LEGGETT & PLATT INC (LEG)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

HIGHLIGHTS

In April, we entered into the Somnigroup Merger Agreement pursuant to which Somnigroup will acquire Leggett & Platt in an all-stock transaction. The transaction is currently anticipated to close by year-end 2026, subject to the satisfaction of customary closing conditions, including approval by the Company shareholders and receipt of certain governmental and regulatory approvals.

We had trade sales of $918 million for the three months ending March 31, 2026, a decrease of 10% versus the first quarter 2025, including a 5% decrease from divestitures.

Earnings Before Interest and Taxes (EBIT) for the three months ending March 31, 2026 was $45 million, a decrease of $18 million compared to the same period in 2025. First quarter EBIT includes a $10 million gain from the sale of real estate, $5 million of restructuring and restructuring-related costs, and $3.5 million of costs related to the Somnigroup Merger.

Earnings Per Share (EPS) was $.14 for the three months ending March 31, 2026, compared to $.22 in the same period of 2025. First quarter EPS includes a $.05 gain from the sale of real estate, $.03 in restructuring and restructuring-related charges, and $.03 of costs related to the Somnigroup Merger.

Operating cash flow was $(56) million in the first three months of 2026, a decrease of $63 million versus the same period of 2025.

INTRODUCTION

What We Do

We are a diversified manufacturer that conceives, designs, and produces a wide range of engineered components and products found in many homes, offices, and automobiles. We make components that are often hidden within, but integral to, our customers’ products.

We are a leading supplier of bedding components; automotive seat comfort and convenience systems; home and work furniture components; geo components; flooring underlayment; and hydraulic cylinders for material handling and heavy construction industries.

Our Segments

Our operations are comprised of approximately 100 production facilities located in 18 countries around the world. Our reportable segments are the same as our operating segments, which also correspond with our management organizational structure. Our segments are described below.

Bedding Products: This segment supplies a variety of components used by bedding manufacturers in the production and assembly of their finished products, as well as produces private label finished mattresses and adjustable bed bases. This segment is also vertically integrated in the production and supply of specialty foam chemicals, steel rod, and drawn steel wire to our own operations and to external customers. We also supply steel rod and wire to trade customers that operate in a broad range of markets. This segment contributed 40% of our trade sales during the first three months of 2026.

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Specialized Products: From this segment, we supply lumbar support systems, seat suspension systems, motors and actuators, and control cables used by automotive manufacturers. We also produce and distribute engineered hydraulic cylinders used in the material handling and heavy construction industries. This segment contributed 26% of our trade sales in the first three months of 2026. On August 29, 2025, we divested our Aerospace Products Group, as discussed in Note L to the Consolidated Condensed Financial Statements on page 19.

Furniture, Flooring & Textile Products: Operations in this segment supply a wide range of components for residential and work furniture manufacturers, as well as select lines of private label finished furniture. We also produce or distribute carpet cushion, hard surface flooring underlayment, and textile and geo components. This segment contributed 34% of our trade sales in the first three months of 2026.

Somnigroup Agreement and Plan of Merger

On April 13, 2026, we entered into the Somnigroup Merger Agreement pursuant to which Somnigroup will acquire Leggett & Platt in an all-stock transaction. Under the terms of the Somnigroup Merger Agreement, Leggett & Platt shareholders will receive 0.1455 shares of common stock, par value $.01 per share, of Somnigroup in exchange for each share of common stock, par value $.01 per share, of Leggett & Platt they own. As a result of the transaction, Leggett & Platt’s shareholders will own approximately 9% of the combined company on a fully diluted basis. The Somnigroup Merger Agreement has been unanimously approved by each of the Board of Directors of Somnigroup and Leggett & Platt.

The transaction is currently anticipated to close by year-end 2026, subject to the satisfaction of customary closing conditions, including approval by Leggett & Platt’s shareholders and receipt of certain governmental and regulatory approvals. The transaction does not require Somnigroup shareholder approval. For a more detailed description of the Somnigroup Merger Agreement, please see our Form 8-K filed April 13, 2026. Reference is also made to the Somnigroup Merger Agreement which is included as Exhibit 2.1 hereof. As of March 31, 2026, we have incurred $6.9 million of costs associated with this activity, of which $3.5 million was incurred in the first three months of 2026. Based on information currently available, we expect total costs incurred during 2026 to be approximately $20 million.

Following the closing of the Somnigroup Merger, Leggett & Platt is expected to operate as a separate business unit within Somnigroup and to maintain its offices in Carthage, Missouri. Leggett & Platt's Chairman and CEO, Karl G. Glassman, will continue to lead Leggett & Platt following the closing date and will assist with a transition to a new CEO of the Leggett & Platt business unit which is expected to take place within twelve months of the closing date.

There are numerous risks, many of which are beyond our control, that could cause the financial, market, and business impacts of the Somnigroup Merger to materially adversely affect us and our shareholders. For additional information, see Forward-Looking Statements beginning on page 1 and Item 1A Risk Factors beginning on page 44.

Customers

We serve thousands of customers worldwide, sustaining many long-term business relationships. Our largest customer, Somnigroup, represented approximately 7% of our trade sales in 2025. Our top 10 customers accounted for approximately 31% 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. The loss of some of these customers, including Somnigroup, would have a material adverse effect on our financial condition, results of operations, and cash flows.

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.

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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 contributed to expanded metal margins and increased demand for our Steel Rod and Drawn Wire operations; however, we have not observed a corresponding improvement in innerspring demand. In April 2026, the U.S. government implemented changes to the Section 232 tariff framework applicable to certain steel and steel‑containing products. While these changes may affect trade flows and pricing dynamics, it is too early to determine their impact on our results of operations. Section 232 steel tariffs were not impacted by the recent Supreme Court ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act.

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. Additionally, we sell components to U.S. customers and maintain some intercompany supply from our Chinese operations. To help mitigate our tariff exposure, we began production in Vietnam in the third quarter of 2025. Within Work Furniture, our teams continue to pursue potential opportunities with customers who have shown interest in regionally-supplied components and finished furniture. However, industry specific dynamics and the ever-changing global trade landscape are impacting our progress in this area. Finally, our Textiles business continues to mitigate most tariff exposure by shifting to alternative sources in countries with lower tariff rates.

In February 2026, the Supreme Court issued a ruling invalidating tariffs imposed under the International Emergency Economic Powers Act (IEEPA). In April 2026, U.S. Customs and Border Protection (CBP) launched the Consolidated Administration and Processing of Entries (CAPE) system to manage refund claims. The Company paid approximately $23 million in IEEPA tariffs that may be recoverable. We submitted approximately $8 million in refund requests to CBP on April 27, 2026, and expect to submit additional requests for approximately $15 million. It is unclear whether, and to what extent, duties will be refunded. In addition, any potential refunds may be offset by refunds due to customers for payments made in connection with the IEEPA tariffs. Because the recoverability and timing of these tariffs is uncertain, we have not recorded any amounts related to potential tariff recoveries.

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 Product

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PART II

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

HIGHLIGHTS

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 restructuring benefit 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 unfavorable 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 bad debt and medical, partially offset by operational efficiency improvements.

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.

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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PART II

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:

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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 enhance profitability 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 allegedly circumventing 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.

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.

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, restructuring benefit, favorable sales mix in Steel Rod and U.S. Spring, and operational efficiency improvements in Specialty Foam. These increases were partially offset by lower volume.

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 efficiency improvements, and restructuring benefit, partially offset by lower volume and earnings associated with the divested Aerospace business.

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.

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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.

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.

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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.

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, restructuring benefit, and operational efficiency improvements in Specialty Foam.

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 efficiency improvements.

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.

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.

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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