Karl G. Glassman
President and Chief Executive Officer at Leggett & Platt
Good morning, and thank you for joining our call today. Upon returning to the CEO role in late May, I hit the ground running and have spent a significant amount of time with our team focusing on both our near-term initiatives and longer-term outlook. My priorities are centered around transparent communication with internal and external stakeholders, identifying opportunities for quick wins to drive improved profitability and empowering our people to tackle those projects, ensuring there are clear timelines and accountability for activities underway and acting with a sense of urgency across the business. I am also focused on ensuring that we have a strong team to help move the business forward.
And on that note, I'm pleased to share that Cassie has decided to stay with the company and will continue to lead our IR function. Furthermore, I would like to welcome Sam Smith. President of the Furniture, Flooring & Textile Products segment to the call today. Sam is joining us to participate in Q&A and will be a regular participant on these calls going forward.
Sam joined Leggett ten years ago and has helped several operational roles of increasing responsibility within our Home Furniture business. He has already spent a tremendous amount of time collaborating with the management teams of each business within the segment, as well as assisting me with operational efficiency improvements in the Specialized Products segment.
I want to emphasize that the strategic priorities discussed on last quarter's earnings call will remain our near to mid-term priorities. As a reminder, those priorities are strengthening our balance sheet and liquidity, improving margins by optimizing operations and our general and administrative cost structure and positioning the company for profitable growth opportunities.
As you know, last quarter we announced the decision to reduce our dividend. Although it was a difficult decision, management and the Board of Directors unanimously agreed that it was the right course of action. We remain committed to maintaining our long held financial strength and the dividend reduction will help solidify our foundation.
Shareholder returns also remain an important long-term capital allocation priority, while our near-term focus is on paying down debt and continuing to invest in our businesses. In the future, we expect to more frequently utilize share repurchases to return capital to shareholders. We continue to work toward improved profitability through execution of our restructuring plan and other operational improvement initiatives. The restructuring plan is on track and some elements of the plan are progressing ahead of schedule and exceeding expectations. Embedding products, we expect restructuring activities within US Spring to be complete by year-end.
Through the first half, we have shifted the majority of our innerspring volume into our four larger remaining spring production facilities. In early third quarter, we completed the transition of all innerspring production. The team has done a fantastic job working with our customers to ensure that there are no disruptions during this process and we now anticipate minimal sales attrition within US Spring. We are also seeing improved efficiency flow through our remaining innerspring facilities earlier than expected and anticipate that future improvements in demand will drive incremental efficiency gains.
Restructuring activities within Specialty Foam are well underway. We have closed one small operation and two additional facility consolidations are in process and should be complete by year-end.
Internationally, we have substantially completed downsizing our Chinese innerspring operation. We still anticipate that all bedding restructuring actions will be complete by the end of 2025. In the Furniture, Flooring & Textile Products segment, restructuring initiatives are also on track. Our Home Furniture restructuring activity is essentially complete and we expect to complete phase one of our flooring products restructuring by the end of the year.
Our second phase of restructuring activity in flooring products will wrap up in the first half of 2025. As we continue to drive operational improvements across the company, we have identified and initiated a small restructuring opportunity within our Specialized Products segment. Our hydraulic cylinders team is working to increase profitability through manufacturing optimization and operating efficiency improvements.
We previously shared that we are initiating a review of our general and administrative cost structure, and we remain optimistic about the potential returns from this activity. In the second quarter, we completed a thorough analysis of the G&A structure across our business units and corporate shared services. Now our teams are working to identify the greatest opportunities for improvement, design necessary organizational changes and organize projects to further streamline processes and resources.
Looking ahead, we remain committed to long-term investment in our key businesses, including Bedding, Automotive and Geo Components. We are confident that our refocused Bedding strategy, which leverages our innerspring and Specialty Foam innovation to target growth in higher-valued SEM. Semi-finished and finished products is the right path forward.
Our automotive business remains healthy and has further growth potential in both comfort and convenience products such as motors and actuators, and we expect to capture additional growth opportunities in our Geo Components business as we expand our product lines and geographic footprint.
Additionally, we are currently conducting a strategic review of our diverse portfolio, asking ourselves if we are the rightful owner of each business and how each one fits into our long-term vision. As we work through our restructuring plan and operational improvement initiatives, including our G&A analysis and we make progress in our portfolio review.
A sharper view of our future is emerging. We will continue gaining visibility in the coming quarters and will share additional details as work continues. We also anticipate sharing an updated and comprehensive long-term vision, including financial targets mid next year. We fully expect that the future Leggett & Platt will be more focused and more profitable.
To our employees, thank you for your hard work and perseverance, your efforts are positioning our company for long-term success.
Now, turning to demand trends in our key markets. Our second quarter 2024 sales and adjusted earnings were lower than anticipated at the beginning of the quarter. Excluding increased inventory write downs and reserves and higher bad debt expense, we would have outperformed our adjusted earnings expectations. We now expect 2024 full year sales to be lower than originally estimated due to softer industry demand in multiple end-markets and continued raw material deflation. Demand in our residential end-markets remains weak as consumers continue to delay big ticket discretionary purchases.
Additionally, many Bedding and furniture industry participants are financially stressed amid a third year of low demand. Against a backdrop of diminished consumer demand, mattresses imported from twelve countries and dumped into the US market by foreign producers have further harmed domestic manufacturers.
We believe the domestic industry deserves a level playing field and we are pleased with the determinations that both the United States Department of Commerce and the United States International Trade Commission have recently made regarding the current mattress antidumping case. Since May, the DOC has published final dumping rates for all twelve countries ranging from 4.6% to triple digits.
The ITC has finalized orders for eight countries and final orders for the remaining four countries are expected in early September. We estimate US mattress market consumption was down mid-single digits versus 2023 in both the second quarter and first half of this year. While landed mattress import volumes have fallen year-to-date, inventory buildup from late last year is still likely being worked through.
In the second half, we expect industry units will remain below 2023 levels, resulting in full year consumption down mid-single-digits. We still expect our 2024 Bedding Products segment's volume to be down high-single-digits due to company-specific factors, including the loss of a customer in Specialty Foam and restructuring-related sales attrition.
Higher-than-expected trade rod sales for non-Bedding applications are expected to partially offset the impact of planned sales attrition. Excluding steel rod, Bedding product sales directly related to the mattress industry are expected to be down low double digits. The global automotive market is experiencing volatility driven by several factors. While our products are utilized in both internal combustion engine and electric vehicles, geographic differences in the global shift to EVs has resulted in internal combustion engine programs running for longer than planned, leading to delayed program launches and timelines.
In Asia, the transition to electric vehicles has surged forward while Europe is grappling with cost and affordability challenges. Meanwhile, North America remains indecisive. Additionally, the growth of new Chinese market entrants and increases in Chinese exports, particularly to Europe is driving further market disruption. Europe has responded by introducing new tariffs, but is yet to be seen if this will slow the pace of Chinese imports.
Light vehicle production in major markets is expected to be down low-single-digits versus 2023. We expect our automotive business will be in line with global production versus our previous assumption of outperformance. This change is largely driven by unfavorable products mix related to the growth of the Chinese electric vehicles.
Finally, our Geo Components business has experienced sluggish project releases in the civil construction market and retail sales have recently been weaker than originally anticipated. We now expect both civil construction and retail full year sales volume to be down low-single-digits. While low volumes continue to be the most significant headwind to earnings, our initiatives to improve operating efficiency and maintain pricing discipline will drive margin recovery in the near-term. With this foundation, we will be well-positioned to capture profitable growth opportunities as demand recovers.
I'll now turn the call over to Ben to review second quarter financial details, a restructuring update, and our revised outlook for the year.
