
We test goodwill for impairment at the reporting unit level (the business groups that are one level below the operating segments) when triggering events occur or at least annually in the second quarter. We conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations. In addition, our long-lived assets are reviewed for recoverability at year end and whenever events or changes in circumstances indicate carrying values may not be recoverable.
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The annual goodwill impairment testing in the second quarter of 2025 indicated no impairments. As of June 30, 2025, the fair values of all reporting units exceeded their respective carrying amounts by less than 100% in part due to ongoing macroeconomic uncertainties, including uncertainty surrounding tariffs. The fair values of our reporting units were reconciled to our consolidated market capitalization, which decreased due to the decline in the stock price compared to the prior year. Fair value exceeded carrying value by less than 50% at June 30, 2025 for the reporting units summarized in the table below, which excludes the Aerospace Products Group divested in August 2025 as discussed in Note S to the Consolidated Financial Statements on page 121.
Reporting Unit
(Dollar amounts in millions)
December 31, 2025 Goodwill Value
Fair value in excess of carrying value as of June 30, 2025
Bedding
Home Furniture
Work Furniture
In evaluating the potential for impairment of goodwill and other long-lived assets, we make assumptions and estimates regarding future operating performance, business trends, and market and economic performance, including future sales, operating margins, growth rates, and discount rates.
We are continuing to monitor all factors impacting these reporting units. If actual results or the long-term outlook of any of our reporting units materially differ from the assumptions and estimates used in the goodwill and other long-lived assets valuation calculations, or there is a sustained decrease in our stock price, we could incur future non-cash impairment charges, which would have a material negative impact on our earnings.
The annual goodwill impairment testing in the second quarter of 2024 indicated that fair value had fallen below carrying value for three reporting units. We had non-cash impairments in 2024 of $587 million, $44 million, and $44 million in our Bedding, Work Furniture, and Hydraulic Cylinders reporting units, respectively. After this impairment, the Hydraulic Cylinders reporting unit did not have any goodwill remaining. In addition, we had an impairment of $1 million related to a small U.S. machinery business within the Bedding Products segment that reached held-for-sale status in the fourth quarter of 2024 and was associated with the 2024 Plan.
Long-lived Asset Impairment
Late in the fourth quarter of 2023, we had a triggering event to review long-lived assets and test for impairment when certain of our Elite Comfort Solutions and Kayfoam customers notified us of efforts to improve their financial position by moving their business to or exploring alternative suppliers, which adversely impacted our future cash flow forecast. Although estimated undiscounted cash flows had previously exceeded carrying values, updated sales and earnings forecasts completed in early January 2024 indicated reduced expected cash flows. As a result, we performed recoverability and impairment testing, which led to a non-cash pretax charge of $444 million for long-lived asset impairments (primarily customer relationships, technology, and trademarks) in the Bedding Products segment for the fourth quarter of 2023. This impairment was unrelated to the 2024 Restructuring Plan discussed below.
The activities resulting in the long-lived asset impairments discussed above were also considered a triggering event for goodwill impairment testing of the Bedding reporting unit, and no impairments were indicated (as discussed in Goodwill Impairment Testing starting on page 37).
We regularly evaluate long-lived assets for indicators of impairment, such as market conditions, operating performance, strategic decisions, or technical obsolescence. While we believe our current asset valuations are appropriate, future assessments may result in non-cash charges, which would have a material negative impact to our earnings.
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2024 Restructuring Plan Substantially Complete
In 2024, we committed to a restructuring plan. The 2024 Plan was primarily associated with our Bedding Products segment and included, to a lesser extent, our Furniture, Flooring & Textile Products segment, our Specialized Products segment, and general and administrative cost structure initiatives. Over the course of the restructuring timeline, we consolidated 17 production and distribution facilities in the Bedding Products segment and four production facilities in the Furniture, Flooring & Textile Products segment. The 2024 Plan was substantially complete at the end of 2025. The following summarizes the 2024 Plan activity:
2024 ACCOMPLISHMENTS
Bedding Products segment
• Consolidated 14 production and distribution facilities (ten in U.S. Spring, three in Specialty Foam, one in Adjustable Bed)
◦ Consolidated all domestic innerspring production into our four remaining locations
◦ Exited our Mexican innerspring operation
• Downsized our Chinese innerspring operation
• Sold two properties
Specialized Products segment
• Launched restructuring activities in our Hydraulic Cylinders business to optimize manufacturing and improve operating efficiencies
Furniture, Flooring & Textile Products segment
• Closed one facility in Home Furniture
• Closed one facility in Flooring Products and substantially completed Phase 1 of Flooring Products restructuring
Corporate
• Reduced corporate general and administrative expenses, fully realized in 2025
2025 ACCOMPLISHMENTS
Bedding Products segment
• Divested a small U.S. machinery business (two facilities)
◦ Consolidated one Specialty Foam production facility
• Sold four properties
Specialized Products segment
• Completed manufacturing efficiencyimprovement activities in Hydraulic Cylinders
◦ Right-sized our Hydraulic Cylinders facility in the UK
Furniture, Flooring & Textile Products segment
• Completed Phase 1 and substantially completed Phase 2 of Flooring Products restructuring
◦ Consolidated two Flooring Products production facilities
• Sold one property
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(Dollar amounts in millions-all pretax)
Actual
Actual
Since Inception
Total Plan Estimate
Plan activity:
Restructuring and restructuring-related costs:
Cash
Non-cash
Total costs
Pretax net cash from real estate 1
1 This is only related to the 2024 Plan and does not include the sale of idle real estate. The proceeds from the 2024 sale of real estate resulted in a pretax gain of $17 million. Real estate sold in 2025 resulted in a pretax gain of $24 million. The remaining real estate sales proceeds are expected to be received during 2026 due to timing of listing properties.
EBIT Benefit:
We realized annualized EBIT benefit of $63 million in 2025 and expect approximately $5 million of incremental EBIT benefit in 2026.
• We realized $22 million in 2024.
• We realized $41 million of incremental EBIT benefit in 2025.
Sales Attrition:
We realized $53 million of annualized sales attrition in 2025 and expect approximately $5 million of incremental sales attrition in 2026.
• We realized $15 million in 2024.
• We realized $38 million of incremental sales attrition in 2025 (including $12 million from the divestiture of a small U.S. machinery business in our Bedding Products segment).
Because of certain risks and uncertainties, EBIT benefit, sales attrition, and the proceeds from the sale of real estate associated with the 2024 Plan may change. We may not be able to dispose of the remaining real estate pursuant to the 2024 Plan or obtain the expected proceeds in a timely manner. Any failure to achieve the intended outcomes could materially adversely affect our business, financial condition, results of operations, cash flows, and liquidity.
Although the 2024 Plan is substantially complete, we continue to identify opportunities to improve our cost structure and profitability across our businesses. On February 24, 2026, we committed to a smaller restructuring plan to consolidate two manufacturing facilities in our Specialty Foam business unit in our Bedding Products segment and one manufacturing facility within our Furniture, Flooring & Textile Products segment into other existing facilities (2026 Restructuring Plan). These actions are expected to improve our manufacturing efficiency and enhanceprofitability and are anticipated to be substantially complete by the end of 2026. We expect to incur restructuring and restructuring-related pretax costs of approximately $ 15 million for the 2026 Restructuring Plan, including approximately $ 10 million of cash charges. If additional restructuring activities are identified and executed, we may incur additional material restructuring costs, restructuring-related costs, or impairments.
Market Demand
Market demand (including product mix) is impacted by several economic factors, with housing turnover and consumer confidence being the most significant. Other important factors include disposable income levels, employment levels, and interest rates. All of these factors influence consumer spending on durable goods, and therefore affect demand for our products and components. Some of these factors also influence spending on infrastructure, facilities, and equipment, which has impacted approximately 30% of our sales. The dynamic macroeconomic environment has pressured most of our end markets and negatively affected the demand for our products. We are also concerned that wide-ranging tariffs will drive inflation, weaken consumer confidence, and pressure consumer demand.
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In recent years, the U.S. mattress market has become increasingly bifurcated. High volume imports have dominated online sales and pressured opening and mid-tier price points for traditional domestic OEMs. Additionally, some mattress manufacturers and retailers have faced financial stress as overall consumer demand for mattresses has declined. In the near-term, the domestic mattress industry is expected to continue to experience some level of volatility resulting from industry bankruptcies, consolidations, and import pressure.
Volatility related to the growth of Chinese EV manufacturers and multinational OEM market share challenges are expected to continue to impact the automotive industry. Delays in EV programs in Europe and changing expectations for internal combustion engines to EV program transitions in North America, along with consumer affordability issues, also add uncertainty to OEM demand.
As a result of these uncertainties, we expect 2026 overall demand to be flat or modestly lower than 2025 levels.
Trends in Cost of Goods Sold
Our costs can vary significantly as market prices for raw materials (many of which are commodities) fluctuate. We typically have short-term commitments from our suppliers; accordingly, our raw material costs generally move with the market. We have also been impacted by fluctuations in transportation, energy, and labor costs. Our ability to recover higher costs (through selling price increases) is crucial. When we experience significant increases in costs, we typically implement price increases to recover the higher costs. Conversely, when costs decrease significantly, we generally pass those lower costs through to our customers. The timing of our price increases or decreases is important; we typically experience a lag in recovering higher costs, and we also realize a lag as costs decline.
Steel is our principal raw material. At various times in past years, we have experienced significant cost fluctuations in this commodity. In most cases, the major changes (both increases and decreases) were passed through to customers with selling price adjustments. Steel costs modestly declined throughout 2024 as U.S. steel markets continued to face soft demand and increased foreign competition. In early 2025, steel costs increased versus the end of 2024 largely due to higher demand and, in early April 2025, costs continued to increase due to recently implemented tariffs reducing foreign competition. Steel costs remained relatively steady for the remainder of the year, resulting in costs that were significantly higher year over year.
As a producer of steel rod, we are also impacted by changes in metal margins (the difference in the cost of steel scrap and the market price for steel rod). Steel rod and steel scrap costs both declined modestly during 2024, leading to metal margin compression. In 2025, steel rod costs increased while average steel scrap costs remained relatively flat, resulting in metal margin expansion year over year. In addition, producing steel rod is energy intensive and depends on electricity and other utilities at commercially reasonable rates. Periods of extreme weather, including prolonged hot or cold weather events, have increased and may continue to increase overall electricity and natural gas demand, place stress on regional power grids, and contribute to higher or more volatile utility rates, impacting our utility costs. Such conditions may also increase the risk of service interruptions.
We have exposure to the cost of chemicals, including TDI, MDI, and polyol. The cost of these chemicals has fluctuated at times, but we have generally passed the changes through to our customers. Average costs in 2025 were in line with 2024 average costs.
Our other raw materials include woven and nonwoven fabrics. When we have experienced changes in the costs of these materials, we generally have been able to pass them through to our customers. In 2025, aggressive competitive discounting, particularly in Flooring and Textiles, has also led to pricing adjustments that have impacted our profitability. In order to mitigate exposure under recently announced tariffs, our Textile business has proactively been sourcing the majority of these materials from outside of China. We are well positioned to serve customers that may face supply disruption from their existing vendors.
When we raise our prices to recover higher raw material costs, this sometimes causes customers to modify their product designs and replace higher cost components with lower cost components. We must continue providing product options to our customers that enable them to improve the functionality of their products and manage their costs, while providing higher profits for our operations.
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Competition
Many of our markets are highly competitive, with the number of competitors varying by product line. In general, our competitors tend to be smaller, private companies. Many of our competitors, both domestic and foreign, compete primarily on the basis of price. Our success has stemmed from the ability to remain price competitive while delivering innovation, product quality, and customer service.
We continue to face pressure from foreign competitors, as some of our customers source a portion of their components and finished products offshore. In addition to lower labor rates, foreign competitors benefit (at times) from lower raw material costs. They may also benefit from currency factors and more lenient regulatory climates. We typically compete in market segments that value product differentiation. When we do compete on cost, we typically remain price competitive in most of our business units, even versus many foreign manufacturers, as a result of our efficient operations, automation, vertical integration in steel rod and wire, logistics and distribution efficiencies, and large-scale purchasing of raw materials and commodities. We have also reacted to foreign competition in certain cases by developing new proprietary products that help our customers reduce total costs and by shifting production offshore to take advantage of lower input costs.
We manufacture innersprings for mattresses, finished mattresses, and steel rod wire (used internally and sold to third parties). Our operations have been impacted by several trade proceedings involving unfair pricing and foreign subsidies.
Anti-Dumping and Countervailing Orders on Innerspring Imports. In 2025, the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) determined that the revocation of certain mattress innerspring orders would likely lead to the continuation or reoccurrence of material injury and dumping of uncovered innersprings from China, Vietnam, and South Africa. Consequently, the antidumping duty orders on innerspring imports from these countries, with duties ranging from 116% to 234%, were extended for an additional five years through April 2030.
Anti-Dumping and Countervailing Orders on Mattress Imports. In 2025, the DOC and the ITC completed sunset reviews of existing antidumping duty orders on finished mattresses from China. The DOC and ITC determined that revocation of the 2019 antidumping duty order on mattresses from China would likely lead to continued or recurring material injury and dumping. As a result, the DOC extended the order, and duties of up to 1,732% on mattresses from China will remain in effect through May 2030.
In March 2020, the Company, along with other companies, filed petitions with the DOC and ITC alleging that manufacturers of mattresses in seven countries (Cambodia, Indonesia, Malaysia, Serbia, Thailand, Turkey, and Vietnam) were selling mattresses in the United States at less than fair value, and that manufacturers in China were receiving unfair subsidies. These petitions resulted in the imposition of antidumping and countervailing duty orders, which are scheduled to remain in effect through May 2026. A sunset review will be conducted at that time to determine whether to extend the orders for an additional five years. Following appeals filed with the U.S. Court of International Trade (CIT), the CIT upheld the ITC’s unanimous injury determination. However, the DOC revoked the antidumping duty order on mattresses from Indonesia. In response, the Company filed an appeal with the U.S. Court of Appeals for the Federal Circuit in April 2025, challenging that decision.
In July 2023, the Company, along with other companies, filed petitions with the DOC and ITC alleging that manufacturers of mattresses in twelve additional countries (Bosnia and Herzegovina, Bulgaria, Burma, India, Italy, Kosovo, Mexico, the Philippines, Poland, Slovenia, Spain, and Taiwan) were selling their mattresses in the United States at less than fair value, and that manufacturers in Indonesia were receiving unfair subsidies. Final dumping determinations for eight countries were issued in May 2024, followed by the ITC’s final injury determination in June 2024. These orders are scheduled for sunset review in June 2029. For the remaining countries, the DOC issued final determinations in July 2024, and the ITC issued its final injury determination in September 2024. Although the case is resolved with respect to duties and injury findings, an importer has filed an appeal challenging the ITC’s critical circumstances determination, which imposed retroactive duties. That appeal remains pending. A sunset review of these orders is scheduled for September 2029.
On November 18, 2025, the Company, along with other companies, filed with the DOC requests to initiate anti-circumvention inquiries on mattress component imports from Poland, Mexico, and Malaysia. The requests state that mattress components are being imported from these three countries and assembled into finished mattresses in the United States, which are then sold in the United States. The anti-circumvention requests allege that the assembly of these components is minor or insignificant under the law and as a result, the
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mattress component imports from Poland, Mexico, and Malaysia are allegedlycircumventing anti-dumping orders.
Anti-Dumping and Countervailing Orders on Steel Wire Rod Imports. Expedited sunset reviews by the ITC are currently being conducted on imports of steel wire rod from Brazil, Indonesia, Mexico, Moldova and Trinidad & Tobago. The current anti-dumping and countervailing duty orders range from 3% to 369%. If the ITC and DOC rule favorably, the duties will be extended another five years. Also, through August 2030, imports of steel wire rod from China are covered by antidumping and countervailing duties ranging from 106% to 193%. Additionally, through August 2028, antidumping and countervailing duty orders are in place on steel wire rod from Belarus, Italy, Korea, Russia, South Africa, Spain, Turkey, Ukraine, United Arab Emirates, and the United Kingdom ranging from less than 1% to 757%.
See Item 3. Legal Proceedings on page 30 for more information.
If any of the foregoing existing or future antidumping and countervailing duties are overturned on appeal or not extended beyond their current terms and dumping and/or subsidization recurs, or manufacturers in the subject countries continue to circumvent the existing duties through transshipment in other jurisdictions or otherwise, our market share, sales, profit margins, and earnings have been, and could continue to be, adversely affected.
Insurance Gain
In the third quarter of 2025, a fire damaged and destroyed equipment and machinery that had been stored in a leased location for the Bedding Products segment. The claim was approved by our insurance carriers and finalized in December 2025. Insurance proceeds of $45 million were received in 2025, with an additional $2 million received in January 2026, resulting in a net $35 million gain.
Pension Settlement
In November 2025, we liquidated our most significant defined benefit plan through the distribution of plan assets and transfer of benefit obligations to an unrelated third-party insurance company. In connection, non-cash settlement charges of $22 million and $1 million were recorded for the years ended December 31, 2025 and 2024, respectively, and an employer contribution of $6 million was made in the fourth quarter of 2025. At December 31, 2025, the remaining net liability for this plan was $1 million and is expected to be fully settled by mid-2026. For more information on the pension settlement, see Note M to the Consolidated Financial Statements on page 110.
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RESULTS OF OPERATIONS—2025 vs. 2024
Consolidated Results
The following table shows the changes in sales and earnings during 2025 and identifies the major factors contributing to the changes from prior year.
(Dollar amounts in millions, except per share data)
Amount
Net trade sales:
Year ended December 31, 2024
Divestitures
2024 sales excluding divestitures
Approximate volume declines
Approximate raw material-related deflation and currency impact
Year ended December 31, 2025
Earnings:
(Dollar amounts, net of tax)
Year ended December 31, 2024
Non-recurring 2024 goodwill impairment
2025 gain on sale of Aerospace Products Group
Increased net gain from insurance proceeds in 2025 related to a storage facility fire versus 2024 related to tornado damage
Decreased 2025 restructuring, restructuring-related, and impairment charges versus 2024
Other items, primarily lower volume, partially offset by metal margin expansion and restructuringbenefit
Year ended December 31, 2025
2024 Earnings (Loss) Per Diluted Share
2025 Earnings (Loss) Per Diluted Share
Full-year trade sales decreased 7%, to $4.06 billion. Divestitures reduced sales 2%. Organic sales decreased 5%, with volume declines of 6% partially offset by raw material-related selling price increases and currency benefit of 1%.
Earnings decreased as a result of the items listed in the above table. The special tax item in 2025 was an expense of $2 million related to U.S. corporate income tax law changes. The expense in 2024 was $5 million and is associated with a deferred tax asset valuation allowance related to a 2022 acquisition in our Specialized Products segment.
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Interest and Income Taxes
Net interest expense in 2025 was $13 million less than 2024 primarily due to lower average net debt levels in 2025 versus 2024.
Our tax rate is determined by a combination of items, including the impact of discrete tax items that may occur. We utilize prudent tax planning strategies for opportunities to optimize our tax rate, but other factors, such as our overall profitability, the mix and level of earnings among jurisdictions, the type of income earned, business acquisitions and dispositions, the impact of tax audits, and the effect of tax law changes can also influence our rate.
Our worldwide effective income tax rate was approximately 19% in 2025 and 0% in 2024. Significant factors impacting our rate for each year are identified below.
In 2025, the U.S. statutory federal income tax rate of 21% was favorably impacted by 6% due to beneficial tax impacts from the Aerospace Products Group divestiture (see Note S ) and 2% related to the non-cash settlement charges associated with the termination and liquidation of one of our domestic defined benefit plans (see Note M ). Offsetting adverse impacts were 4% related to foreign withholding taxes, 1% related to the enactment of Public Law 119-21, as discussed below, and 1% related to other less significant items.
In 2024, the U.S. statutory federal income tax rate of 21% (which resulted in a tax benefit due to taxable loss) was adversely impacted by 20% due to non-deductible tax effects from goodwill impairment charges, 2% related to foreign withholding taxes, and 1% related to a change in valuation allowance from a 2022 acquisition in our Specialized Products segment. An offsetting favorable impact of 2% was related to other less significant items.
On July 4, 2025, President Trump signed Public Law 119-21 (also known as the "One Big Beautiful Bill"), which includes changes to the U.S. corporate income tax system, such as modifications to the limitation of interest deductibility, the reinstatement of 100% bonus depreciation, and the allowable immediate expensing of qualifying research and experimentation expenses. In addition, other U.S. corporate tax changes embodied in the legislation, including certain modifications to the international tax system, will be effective in 2026.
See Note O on page 114 of the Notes to Consolidated Financial Statements for additional details.
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Segment Results
In the following section we discuss 2025 sales and EBIT (earnings before interest and taxes) for each of our segments. We provide additional detail about segment results in Note C on page 88 of the Notes to Consolidated Financial Statements. We use EBIT to assess operational performance, and it is useful to investors as it aids in understanding of underlying operational profitability.
(Dollar amounts in millions)
Change in Sales
% Change
Organic
Sales 1
Trade sales
Bedding Products
Specialized Products
Furniture, Flooring & Textile Products
Total trade sales
Change in EBIT
EBIT Margins
EBIT
Bedding Products
Specialized Products
Furniture, Flooring & Textile Products
Intersegment eliminations & other
Total EBIT 2
Depreciation and amortization
Bedding Products
Specialized Products
Furniture, Flooring & Textile Products
Unallocated 3
Total depreciation and amortization
1 This is the change in sales not attributable to acquisitions or divestitures in the last 12 months. Refer to the respective segment discussion below for a reconciliation of the change in total segment sales to organic sales.
2 Total 2025 EBIT of $356.0 million less interest expense net of interest income of $66.3 million and income tax of $54.3 million equals 2025 Net earnings (loss) of $235.4 million. Total 2024 EBIT of $(429.9) million less interest expense net of interest income of $79.3 million and income tax of $2.2 million equals 2024 Net earnings (loss) of $(511.4) million.
3 Unallocated consists primarily of depreciation and amortization of non-operating assets.
Bedding Products
Trade sales decreased 11%. The divestiture of a small U.S. machinery business that was part of the 2024 Plan reduced sales 1%. Organic sales were down 10%. Volume declines of 12% were primarily due to sales weakness at a certain customer and retailer merchandising changes in Adjustable Bed and Specialty Foam, demand softness in U.S. and European bedding markets, restructuring-related sales attrition, and the exit of a customer in Specialty Foam, partially offset by higher trade rod and wire sales. Raw material-related selling price increases and currency benefit added 2% to sales.
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EBIT increased $648 million, primarily due to the year-over-year changes from the items listed below, as well as metal margin expansion, restructuringbenefit, favorable sales mix in Steel Rod and U.S. Spring, and operational efficiencyimprovements in Specialty Foam. These increases were partially offset by lower volume.
(Income)/expense (Dollar amounts in millions)
Net gain from insurance proceeds
Gain on sale of real estate
Restructuring, restructuring-related, and impairment charges
Goodwill impairment
Total
Specialized Products
Trade sales decreased 9%. The divestiture of the Aerospace Products Group reduced sales 5%. Organic sales decreased 4%. Volume decreased 5% from declines in Automotive and Hydraulic Cylinders partially offset by growth in Aerospace in the first half of the year. Raw material-related selling price increases and currency benefit added 1% to sales.
EBIT increased $140 million, primarily due to the year-over-year changes from the items listed below, as well as pricing actions, operational efficiencyimprovements, and restructuringbenefit, partially offset by lower volume and earnings associated with the divested Aerospace business.
(Income)/expense (Dollar amounts in millions)
Gain on sale of Aerospace Products Group
Gain on sale of real estate
Restructuring, restructuring-related, and impairment charges
Goodwill impairment
Total
Furniture, Flooring & Textile Products
Trade sales decreased 1%. The divestiture of a small Work Furniture operation reduced sales less than 1%. Organic sales were down 1%. Volume was flat year over year from demand softness in Home Furniture and Flooring offset by growth in Textiles and Work Furniture. Raw material-related selling price decreases, net of currency benefit, reduced sales 1%.
EBIT increased $20 million, primarily due to the year-over-year changes from the items listed below, partially offset by pricing adjustments, currency impact, start-up costs associated with a new Home Furniture facility in Vietnam, and the aggregate of other smaller items.
(Income)/expense (Dollar amounts in millions)
Gain on sale of real estate
Net gain from insurance proceeds
Restructuring, restructuring-related, and impairment charges
Goodwill impairment
Total
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RESULTS OF OPERATIONS—2024 vs. 2023
Consolidated Results
The following table shows the changes in sales and earnings during 2024, and identifies the major factors contributing to the changes from prior year.
(Dollar amounts in millions, except per share data)
Amount
Net trade sales:
Year ended December 31, 2023
Approximate volume declines
Approximate raw material-related deflation
Year ended December 31, 2024
Earnings:
(Dollar amounts, net of tax)
Year ended December 31, 2023
2024 goodwill impairment
Non-recurring 2023 long-lived asset impairment
2024 restructuring, restructuring-related, and impairment charges
Offsetting 2023 and 2024 net real estate gains
Offsetting 2023 and 2024 net gain from insurance proceeds from tornado damage
2024 CEO transition costs
Special tax item
Other items, primarily lower volume and unfavorable sales mix, raw material-related pricing adjustments, metal margin compression, and higher expenses (bad debt, medical, etc.)
Year ended December 31, 2024
2023 Earnings (Loss) Per Diluted Shares
2024 Earnings (Loss) Per Diluted Share
Full-year trade sales decreased 7%, to $4.38 billion. Organic sales decreased 7%, with volume declines of 4% and raw material-related price decreases of 3%.
Earnings decreased as a result of the items listed in the above table. The special tax item is associated with a deferred tax asset valuation allowance related to a 2022 acquisition in our Specialized Products segment.
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Interest and Income Taxes
Net interest expense in 2024 was lower by $4 million compared to 2023. Interest rates on borrowings were higher, reflecting the effect of the retirement of our $300 million Senior Notes in the fourth quarter of 2024 paid with commercial paper, but were more than offset by lower outstanding balances due to our deleveraging efforts.
Our worldwide effective income tax rate was approximately 0% in 2024 and 21% in 2023. The following table reflects how our effective income tax rate differs from the statutory federal income tax rate. See Note O on page 114 of the Notes to Consolidated Financial Statements for additional details.
Year Ended December 31
Statutory federal income tax rate
Increases (decreases) in rate resulting from:
State taxes, net of federal benefit
Tax effect of foreign operations
Global intangible low-taxed income
Current and deferred foreign withholding taxes
Goodwill and long-lived asset impairments
Stock-based compensation
Change in valuation allowance
Change in uncertain tax positions, net
Other permanent differences, net
Other, net
Effective tax rate
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Segment Results
In the following section we discuss 2024 sales and EBIT for each of our segments. We provide additional detail about segment results in Note C on page 88 of the Notes to Consolidated Financial Statements. We use EBIT to assess operational performance, and it is useful to investors as it aids in understanding of underlying operational profitability.
(Dollar amounts in millions)
Change in Sales
% Change
Organic
Sales 1
Trade sales
Bedding Products
Specialized Products
Furniture, Flooring & Textile Products
Total trade sales
Change in EBIT
EBIT Margins
EBIT
Bedding Products
Specialized Products
Furniture, Flooring & Textile Products
Intersegment eliminations & other
Total EBIT 2
Depreciation and amortization
Bedding Products
Specialized Products
Furniture, Flooring & Textile Products
Unallocated 3
Total depreciation and amortization
1 This is the change in sales not attributable to acquisitions or divestitures in the last 12 months.
2 Total 2024 EBIT of $(429.9) million less interest expense net of interest income of $79.3 million and income tax of $2.2 million equals 2024 Net earnings (loss) of $(511.4) million. Total 2023 EBIT of $(90.4) million less interest expense net of interest income of $83.0 million and income tax of $(36.6) million equals 2023 Net earnings (loss) of $(136.8) million.
3 Unallocated consists primarily of depreciation and amortization of non-operating assets.
Bedding Products
Trade sales decreased 11%. Organic sales were down 11%, from volume declines of 6%, primarily due to demand softness in U.S. and European bedding markets and the expected exit of a customer in Specialty Foam, partially offset by higher trade rod sales. Raw material-related selling price decreases reduced sales 5%.
EBIT decreased $205 million, primarily due to the year-over-year changes from the items listed below, as well as raw material-related pricing adjustments, unfavorable sales mix in Steel Rod and Specialty Foam, metal margin compression, lower volume, and other expense items such as higher bad det reserves and increased
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inventory write-downs/reserves, partially offset by lower amortization expense due to the 2023 long-lived asset impairment, restructuringbenefit, and operational efficiencyimprovements in Specialty Foam.
(Income)/expense (Dollar amounts in millions)
Gain on sale of real estate
Net gain from insurance proceeds
Goodwill impairment
Restructuring, restructuring-related, and impairment charges
Long-lived asset impairment
Total
Specialized Products
Trade sales decreased 3%. Organic sales decreased 3%. Volume decreased 3% with soft demand in the second half of the year in Automotive and Hydraulic Cylinders partially offset by strong demand in Aerospace. Raw material-related price increases were offset by currency impact.
EBIT decreased $61 million, primarily due to the year-over-year changes from the items listed below, as well as lower volume and less benefit from a reduction to a contingent purchase price liability associated with a prior year acquisition, partially offset by disciplined cost management and operational efficiencyimprovements.
(Income)/expense (Dollar amounts in millions)
Goodwill impairment
Restructuring, restructuring-related, and impairment charges
Total
Furniture, Flooring & Textile Products
Trade sales decreased 6%. Organic sales were down 6%. Volume decreased 3% with continued weak demand in residential end markets and demand softness in Geo Components through the third quarter. Raw material-related selling price decreases reduced sales 3%.
EBIT decreased $70 million, primarily due to the year-over-year changes from the items listed below and lower volume.
(Income)/expense (Dollar amounts in millions)
Net gain from insurance proceeds
Gain on sale of real estate
Goodwill impairment
Restructuring, restructuring-related, and impairment charges
Total
LIQUIDITY AND CAPITALIZATION
Liquidity
Sources of Cash
Cash on Hand
At December 31, 2025, we had cash and cash equivalents of $587 million primarily invested in interest-bearing bank accounts and in bank time deposits with original maturities of three months or less. A substantial majority of these funds are held in the international accounts of our foreign operations.
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If we were to bring back immediately all our foreign cash to the United States in the form of dividends, we would pay foreign withholding taxes of approximately $29 million. Due to capital requirements in various jurisdictions, $101 million of this cash was inaccessible for repatriation at year end. Inaccessible cash balances can fluctuate from quarter to quarter based on the amount of foreign distributable profits available and the variability of our foreign cash balances.
Cash from Operations
The primary source of funds for our short-term cash requirements is our cash generated from operating activities. Earnings and changes in working capital levels are the two factors that generally have the greatest impact on our cash from operations.
Cash from operations - 2023 $497 million, 2024 $306 million, 2025 $338 million
Cash from operations increased $32.5 million in 2025, driven primarily by working capital improvements.
We ended 2025 with working capital at 25.8% and adjusted working capital at 11.6% of annualized sales. 1 The table below explains this non-GAAP calculation. We eliminate cash, current debt maturities, and the current portion of operating lease liabilities from working capital to monitor our operating efficiency and performance related to trade receivables, inventories, and accounts payable. We believe this provides a more useful measurement to investors since cash and current maturities can fluctuate significantly from period to period. As discussed in Cash on Hand on page 51, a substantial majority of these funds are held by international operations and may not be immediately accessible.
(Dollar amounts in millions)
Current assets
Current liabilities
Working capital
Cash and cash equivalents
Current debt maturities and current portion of operating lease liabilities
Adjusted working capital
Annualized sales 1
Working capital as a percent of annualized sales
Adjusted working capital as a percent of annualized sales
1 Annualized sales equal fourth quarter sales ($938.6 million in 2025 and $1,056.4 million in 2024) multiplied by 4. We believe measuring our working capital against this sales metric is more useful, since efficient management of working capital includes adjusting those net asset levels to reflect current business volume.
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Three Primary Components of our Working Capital
Amount (in millions)
Days
Trade Receivables
DSO 1
Inventories
DIO 2
Accounts Payable
DPO 3
1 Days sales outstanding: ((beginning of year trade receivables + end of year trade receivables) ÷ 2) ÷ (net trade sales ÷ number of days in the period)
2 Days inventory on hand: ((beginning of year inventory + end of year inventory) ÷ 2) ÷ (cost of goods sold ÷ number of days in the period)
3 Days payables outstanding: ((beginning of year accounts payable + end of year accounts payable) ÷ 2) ÷ (cost of goods sold ÷ number of days in the period)
We continue to monitor all elements of working capital in order to optimize cash flow.
On August 29, 2025, we divested our Aerospace Products Group, as discussed in Note S to the Consolidated Financial Statements on page 121. Due to the divestiture, as of August 29, 2025, trade receivables decreased $23 million, inventories decreased $68 million, and accounts payable decreased $15 million. As a result, our DSO and DPO decreased by approximately two days and DIO decreased by seven days due to the long lead times typical in the aerospace industry.
Trade Receivables - Our trade receivables decreased by $69 million at December 31, 2025 compared to the prior year, and our DSO has been relatively consistent the last three years. The decrease in accounts receivable was primarily due to the Aerospace Products Group divestiture and demand softness, partially offset by currency impacts.
We recorded bad debt expense of $7 million during 2025 and $6 million during 2024. Weak demand and changing market dynamics have created disruption and financial instability for some of our customers, particularly in the Bedding Products segment. Recently, we have seen slower payment trends among certain customers, and we are actively managing and maintaining close oversight of these receivables. We monitor our receivables closely and make reserve decisions based upon individual customer risk reviews, aging of customer accounts, historical loss experience, and general macroeconomic and industry trends that could impact the expected collectability of all customers or pools of customers with similar risk.
Inventories - Our inventories decreased by $100 million at December 31, 2025 compared to the prior year, and our DIO decreased during 2025 primarily due to the Aerospace Products Group divestiture and inventory reductions to align with demand softness, partially offset by inflation and currency impacts.
We continuously monitor our slower-moving and potentially obsolete inventory through reports on inventory quantities compared to usage within the previous 12 months. We also monitor potential inventory implications for customers experiencing financial challenges which may impact their ability to take delivery of previously ordered inventory. When potential inventory obsolescence is indicated by these controls, we will take charges for write-downs to maintain an adequate level of reserves. Write-down of inventories were $13 million, $36 million, and $9 million during 2025, 2024, and 2023, respectively. Reserves increased in 2024 primarily due to 2024 Restructuring Plan impacts and write-downs of selected products primarily in our Bedding Products segment.
Accounts Payable - Our accounts payable decreased by $31 million at December 31, 2025 compared to the prior year and our DPO has been relatively consistent in the last three years. The 2025 accounts payable decrease was primarily related to the Aerospace Products group divestiture and lower purchasing volumes due to demand softness, partially offset by timing of payments and currency impacts. The 2024 accounts payable decrease was related to lower purchasing volumes due to softening demand and efforts to lower inventory levels, partially offset by timing of payments. We continue to look for ways to
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establish and maintain favorable payment terms through purchasing synergies and also utilize third-party services that offer flexibility to our vendors, which, in turn, helps us manage our DPO as discussed below.
Accounts Receivable and Accounts Payable Programs - We participate in trade receivables sales programs in combination with third-party banking institutions and certain customers. Under each of these programs, we sell our entire interest in the trade receivable for 100% of face value, less a discount. Because control of the sold receivable is transferred to the buyer at the time of sale, accounts receivable balances sold are removed from the Consolidated Balance Sheets, and the related proceeds are reported as cash provided by operating activities in the Consolidated Statements of Cash Flows. Approximately $45 million of trade receivables were sold and removed from our Consolidated Balance Sheets at both December 31, 2025 and 2024. These sales reduced our quarterly DSO by roughly four days at both December 31, 2025 and 2024. There was no operating cash flow impact for December 31, 2025. The impact to operating cash flow was an approximate $15 million decrease in December 31, 2024.
For accounts payable, we occasionally utilize third-party programs that allow our suppliers to be paid earlier at a discount. While we continue to make payments based on our customary terms, a supplier can elect to take payment from a third party earlier with a discount, and in that case, we pay the third party on the original due date of the invoice. Contracts with our suppliers are negotiated independently of supplier participation in the programs, and we cannot increase payment terms pursuant to the programs. As such, there is no direct impact on our DPO, accounts payable, operating cash flows, or liquidity. The accounts payable settled through the third-party programs, which remain on our Consolidated Balance Sheets, were approximately $115 million and $120 million at December 31, 2025 and 2024, respectively.
The above items encompass multiple individual programs that are utilized as tools in our cash flow management, and we offer them as options to facilitate customer and vendor operating cycles. Because many of these programs operate independently, and a cessation of all these programs at the same time is not reasonably likely, we do not expect changes in these programs to have a material impact on our operating cash flows or liquidity.
Mexico Value-Added Taxes (VAT) Recoverable - We are subject to VAT in various jurisdictions. Where we are entitled to a refund of the VAT we have paid, we submit claims to the government authorities and establish receivables for these claims. As of December 31, 2024, we had outstanding Mexico VAT receivables of $35 million, primarily due to delays in processing refunds by the local tax authorities. Refunds received during 2025 reduced this receivable to $2 million at December 31, 2025. To mitigate the impact of future VAT outflows in Mexico, we obtained a temporary tax exemption in 2025 for one of our primary Mexico entities, thereby improving cash flow and reducing the need to submit refund claims.
Commercial Paper Program
Another source of funds for our short-term cash requirements is our $1.0 billion commercial paper program. As of December 31, 2025, we had $709 million available under the program. For more information on our commercial paper program, see Commercial Paper Program on page 57.
Credit Facility
Our credit facility is a multi-currency facility providing us the ability, from time to time, to borrow, repay, and re-borrow up to $1.0 billion until the maturity date, at which time our ability to borrow under the facility will terminate. The credit facility matures in July 2030. Currently, there are no borrowings under the credit facility. For more information on our credit facility, see Credit Facility on page 58, and Note J on page 101 of the Notes to Consolidated Financial Statements.
Capital Markets
Our cost of borrowing and ability to access the capital markets are affected by market conditions and the credit ratings assigned to our debt. While we believe that we have the ability to raise debt in the capital markets which acts as a source of funding of long-term cash requirements, a downgrade of our credit rating could limit our access to the capital markets and result in increased borrowing costs. Currently, we have $1.5 billion of total debt outstanding in equal tranches maturing in 2027, 2029, and 2051. For more information, please see Long-Term Debt on page 58, and Note J on page 101 of the Notes to Consolidated Financial Statements.
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Uses of Cash
We reduced debt during 2025 using a combination of Aerospace divestiture proceeds, cash from operations, and real estate sales. In the near term, we anticipate applying most of our cash flow from operations to reduce net debt, while also pursuing opportunities for share repurchases and small strategic acquisitions as conditions allow. In the longer term, we expect to use cash to grow our business, both organically and through strategic acquisitions, while also returning cash to shareholders through share repurchases and dividends.
Capital Expenditures
Capital expenditures - 2023 $114 million, 2024 $82 million, 2025 $57 million
Total capital expenditures in 2025 were $57 million, lower than previous years, primarily due to the execution of the 2024 Restructuring Plan and the delay of some projects into 2026 due to operational priorities and tariff considerations. We expect capital expenditures of $100 million to $115 million in 2026, primarily driven by normal maintenance and growth, projects delayed from 2025, and the replacement of equipment lost in a storage facility fire within our Bedding Products segment. These expenditures are expected to include investments to support expansion in businesses and product lines where sales are profitably growing, maintenance, efficiencyimprovements, and system enhancements.
For the periods covered, our employee incentive plans emphasized returns on capital, including capital expenditures and working capital. This emphasis focuses our management on asset utilization and helps ensure that we are investing additional capital dollars where attractive return potential exists.
In 2025, we paid quarterly dividends of $.05 per share. In the last two quarters of 2024, we paid a quarterly dividend of $.05 per share compared to $.46 per share in the last two quarters of 2023. The decision to reduce the dividend was made following a thorough evaluation by the Board and our management team. This action frees up capital to accelerate the deleveraging of our balance sheet and solidify our long-held financial strength.
Share Repurchases
We have been authorized by the Board to repurchase up to 10 million shares each calendar year, but we have established no specific repurchase commitment or timetable. The amount of future repurchases is dependent upon the price of the stock, the amount of discretionary cash flow generated by the Company, alternative uses for the cash (including organic growth opportunities and acquisitions) and other factors. We expect share repurchases to offset share issuances, resulting in minimal dilution in 2026.
During the last three years, we repurchased a total of 1 million shares of our stock and issued 4 million shares through employee benefit plans. Our net share repurchases were $6 million, $5 million, and $2 million in 2023, 2024, and 2025, respectively. In 2025, we repurchased .3 million shares (at an average price of $9.80) and issued 1 million shares.
Acquisitions
We seek acquisitions that add capabilities in our businesses. We expect all acquisitions to have a clear strategic rationale, a sustainable competitive advantage, a strong fit with the Company, and be in attractive and growing markets. No businesses were acquired in the last three years.
Short-Term and Long-Term Cash Requirements
In addition to the expected uses of cash discussed above, we have various material short-term (12 months or less) and long-term (more than 12 months) cash requirements as of December 31, 2025 as listed below:
Cash Requirements
Short-Term
Long-Term
(Dollar amounts in millions)
Current and long-term debt, excluding finance leases 1
Operating and finance leases 2
Purchase obligations 3
Interest payments 4
1 The long-term debt presented above could be accelerated if we were not able to make the principal and interest payments when due. See Note J on page 101 in the Notes to Consolidated Financial Statements for more information regarding scheduled maturities of our long-term debt.
2 See Note K on page 103 in the Notes to Consolidated Financial Statements for additional information on leases.
3 Purchase obligations primarily include open short-term (30-120 days) purchase orders that arise in the normal course of operating our facilities.
4 Interest payments assume debt outstanding remains constant with amounts at December 31, 2025 and at rates in effect at the end of the year.
See Note I on page 101 of the Notes to Consolidated Financial Statements for details regarding deferred income taxes, other reserves for tax contingencies, accrued expenses, and other liabilities reflected on our Consolidated Balance Sheets.
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Capitalization
Capitalization Table
This table presents key debt and capitalization statistics at the end of the three most recent years:
(Dollar amounts in millions)
Total debt excluding credit facility/commercial paper
Less: Current maturities of long-term debt and short-term debt
Scheduled maturities of long-term debt
Average interest rates 1
Average maturities in years 1
Credit facility/commercial paper 2
Weighted average interest rate on year-end balance
Average interest rate during the year
Total long-term debt
Deferred income taxes and other liabilities
Total equity
Total capitalization
Unused committed credit: 2
Long-term
Short-term
Total unused committed credit
Cash and cash equivalents
1 These rates include current maturities, but exclude commercial paper to reflect the averages of outstanding debt with scheduled maturities.
2 The unused committed credit amount is based on our revolving credit facility and commercial paper program which, at year-end 2024 and 2025, had a total authorized program amount of $1.2 billion and $1.0 billion, respectively. However, our borrowing capacity is limited by covenants to our credit facility. Reference is made to the discussion under Commercial Paper Program below on page 57 and Credit Facility on page 58 for more details about our borrowing capacity at December 31, 2025.
Commercial Paper Program
Details of our commercial paper program at December 31 are presented in the table below:
(Dollar amounts in millions)
Total authorized program
Commercial paper outstanding (classified as long-term debt)
Letters of credit issued under the credit agreement
Amount limited by restrictive covenants of credit facility 1
Total program available
1 Our borrowing capacity is limited by covenants in our credit facility. Reference is made to the discussion under Credit Facility on page 58 for more details about our borrowing capacity at December 31, 2025.
The average and maximum amounts of commercial paper outstanding during 2025 were $292 million and $518 million, respectively. During the fourth quarter, the average and maximum amounts outstanding were $3 million and $26 million, respectively. At year end, we had no letters of credit outstanding under the credit facility,
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but we had issued $93 million of stand-by letters of credit under other bank agreements to take advantage of better pricing.
Over the long term, and subject to our credit ratings, market conditions, capital needs, and alternative capital market opportunities, we may borrow under the commercial paper program. We view the notes as a source of long-term funds and have classified the borrowings under the commercial paper program as long-term borrowings on our balance sheet. We have the intent to roll over such obligations on a long-term basis and have the ability to refinance these borrowings on a long-term basis as evidenced by our amended revolving credit facility maturing in July 2030 discussed below in Credit Facility .
The Company has multiple credit rating agencies that provide ratings of our short- and long-term debt. In the past, rating downgrades have resulted in, and could continue to result in, higher interest rates. Lower credit ratings could adversely affect our sources of borrowing and our financial arrangements, including access to the capital markets, commercial paper market, our lending agreements, and supply chain financing arrangements. If we are unable to meet our short-term borrowing needs in the commercial paper market, we may rely more heavily on bank debt to fund short-term working capital needs at higher interest costs.
Credit Facility
Our multi-currency credit facility was amended in July 2025 and matures on July 24, 2030. It provides us the ability, from time to time, subject to certain restrictive covenants and customary conditions, to borrow, repay, and re-borrow up to $1.0 billion (previous to the amendment was $1.2 billion). At December 31, 2025, we were in compliance with all of our debt covenants. Capitalized terms used in this section but not defined herein have the meanings set forth in the Credit Agreement.
Our credit facility contains restrictive covenants, which include: (a) a Leverage Ratio requiring us to maintain, as of the last day of each fiscal quarter, (i) Consolidated Funded Indebtedness minus the lesser of: (A) Unrestricted Cash, or (B) $750.0 million to (ii) Consolidated EBITDA for the four consecutive trailing quarters most recently ended on or prior to such date, such ratio not being greater than 3.50 to 1.00; provided however, subject to certain limitations, if we make a Material Acquisition, at our election, the maximum Leverage Ratio shall be 4.00 to 1.00 for the fiscal quarter during which such Material Acquisition is consummated and the next three consecutive fiscal quarters; (b) a limitation of the amount of total secured obligations to 15% of our total consolidated assets; and (c) a limitation on our ability to sell, lease, transfer, or dispose of all or substantially all of our assets and the assets of our subsidiaries, taken as a whole (other than accounts receivable sold in a Permitted Securitization Transaction, products sold in the ordinary course of business and our ability to sell, lease, transfer, or dispose of any of our assets or the assets of one of our subsidiaries to us or one of our subsidiaries, as applicable) at any given point in time.
For more information about long-term debt, please see Note J on page 101 of the Notes to Consolidated Financial Statements.
Our credit facility serves as back-up for our commercial paper program. At December 31, 2025, we had no outstanding commercial paper and no borrowing under the credit facility. As our trailing 12-month Consolidated EBITDA, Unrestricted Cash, and debt levels change, our borrowing capacity increases or decreases. Based on our trailing 12-month Consolidated EBITDA, Unrestricted Cash, leverage ratio covenant of 3.50 to 1.00, and debt levels at December 31, 2025, our borrowing capacity under the credit facility was $709 million. However, this may not be indicative of the actual borrowing capacity moving forward, which may be materially different depending on our Consolidated EBITDA, Unrestricted Cash, and debt levels.
Long-Term Debt
Currently, we have $1.5 billion of total debt outstanding in equal tranches maturing in 2027, 2029, and 2051. We had no commercial paper borrowings at December 31, 2025. We anticipate lower average commercial paper borrowings in 2026 compared to 2025, and as a result, we expect to realize lower net interest expense in 2026. For more details on long-term debt, see Note J on page 101 of the Notes to Consolidated Financial Statements.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. To do so, we must make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and disclosures. If we used different estimates or judgments, our financial statements could change. Some of these changes could be significant. Our estimates are considered by management, at the time they are made, to be reasonable and appropriate. Estimates are adjusted for actual events as they occur.
Critical accounting estimates are those that are: (a) subject to uncertainty and change and (b) of material impact to our financial statements. Listed below are the estimates and judgments which we believe could have the most significant effect on our financial statements.
We provide additional details regarding our significant accounting policies in Note A on page 81 of the Notes to Consolidated Financial Statements.
Description
Judgments and Uncertainty
Changes in Estimate and Effect if Actual Results Differ from Assumptions
Goodwill
Goodwill is assessed for impairment annually as of June 30 and as triggering events occur.
Goodwill is evaluated using a quantitative analysis at the reporting unit level, which is one level below our operating segments.
Judgment is required in the quantitative analysis. We estimate fair value using a combination of:
(a) A discounted cash flow model that contains uncertainties related to the forecast of future results, as many outside economic and competitive factors can influence future performance as discussed in Note A on page 81 of the Notes to Consolidated Financial Statements.
(b) A market approach, using price to earnings ratios for comparable publicly traded companies that operate in the same or similar industry and with characteristics similar to the reporting unit.
We had no goodwill impairments in 2025 and 2023. In 2024, we had total goodwill impairments of $676 million.
All reporting units had fair values in excess of carrying value of less than 100% in 2025 as discussed in Note F on page 97 of the Notes to Consolidated Financial Statements. At December 31, 2025, we had $751 million of goodwill.
Information regarding material assumptions used to determine if a goodwill impairment exists can be found in Note A on page 81 and Note F on page 97 of the Notes to Consolidated Financial Statements.
Our assumptions are based on our current business strategy in light of present industry and economic conditions, as well as future expectations. If we are not able to achieve projected performance levels, future non-cash impairments could be possible. For additional information regarding uncertainties, see discussions in Goodwill and Long-Lived Asset Impairment Testing starting on page 37.
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Description
Judgments and Uncertainty
Changes in Estimate and Effect if Actual Results Differ from Assumptions
Other Long-Lived Assets
Other long-lived assets are tested for recoverability at year end and whenever events or circumstances indicate the carrying value may not be recoverable.
For other long-lived assets we estimate fair value at the lowest level where cash flows can be measured.
Impairments of other long-lived assets usually occur when industry trends reduce our forecasted sales and earnings, major restructuring activities take place, or we decide to discontinue selected products.
Our impairment assessments have uncertainties because they require estimates of future cash flows to determine if undiscounted cash flows are sufficient to recover carrying values of these assets.
For assets where undiscounted cash flows are not expected to recover carrying value, fair value is estimated using discounted cash flow models for intangibles and right-of-use assets or estimated replacement cost for fixed assets.
We had $19 million of non-cash pretax impairment charges in 2025, all of which were associated with the 2024 Restructuring Plan. In 2024, we had non-cash pretax impairment charges of $6 million, with $4 million related to the 2024 Restructuring Plan.
We had a triggering event to review long-lived assets for impairmentlate in the fourth quarter of 2023, which resulted in non-cash pretax impairment charges of $444 million in our Bedding Products segment.
For additional information, see Note F on page 97 of the Notes to Consolidated Financial Statements and Goodwill and Long-Lived Asset Impairment Testing starting on page 37.
At December 31, 2025, net property, plant and equipment was $664 million, net intangible assets (other than goodwill) were $91 million, and operating lease right-of-use assets were $138 million.
Inventory Reserves
We reduce the carrying value of inventories to reflect an estimate of net realizable value for slow-moving (i.e., not selling very quickly) and obsolete inventory.
Generally, a reserve is required when we have more than a 12-month supply of the product.
The calculation also uses an estimate of the ultimate recoverability of items identified as slow-moving, based upon historical experience.
If we had no sales of a given product for 12 months, those items are generally deemed to be obsolete with no value and are written down completely.
Our inventory reserve contains uncertainties because the calculation requires management to make assumptions about the value of products that are obsolete or slow-moving.
Purchases of inventories in excess of quantities ultimately sold and/or changes in customer behavior and requirements can cause inventory to become obsolete or slow-moving. Restructuring activity and decisions to narrow product offerings also impact the estimated net realizable value of inventories.
At December 31, 2025, the reserve for obsolete and slow-moving inventory was $42 million, approximately 7% of inventories. Our reserves at December 31, 2024 and December 31, 2023 were 8% and 6%, respectively.
Write-down of inventories were $13 million, $36 million, and $9 million during 2025, 2024, and 2023, respectively. Reserves increased in 2024 primarily due to 2024 Restructuring Plan impacts and write-downs of selected products primarily in our Bedding Products segment.
There have been no changes to our policies for establishing reserves, and as expected, we are moving closer to our historical obsolescence levels.
For additional information, see discussions of our inventories in the working capital section starting on page 53.
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Description
Judgments and Uncertainty
Changes in Estimate and Effect if Actual Results Differ from Assumptions
Income Taxes
In the ordinary course of business, we must make estimates of the tax treatment of many transactions, even though the ultimate tax outcome may remain uncertain for some time. These estimates become part of the annual income tax expense reported in our financial statements. Subsequent to year end, we finalize our tax analysis and file income tax returns. Tax authorities periodically audit these income tax returns and examine our tax filing positions, including (among other things) the timing and amounts of deductions, and the allocation of income among tax jurisdictions. If necessary, we adjust income tax expense in our financial statements in the periods in which the actual outcome becomes more certain.
Our tax liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures related to our various filing positions.
Our effective tax rate is also impacted by changes in tax laws, the current mix of earnings by taxing jurisdiction, and the results of current tax audits and assessments.
At December 31, 2025 and 2024, we had $153 million and $148 million, respectively, of net deferred tax assets on our balance sheet. The ultimate realization of these deferred tax assets is dependent upon the amount, source, and timing of future taxable income. In cases where we believe it is more likely than not that we may not realize the future potential tax benefits, we establish a valuation allowance against them.
Changes in U.S. and foreign tax laws could impact assumptions related to the taxation and repatriation of certain foreign earnings.
Reviews and audits by various taxing authorities, including China, continue as governments look for ways to raise additional revenue. Based upon past audit experience, we do not expect any material changes to our tax liability as a result of this audit activity; however, we could incur additional tax expense if we have audit adjustments higher than recent historical experience.
We believe that appropriate valuation allowances have been recorded as necessary. However, if earnings expectations or other assumptions change such that additional valuation allowances are required, we could incur additional tax expense. Likewise, if fewer valuation allowances are needed, we could incur reduced tax expense.
CONTINGENCIES
Legal Contingencies
We are exposed to legal contingencies that, if realized, could have a material negative impact on our financial condition, results of operations, and cash flows.
Although we deny liability in all currently threatened or pending legal proceedings, we have recorded an immaterial aggregate contingency accrual in all three years (which does not include accrued expenses related to employment, workers' compensation, vehicle-related personal injury, product and general liability claims, taxation issues, and environmental matters). Based on current known facts, as of December 31, 2025, aggregate reasonably possible (but not probable, and therefore not accrued) losses in excess of the accruals for legal contingencies are estimated to be $26 million. If our assumptions or analyses regarding any of our contingencies are incorrect, or if facts change or future litigation arises, we could realize losses in excess of the recorded accruals (including losses in excess of the $26 million referenced above), which could have a material negative impact on our financial condition, results of operations, and cash flows.
For more information regarding our legal contingencies, see Item 3. Legal Proceedings on page 30 and Note T on page 122 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference.
Chinese Tax Authority Reviews
China has recently intensified its review of tax compliance among foreign enterprises. We underwent reviews in 2023 and 2024 resulting in no material findings, while in 2025 and early 2026, we have seen an increased number of these reviews initiated by Chinese tax authorities. We believe we have valid defenses and
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intend to rigorously contest any assessments through the administrative appeal process in China. While we believe we will be successful, we could incur additional tax expense that could have a material negative effect on our results of operations or financial condition.
Climate Change
Transition Risks
Change in Laws, Policies, and Regulations. Climate change is commonly attributed to increased greenhouse gas (GHG) emissions, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit such emissions. At December 31, 2025, we had 104 manufacturing facilities in 18 countries, primarily located in North America, Europe, and Asia. We also maintain a fleet of semi-trucks that emit GHG. Certain transition risks, or risks related to the process of reducing our carbon footprint, could materially affect our business, capital expenditures, results of operations, financial condition, competitive position, and reputation. One transition risk is the change in laws, regulations, and policies that could impose significant operational and compliance burdens. Also, if our customers incur additional costs to comply with such laws, regulations, and policies, impacting their ability to operate at the same or similar levels, the demand for our products could be adversely affected. Inconsistent climate legislation in jurisdictions where we operate creates economic and regulatory uncertainty and could increase our costs if such laws, regulations, or policies impose significant operational restrictions and compliance requirements on us. Non-compliance with such laws, regulations, and policies could also negatively impact our reputation. To date, however, we have not experienced a material impact from these legislative and regulatory efforts.
Market Transition. We manufacture various automotive components, including lumbar support and massage systems for seating, seat suspension systems, motors, actuators, and cables. For decades, automotive manufacturers have sought lightweight components to increase the fuel efficiency of automobiles. Replacing traditional steel components with lightweight alternative components can directly reduce vehicle weight and fuel consumption. This increased fuel efficiency also indirectly reduces GHG emissions. If we are unable to react to technological changes, develop new and innovative products, or respond to evolving business trends, including continuing to produce comparatively lightweight components, our share in these markets could be negatively impacted.
Driven in part by climate change legislation, the global automotive industry has experienced a rapid acceleration in the transition from internal combustion engine vehicles to electric vehicles (EVs). China has emerged as a global leader in EV adoption, with Chinese EV manufacturers gaining market share at the expense of our multinational automotive OEM customer base. This shift has intensified competitive pressures across traditional automotive supply chains and has begun to impact our market share, particularly in regions where Chinese EV manufacturers have seen success in competing on price. If our multinational automotive OEM customers are unable to compete effectively with the Chinese EV manufacturers, their market share could continue to be further reduced, which could continue to negatively impact the demand for our Automotive products.
Physical Climate Change Risks
Direct Physical Effects. The acute and chronic physical effects of severe weather-related events, natural disasters, and/or significant climate pattern changes could have an increasingly adverse impact our business and customers. As mentioned above, at December 31, 2025, we had 104 manufacturing facilities in 18 countries, primarily in North America, Europe, and Asia. We serve thousands of customers worldwide. In 2025, our customers were located in approximately 100 countries.
Although our diverse geographical manufacturing footprint and our broad geographical customer base mitigates the potential physical risks of any local or regional severe weather-related event having a material effect on our operations and results, the increased frequency and severity of such weather-related events could damage our physical assets, local infrastructure, transportation systems, water delivery systems, and our customers' or suppliers' operations, and disrupt our manufacturing operations (including our steel rod mill and wire drawing mills), all of which could harm our business, results of operations, and financial condition.
Indirect Physical Effects. The physical effects of climate change could continue to adversely impact our supply chain. In the past, we experienced (due, in part, to severe weather-related impacts) supply shortages in chemicals, which restricted foam supply and constrained overall mattress production in the bedding industry.
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This reduced our production levels and increased our cost of chemicals and foam. Severe weather impacts could also reduce the supply of other products in our supply chain, resulting in higher prices for our products and the resources needed to produce them. If we are unable to secure an adequate and timely supply of raw materials and products in our supply chain, or the cost of these raw materials or products materially increases, it could negatively impact our business, results of operations, and financial condition.
In recent years, drought conditions lowered the water levels of the Mississippi River and Panama Canal, reducing traffic through these waterways and impacting some of our shipments. Although these issues did not materially impact our results of operations, additional logistical disruptions could result in additional costs and delays in our ability to deliver products timely to certain customers.
In addition, although the cost has not been material to our business, results of operations, and financial condition, severe weather-related incidents have resulted and may, in the future, result in increased costs of our property insurance.
GHG Reduction Strategy and Compliance Costs
To date, we have not experienced material climate-related compliance costs. However, evaluating opportunities to reduce our emissions, setting GHG emissions reduction goals, and measuring performance in achieving those goals are part of our sustainability and corporate governance strategy. We completed our GHG emissions inventory covering 2019 through 2024. To ensure our information is complete and accurate, we engaged a third-party limited assurance provider for these years. Our emissions inventory includes Scope 1 and Scope 2 carbon dioxide equivalent emissions. We considered the principles and guidance of the GHG Protocol Corporate Accounting and Reporting Standard. At the end of 2024, our total GHG emissions, measured using a market-based approach, were approximately 21% less than our combined Scope 1 and 2 GHG emissions over our baseline year of 2019, which was due in significant part to the decrease in production over the same time period.
Our baseline measurement informed our long-term GHG emissions reduction strategy, including setting GHG reduction goals and other key performance areas. Our GHG emissions reduction strategy will continue to evolve, but we have established GHG emissions reduction goals which can be found in Addendum 1 to our Sustainability Progress Report available at www.leggett.com/sustainability. Our ability to achieve any stated goal is subject to numerous factors and conditions, many of which are outside of our control, including but not limited to, evolving regulatory requirements affecting sustainability standards or disclosures or imposing different requirements, and the pace of changes in available materials and technology. Neither our Sustainability Progress Report, Addendum 1 to such report, nor the Leggett website, constitute part of this Annual Report on Form 10-K.
Our key initiatives for 2026 include undertaking our first Scope 3 emissions inventory and preparing for and complying with new reporting requirements. We have developed preliminary estimates of capital expenditures and operating costs that may be required to implement our GHG emissions reduction strategy. Based on our preliminary analysis, we do not expect that such capital expenditures or operating costs will be material to our financial condition or results of operations.
Cybersecurity Risk
We rely on information systems to obtain, process, analyze, and manage data, as well as to facilitate the manufacture and distribution of inventory to and from our facilities. We receive, process, and ship orders, manage the billing of and collections from our customers, and manage the accounting for and payment to our vendors. We also manage our production processes with certain industrial control systems. Consequently, we are subject to cybersecurity risk.
Although we have purchased broad form cyber insurance coverage and strive to provide a balanced level of cybersecurity protections, cybersecurity risk has increased due to growing sophistication of cybersecurity adversaries, as well as the increased frequency of cybersecurity attacks. As such, information technology failures or cybersecurity breaches could still create system disruptions or unauthorized disclosure or alterations of confidential information and disruptions to the systems of our third-party suppliers and providers. We cannot be certain that the attacker’s capabilities will not compromise our cybersecurity defenses surrounding our information systems or bypass our detection capabilities, including those resulting from ransomware attached to our industrial control systems. If these systems are interrupted or damaged by any incident or fail for any extended period of time, then our results of operations could be adversely affected. We may incur material
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remediation costs and cybersecurity protection costs, lost revenues resulting from unauthorized use of proprietary information, material litigation costs, increases in insurance premiums, reputational damage, damage to our competitiveness, and negative impact on our stock price and long-term shareholder value. We may also be required to devote significant management resources and expend significant additional resources to address problems created by any such interruption, damage, or failure.
For more information regarding cybersecurity risks, refer to Information Technology and Cybersecurity Risk Factors on page 22 and Item 1C. Cybersecurity on page 26.
NEW ACCOUNTING STANDARDS
The FASB has issued accounting guidance effective for current and future periods. See Note A on page 81 of the Notes to Consolidated Financial Statements for a more complete discussion.
