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. We anticipate the transaction to close upon satisfaction of customary closing conditions, including approval by the Company shareholders and receipt of certain governmental and regulatory approvals. A special meeting of the Leggett & Platt shareholders has been scheduled for August 20, 2026 to vote on the Somnigroup Merger and related proposals. On June 3, 2026, the required 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), expired.
We had trade sales of $1.0 billion for the three months ending June 30, 2026, a decrease of 6% versus the second quarter 2025, including a 5% decrease from divestitures.
Earnings Before Interest and Taxes (EBIT) was $80 million for the second quarter and $125 million for the six months ending June 30, 2026, a decrease of $10 million and $29 million, respectively, compared to the same periods in 2025. Second quarter EBIT includes a $12 million gain from the sale of real estate, $10 million of restructuring and restructuring-related costs, and $10 million of costs related to the Somnigroup Merger. EBIT for the six months ending June 30, 2026 includes $21 million gain from the sale of real estate, $15 million of restructuring and restructuring-related costs, and $14 million of costs related to the Somnigroup Merger.
Earnings Per Share (EPS) was $.33 for the second quarter and $.47 for the six months ending June 30, 2026, compared to $.38 and $.60 in the same periods of 2025. Second quarter EPS includes a $.06 gain from the sale of real estate, $.05 in restructuring and restructuring-related charges, and $.07 of costs related to the Somnigroup Merger. EPS for the six months ending June 30, 2026 includes an $.11 gain from the sale of real estate, $.08 in restructuring and restructuring-related charges, and $.10 of costs related to the Somnigroup Merger.
Operating cash flow was $(10) million in the first six months of 2026, a decrease of $101 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 39% of our trade sales during the first six months of 2026.
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 six months of 2026. On August 29, 2025, we divested our Aerospace Products Group, as discussed in Note N to the Consolidated Condensed Financial Statements on page 23. 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 35% of our trade sales in the first six 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. Upon completion of the Somnigroup Merger, Leggett & Platt’s shareholders are expected to own approximately 8.6% of the combined company, based on the number of shares of Leggett & Platt common stock and Somnigroup common stock outstanding as of the record date of the special meeting. The Somnigroup Merger Agreement has been unanimously approved by each of the Board of Directors of Somnigroup and Leggett & Platt.
We anticipate the transaction to close upon satisfaction of customary closing conditions, including approval by Leggett & Platt’s shareholders and receipt of certain governmental and regulatory approvals. A special meeting of the Leggett & Platt shareholders has been scheduled for August 20, 2026 to vote on the Somnigroup Merger and related proposals. The transaction does not require Somnigroup shareholder approval. On June 3, 2026, the required 30-day waiting period under the HSR Act expired. 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 and Leggett & Platt's Proxy Statement filed July 9, 2026. As of June 30, 2026, we have incurred $17 million of costs associated with this activity, of which $14 million was incurred in the first six 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, Item 1A Risk Factors beginning on page 50, and Risk Factors in the Leggett & Platt Proxy Statement filed July 9, 2026. 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.
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. To date, these changes have not materially impacted our results of operations. Section 232 steel tariffs were not impacted by the February 2026 Supreme Court ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA), which is described more fully below.
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 reduce the impact of tariffs by shifting to alternative sources in countries with the most attractive total cost.
In February 2026, the Supreme Court issued a ruling invalidating tariffs imposed under 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, and we have submitted refund requests to CBP for substantially all of this balance. We have elected the loss recovery model and will record amounts related to tariff recoveries as the funds are received or receipt is probable. As of June 30, 2026, we had received $4 million in cash and recorded receivables of $15 million for refunds which were received in early July 2026. A portion of refunds received are expected to be returned to our customers, and accordingly, we have recorded a liability for these amounts.
We continue to actively evaluate, and where possible, mitigate, the impact of tariffs and counter-tariffs on our results of operations and financial condition. 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 of 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 outstanding 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 pretax earnings, see Note N to the Consolidated Condensed Financial Statements on page 23. Goodwill and Long-Lived Asset Impairment Testing
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 June 30, 2026, goodwill and other intangible assets represented $828 million, or 23% of our total assets. In addition, net property, plant and equipment, operating lease right-of-use assets, and other noncurrent assets totaled $944 million, or 26% 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.
The annual goodwill impairment testing in the second quarter of 2026 indicated no impairments. As of June 30, 2026, the fair values of all reporting units exceeded their respective carrying amounts by 50% or less. Our Home Furniture reporting unit exceeded carrying value by less than 5%, and our Bedding and Work Furniture reporting units exceeded carrying value by approximately 10%. While no impairment was recorded, it is possible that future changes in circumstances could result in a non-cash impairment charge. Conducting impairment tests involves considerable judgment when establishing assumptions regarding future operating performance, business trends, and market and economic performance, including future sales, operating margins, growth rates, and discount rates. If actual results differ from these assumptions, if general economic conditions worsen, or if our stock price experiences a sustained decline, we could be required to record future impairment charges. Any such non‑cash charges could have a material adverse effect on our results of operations.
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 and the geopolitical conflict in the Middle East will drive inflation, weaken consumer confidence, and pressure consumer demand.
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, add additional uncertainty to OEM demand.
As a result of these uncertainties, we expect demand in 2026 to remain muted.
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. In 2025, steel costs increased largely due to higher demand and tariffs implemented in April 2025 that reduced foreign competition. Steel costs increased during the first quarter of 2026, driven primarily by ongoing trade measures and higher input costs, and remained relatively stable throughout the second quarter of 2026.
As a producer of steel rod, we are impacted by changes in metal margins (the difference in the cost of steel scrap and the market price for steel rod). In 2025, steel rod prices increased while average steel scrap costs remained relatively flat, resulting in metal margin expansion during the year. In the first quarter of 2026, metal margins were relatively stable, continuing to be higher year over year. During the second quarter of 2026, metal margins expanded further, as steel scrap costs decreased slightly while steel rod prices remained relatively flat.
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 relatively stable, but began increasing late in the first quarter of 2026, primarily due to a fire at a U.S. chemical plant in March impacting domestic supply and the impact of the Middle East conflict on global supply and price of petroleum-based products.
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, led to pricing adjustments that impacted our profitability. In order to reduce the impacts of tariffs, our Textiles business has proactively been sourcing the majority of these materials from outside of China. Through the first half of 2026, our Textiles business experienced upward pressure on raw material costs, with inflation accelerating in the second quarter due to the impact of the Middle East conflict on the price of petroleum-based products and uncertainty around shipments through the Strait of Hormuz.
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.
Supply Chain Disruptions
Beginning in February 2026, the conflict in the Middle East has led to disruptions in shipping through the Strait of Hormuz. This resulted in higher transportation costs and increased transit times starting late in the first quarter, as well as increased chemical prices, which impacted our costs in the second quarter. Our teams are mitigating these pressures through product and sourcing actions and by passing through price increases where appropriate.
In addition, increased global fuel and freight costs have resulted in higher transportation costs, increased risk of delays for inbound materials and customer shipments, and reduced flexibility to move freight last-minute without premium cost. To address these items, we are implementing mitigation efforts such as passing through price increases where appropriate, utilizing alternative routing strategies, and enhanced planning practices.
2026 Restructuring Plan
On February 24, 2026, we committed to a 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). During the second quarter of 2026, we expanded the 2026 Restructuring Plan to include the consolidation of one additional manufacturing facility within our Furniture, Flooring & Textile Products segment and cost improvement opportunities identified in each of our three segments. These actions are expected to improve manufacturing efficiencies 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 $25 million for the 2026 Restructuring Plan, including approximately $15 million of cash charges.
We are continuing to evaluate opportunities to proactively improve our cost structure and profitability across our businesses. The execution of any of these opportunities may result in additional restructuring costs, restructuring-related costs, or impairments.
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.
In our Bedding segment, 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.
Antidumping 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.
Antidumping 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 through May 2026. 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. On April 1, 2026, the DOC initiated a sunset review to determine whether to extend the orders for an additional five years. Because the DOC did not receive adequate substantive responses related to this sunset review, on May 20, 2026, it announced that it will conduct an expedited sunset review. On July 6, 2026, the ITC announced it would also conduct an expedited sunset review.
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 filed an appeal challenging the ITC’s critical circumstances determination, which imposed retroactive duties. That appeal was dismissed. 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 mattress component imports from Poland, Mexico, and Malaysia are allegedly circumventing antidumping orders. The Company, along with the other companies involved in this matter, withdrew their circumvention request regarding Poland on June 8, 2026. The requests for Mexico and Malaysia are proceeding.
Antidumping and Countervailing Orders on Steel Wire Rod Imports. On February 10, 2026, the ITC made affirmative determinations in its expedited sunset reviews of the antidumping and countervailing duty orders on imports of steel wire rod from Brazil, Indonesia, Mexico, Moldova, and Trinidad & Tobago. Consequently, the antidumping and countervailing duties on steel wire rod imports from these countries, which range from less than 1% to 369%, will be extended for another five years until approximately March 2031. 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%.
On April 6, 2026, certain domestic producers filed with the DOC a petition seeking countervailing duties on carbon and alloy steel wire rod from the People's Democratic Republic of Algeria (Algeria). The petitioners allege that Algeria maintains a system of economic programs and policies that confer unfair subsidies to Algerian producers. Petitioners also allege that China is providing transnational subsidies to Algerian carbon and alloy steel wire rod producers. The DOC announced on April 28, 2026, that it will initiate a countervailing duty investigation. On July 8, 2026, the DOC published its affirmative preliminary countervailing duty determination and found that Algerian exporters were subsidized at a rate of 73.33%. Consequently, importers of competing Algerian wire rod must post a deposit that is sufficient to cover this additional duty rate and final import duties on Algerian wire rod are suspended.
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.
RESULTS OF OPERATIONS
Discussion of Consolidated Results
Second Quarter:
Trade sales were $1.0 billion in the current quarter, a 6% decrease versus the second quarter of 2025. Organic sales decreased 1%. Volume was down 4%, primarily from continued weak demand across most of our end markets, retailer merchandising changes in Adjustable Bed, and the decision during the fourth quarter of 2025 to walk away from a financially challenged customer in U.S. Spring. Raw material-related selling price increases added 2% to sales and currency benefit increased sales 1%. Divestitures of the Aerospace Products Group and small operations in Bedding and Work Furniture in 2025 reduced sales 5%.
EBIT was $80 million in the current quarter, a decrease of $10 million compared to the second quarter of 2025. The decrease includes higher restructuring charges, lower real estate gains, and costs related to the Somnigroup Merger, partially offset by metal margin expansion, restructuring benefit, and other favorable items, most of which are not expected to repeat in future quarters.
EPS was $.33 in the current quarter, versus $.38 in the second quarter of 2025. The decrease primarily reflects lower EBIT as discussed above. EPS was also impacted by lower net interest expense and income tax expense impacts discussed below.
Six Months:
Trade sales were $1.9 billion in the first six months of 2026, an 8% decrease versus the same period last year. Organic sales decreased 3%. Volume was down 6%, primarily from continued weak demand across most of our end markets, retailer merchandising changes in Adjustable Bed, and the decision during the fourth quarter of 2025 to walk away from a financially challenged customer in U.S. Spring. Raw material-related selling price increases added 2% to sales and currency benefit increased sales 1%. Divestitures of the Aerospace Products Group and small operations in Bedding and Work Furniture in 2025 reduced sales 5%.
EBIT was $125 million in the first six months of 2026, a decrease of $29 million versus the same period of 2025, primarily from lower volume, earnings associated with the divested Aerospace business, costs related to the Somnigroup Merger, restructuring and restructuring-related costs, and margin compression in our Flooring business driven by higher costs combined with pricing pressure resulting from the soft demand environment. These items were partially offset by metal margin expansion, restructuring benefits, and other favorable items, most of which are not expected to repeat in future quarters.
EPS was $.47 for the first six months of 2026, versus $.60 in the same period of 2025. The decrease primarily reflects lower EBIT as discussed above. EPS was also impacted by lower net interest expense and income tax expense impacts discussed below.
Net Interest Expense and Income Taxes
2026 net interest expense was $7 million and $12 million lower than the three and six months ended June 30, 2025 primarily due to lower average net debt levels in 2026 versus 2025.
Our worldwide effective tax rate was 31% for the second quarter of 2026, compared to 27% for the same quarter last year. While the U.S. statutory federal income tax rate was 21% in both years, foreign withholding taxes increased the rate by 4% in 2026 and 5% in 2025. Less significant items added 2% in 2026 and 1% in 2025. In addition, full-year expected nondeductible costs associated with the Somnigroup activity contributed 4% to the 2026 rate.
For the full year, we are anticipating an effective tax rate of approximately 31%, including the impact of discrete tax items that we expect to occur from quarter to quarter. 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 effective tax rate.
Discussion of Segment Results
Second Quarter:
A description of the products included in each segment, along with segment financial data, appears in Note C to the Consolidated Condensed Financial Statements on page 11. A summary of segment results is shown in the following tables. We use EBIT to assess operational performance, and it is useful to investors as it aids in understanding of underlying operational profitability. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Trade Sales (Dollar amounts in millions) | Three Months Ended
June 30, 2026 | | Three Months Ended
June 30, 2025 | | Change in Trade Sales | | % Change in Organic Sales 1 |
| $ | | % | |
| Bedding Products | $ | 386.9 | | | $ | 391.4 | | | $ | (4.5) | | | (1.1 | %) | | (1.1 | %) |
| Specialized Products | 247.0 | | | 304.1 | | | (57.1) | | | (18.8) | | | (2.6) | |
| Furniture, Flooring & Textile Products | 365.8 | | | 362.5 | | | 3.3 | | | .9 | | | 1.4 | |
| | | | | | | | | |
| | | | | | | | | |
| Total trade sales | $ | 999.7 | | | $ | 1,058.0 | | | $ | (58.3) | | | (5.5 | %) | | (.6 | %) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2026 | | Three Months Ended June 30, 2025 | | Change in EBIT | | EBIT Margins |
EBIT (Dollar amounts in millions) | $ | | % | | Three Months Ended June 30, 2026 | | Three Months Ended June 30, 2025 |
| Bedding Products | $ | 42.1 | | | $ | 27.2 | | | $ | 14.9 | | | 54.8 | % | | 10.9 | % | | 6.9 | % |
| Specialized Products | 19.2 | | | 38.7 | | | (19.5) | | | (50.4) | | | 7.8 | | | 12.7 | |
| Furniture, Flooring & Textile Products | 28.9 | | | 24.4 | | | 4.5 | | | 18.4 | | | 7.9 | | | 6.7 | |
| Intersegment eliminations and other | (10.1) | | | .1 | | | (10.2) | | | | | | | |
Total EBIT 2 | $ | 80.1 | | | $ | 90.4 | | | $ | (10.3) | | | (11.4) | % | | 8.0 | % | | 8.5 | % |
| | | | | | | | | | | |
Depreciation and Amortization
(Dollar amounts in millions) | Three Months Ended June 30, 2026 | | Three Months Ended June 30, 2025 |
| Bedding Products | $ | 13.4 | | | $ | 13.3 | |
| Specialized Products | 8.5 | | | 8.2 | |
| Furniture, Flooring & Textile Products | 3.7 | | | 4.6 | |
Unallocated 3 | 2.9 | | | 3.6 | |
| Total depreciation and amortization | $ | 28.5 | | | $ | 29.7 | |
1 This is a change in trade 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 trade sales to organic sales.
2 Total three months ended June 30, 2026 EBIT of $80.1 million less interest expense net of interest income of $11.7 million and income tax of $21.3 million equals three months ended June 30, 2026 Net earnings of $47.1 million. Total three months ended June 30, 2025 EBIT of $90.4 million less interest expense net of interest income of $18.7 million and income tax of $19.2 million equals three months ended June 30, 2025 Net earnings of $52.5 million.
3 Unallocated consists primarily of depreciation and amortization of non-operating assets.
Bedding Products
Trade sales decreased $5 million, or 1%. Organic sales decreased 1%. Volume decreased 7%, primarily due to retailer merchandising changes and lower volume with a certain customer in Adjustable Bed, demand softness in U.S. and European bedding markets, and the decision during the fourth quarter of 2025 to walk away from a financially challenged customer in U.S. Spring. These declines were partially offset by higher trade rod and wire sales. Raw material-related selling price increases and currency benefit added 6% to sales.
EBIT increased $15 million, primarily from metal margin expansion, favorable sales mix, temporary price-cost timing benefit in Specialty Foam, and restructuring benefit. These increases were partially offset by lower volume.
Specialized Products
Trade sales decreased $57 million, or 19%. The divestiture of the Aerospace Products Group reduced sales 16%. Organic sales decreased 3%. Volume decreased 4% from softer market demand. Currency benefit increased sales 1%.
EBIT decreased $20 million, primarily from earnings associated with the divested Aerospace business, currency impact, and lower volume.
Furniture, Flooring & Textile Products
Trade sales and organic sales increased 1%. Volume was flat, with growth in Textiles offset by declines in Home Furniture, Work Furniture, and Flooring. Raw material-related selling price increases added 1% to sales. The 2025 divestiture of a small Work Furniture operation reduced sales less than 1%.
EBIT increased $5 million, benefiting from refunds of IEEPA tariffs that were paid during the 11-month period they were in force. During that period, competitive pressures led to margin compression as cost increases, including tariffs, were not fully recovered through increased selling prices.
Six Months:
A description of the products included in each segment, along with segment financial data, appears in Note C to the Consolidated Condensed Financial Statements on page 11. A summary of segment results is shown in the following tables. We use EBIT to assess operational performance, and it is useful to investors as it aids in understanding of underlying operational profitability. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Trade Sales (Dollar amounts in millions) | Six Months Ended
June 30, 2026 | | Six Months Ended
June 30, 2025 | | Change in Sales | | % Change in Organic Sales 1 |
| $ | | % | |
| Bedding Products | $ | 751.8 | | | $ | 782.1 | | | $ | (30.3) | | | (3.9 | %) | | (3.7 | %) |
| Specialized Products | 491.1 | | | 604.2 | | | (113.1) | | | (18.7) | | | (2.0) | |
| Furniture, Flooring & Textile Products | 675.0 | | | 693.8 | | | (18.8) | | | (2.7) | | | (2.2) | |
| | | | | | | | | |
| | | | | | | | | |
| Total trade sales | $ | 1,917.9 | | | $ | 2,080.1 | | | $ | (162.2) | | | (7.8 | %) | | (2.7 | %) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended
June 30, 2026 | | Six Months Ended
June 30, 2025 | | Change in EBIT | | EBIT Margins |
EBIT (Dollar amounts in millions) | $ | | % | | Six Months Ended
June 30, 2026 | | Six Months Ended
June 30, 2025 |
| Bedding Products | $ | 67.8 | | | $ | 36.8 | | | $ | 31.0 | | | 84.2 | % | | 9.0 | % | | 4.7 | % |
| Specialized Products | 36.9 | | | 67.1 | | | (30.2) | | | (45.0) | | | 7.5 | | | 11.1 | |
| Furniture, Flooring & Textile Products | 33.3 | | | 49.2 | | | (15.9) | | | (32.3) | | | 4.9 | | | 7.1 | |
| Intersegment eliminations and other | (13.4) | | | .2 | | | (13.6) | | | | | | | |
Total EBIT 2 | $ | 124.6 | | | $ | 153.3 | | | $ | (28.7) | | | (18.7) | % | | 6.5 | % | | 7.4 | % |
| | | | | | | | | | | |
Depreciation and Amortization
(Dollar amounts in millions) | Six Months Ended
June 30, 2026 | | Six Months Ended
June 30, 2025 |
| Bedding Products | $ | 25.8 | | | $ | 26.3 | |
| Specialized Products | 16.6 | | | 18.6 | |
| Furniture, Flooring & Textile Products | 8.0 | | | 9.5 | |
Unallocated 3 | 6.3 | | | 6.9 | |
| Total depreciation and amortization | $ | 56.7 | | | $ | 61.3 | |
1This column represents a change in trade 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 trade sales to organic sales.
2Total six months ended June 30, 2026 EBIT of $124.6 million less interest expense net of interest income of $24.3 million and income tax of $33.2 million equals six months ended June 30, 2026 Net earnings of $67.1 million. Total six months ended June 30, 2025 EBIT of $153.3 million less interest expense net of interest income of $36.5 million and income tax of $33.7 million equals six months ended June 30, 2025 Net earnings of $83.1 million.
3Unallocated consists primarily of depreciation and amortization of non-operating assets.
Bedding Products
Trade sales decreased $30 million, or 4%. Organic sales decreased 4%. Volume decreased 10%, primarily due to retailer merchandising changes and lower volume with a certain customer in Adjustable Bed, demand softness in U.S. and European bedding markets, and the decision during the fourth quarter of 2025 to walk away from a financially challenged customer in U.S. Spring. These declines were partially offset by higher trade rod and wire sales. Raw material-related selling price increases and currency benefit added 6% to sales. The 2025 divestiture of a small U.S. machinery business reduced sales less than 1%.
EBIT increased $31 million, primarily from metal margin expansion in trade rod, restructuring benefit, and higher gains on the sale of real estate, partially offset by restructuring and restructuring-related costs and lower volume.
Specialized Products
Trade sales decreased $113 million, or 19%. The 2025 divestiture of the Aerospace Products Group reduced sales 17%.Organic sales decreased 2%. Volume decreased 4% from softer market demand. Raw material-related selling price increases and currency benefit increased sales 2%.
EBIT decreased $30 million, primarily from earnings associated with the divested Aerospace Products Group, currency impacts, and lower volume.
Furniture, Flooring & Textile Products
Trade sales decreased $19 million, or 3%. Organic sales decreased 2%. Volume decreased 3% from declines in Home Furniture and Flooring. Raw material-related selling price increases and currency benefit increased sales 1%. The 2025 divestiture of a small Work Furniture operation reduced sales less than 1%.
EBIT decreased $16 million, primarily from lower volume impacts, margin compression in our Flooring business, and currency impact. These items were partially offset by the benefit from refunds of IEEPA tariffs in the second quarter that were paid during the 11-month period they were in force. During that period, competitive pressures led to margin compression as cost increases, including tariffs, were not fully recovered through increased selling prices.
LIQUIDITY AND CAPITALIZATION
Liquidity
Sources of Cash
Cash on Hand
At June 30, 2026, we had cash and cash equivalents of $546 million primarily invested in interest-bearing bank accounts and in bank time deposits with original maturities of three months or less. Approximately 85% of these funds are held in the international accounts of our foreign operations.
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 based on current withholding tax rates. Due to capital requirements in various jurisdictions, approximately $22 million of this cash was inaccessible for repatriation at June 30, 2026. 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 for the six months ended June 30, 2026 was $(10) million, down $101 million from the same period last year, reflecting an expected larger investment in working capital, as well as lower earnings.
We ended the quarter with working capital at 26.3% and adjusted working capital at 13.9% of annualized trade sales. 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 above, a substantial majority of these funds are held by international operations and may not be immediately accessible. | | | | | | | | | | | |
| (Dollar amounts in millions) | June 30, 2026 | | December 31, 2025 |
| Current assets | $ | 1,831.3 | | | $ | 1,743.6 | |
| Current liabilities | 779.3 | | | 775.0 | |
| Working capital | 1,052.0 | | | 968.6 | |
| Less: Cash and cash equivalents included in current assets | 545.8 | | | 587.4 | |
| Add: Current debt maturities and current portion of operating lease liabilities included in current liabilities | 50.0 | | | 53.0 | |
| Adjusted working capital | $ | 556.2 | | | $ | 434.2 | |
Annualized sales 1 | $ | 3,998.8 | | | $ | 3,754.4 | |
| Working capital as a percent of annualized trade sales | 26.3 | % | | 25.8 | % |
| Adjusted working capital as a percent of annualized trade sales | 13.9 | % | | 11.6 | % |
1 Annualized sales is the respective quarter's sales multiplied by 4 (second quarter 2026 and fourth quarter 2025 sales were $999.7 million and $938.6 million, respectively). 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.
Primary Components of our Working Capital | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amount (in millions) | | | | Days |
| | | | | | | | | Three Months Ended | | Twelve Months Ended | | Three Months Ended |
| June 30, 2026 | | December 31, 2025 | | June 30, 2025 | | | | June 30, 2026 | | December 31, 2025 | | June 30, 2025 |
| Trade Receivables | $ | 518.4 | | | $ | 433.7 | | | $ | 542.2 | | | DSO 1 | | 47 | | 42 | | 47 |
| | | | | | | | | | | | | |
| Inventories | $ | 638.3 | | | $ | 622.6 | | | $ | 648.6 | | | DIO 2 | | 73 | | 74 | | 68 |
| | | | | | | | | | | | | |
| Accounts Payable | $ | 475.5 | | | $ | 466.6 | | | $ | 468.4 | | | DPO 3 | | 54 | | 53 | | 49 |
1Days sales outstanding
a. Quarterly: end of period trade receivables ÷ (quarterly net trade sales ÷ number of days in the period)
b. Annually: ((beginning of year trade receivables + end of period trade receivables) ÷ 2) ÷ (net trade sales ÷ number of days in the period)
2Days inventory on hand
a. Quarterly: end of period inventory ÷ (quarterly cost of goods sold ÷ number of days in the period)
b. Annually: ((beginning of year inventory + end of period inventory) ÷ 2) ÷ (cost of goods sold ÷ number of days in the period)
3Days payables outstanding
a. Quarterly: end of period accounts payable ÷ (quarterly cost of goods sold ÷ number of days in the period)
b. Annually: ((beginning of year accounts payable + end of period 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.
In March 2025, our Aerospace Products Group met the criteria to be classified as held for sale, and was subsequently divested on August 29, 2025, as discussed in Note N to the Consolidated Condensed Financial Statements on page 23. As a result of the held-for-sale classification, trade receivables, inventories, and accounts payable balances for the Aerospace Products Group at June 30, 2025 are excluded in the table above. If net trade sales and cost of goods sold for the three months ended June 30, 2025 are excluded from the days calculations, our DSO for that time period would be approximately two days higher and DIO and DPO would be approximately three days higher. Trade Receivables - Our trade receivables and DSO increased at June 30, 2026 compared to December 31, 2025 primarily due to increased trade sales of steel rod and wire, seasonality in our Textiles business, and timing of collections. Trade receivables decreased compared to June 30, 2025 primarily due to lower sales volumes and timing of collections, partially offset by increased trade sales of steel rod and wire, expanded metal margins, and chemical price increases.
We recorded bad debt expense of $3 million and $2 million during the first six months of 2026 and 2025, respectively. Weak demand and changing market dynamics have created disruption and financial instability, including bankruptcy, for some of our customers, particularly in the Bedding Products segment. 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 increased at June 30, 2026 compared to December 31, 2025 due to increased scrap steel purchases and increased chemical costs, partially offset by seasonal inventory reductions in our Textiles business. Inventories decreased compared to June 30, 2025 due to inventory reductions to align with demand softness, partially offset by increased scrap steel purchases and higher steel and chemical costs.
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. Inventory write-downs for the first six months of 2026 were $7 million versus $8 million in the first six months of 2025.
Accounts Payable - Our accounts payable increased compared to both December 31, 2025 and June 30, 2025 primarily due to increased scrap steel purchases and higher steel and chemical costs, partially offset by demand softness and timing of payments. We continue to look for ways to 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 Condensed Balance Sheets and the related proceeds are reported as cash provided by operating activities in the Consolidated Condensed Statements of Cash Flows. Approximately $45 million of trade receivables were sold and removed from our balance sheets at both June 30, 2026 and December 31, 2025. These sales reduced our quarterly DSO by roughly four days at both June 30, 2026 and December 31, 2025. There was no operating cash flow impact for the six months ended June 30, 2026.
For accounts payable, we 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 Condensed Balance Sheets, were approximately $115 million at both June 30, 2026 and December 31, 2025.
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.
Commercial Paper Program
Another source of funds for our short-term cash requirements is our $1.0 billion commercial paper program. As of June 30, 2026, we had $668 million available under the program. For more information on our commercial paper program, see Commercial Paper Program on page 41. However, pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, the Company may not incur indebtedness for borrowed money under the credit facility or the commercial paper program, in the aggregate, in excess of $150 million unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld. 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 42. However, pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, the Company may not incur indebtedness for borrowed money under the credit facility or the commercial paper program, in the aggregate, in excess of $150 million unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld. 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 senior notes outstanding in equal tranches maturing in 2027, 2029, and 2051. For more information, please see Long-Term Debt on page 42. However, our ability to raise debt in the capital markets is subject to the terms of the Somnigroup Merger Agreement. In particular, unless consented to by Somnigroup, in writing, which may not be unreasonably withheld, during the period after signing but prior to closing, we may not raise debt in the capital markets, unless subject to certain conditions, we refinance our outstanding senior notes within three months of maturity. Uses of Cash
Prior to the Somnigroup Merger Agreement, we expected to use cash to reduce net debt and grow our business, both organically and through strategic acquisitions, while also returning cash to shareholders through share repurchases and dividends. However, the Somnigroup Merger Agreement restricts our uses of cash, during the period after signing but prior to closing, as described below unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld.
Capital Expenditures
We are making investments to support expansion in businesses and product lines where sales are profitably growing, maintenance, efficiency improvements, and system enhancements. We expect capital expenditures of approximately $100 million in 2026, with $45 million spent during the six months ended June 30, 2026. 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. Pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, the Company may not make capital expenditures in excess of $150 million in the aggregate in any calendar year, unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld.
Dividends
In the second quarter of 2026, we declared a quarterly dividend of $.05 per share, consistent with the quarterly dividend declared in the second quarter of 2025. We paid $7 million in each of the second quarters of 2026 and 2025 for the quarterly dividend declared in the first quarter of each year. On July 30, 2026, the Board of Directors declared a third quarter dividend of $.05 per share, consistent with the quarterly dividend declared in the third quarter of 2025. The dividend will be paid on August 24, 2026 to shareholders of record on August 10, 2026. Pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld, the Company may only continue the dividend of up to $.05 per share per calendar quarter and may only increase the dividend by up to $.01 per share per calendar year.
Share Repurchases
During the second quarter of 2026, there were no material share repurchases and we issued .2 million shares through employee benefit plans. For the first six months of 2026, we repurchased .3 million shares of our stock (at an average price of $11.46) and issued 1.4 million shares through employee benefit plans.
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. Pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, the Company may not purchase any of its shares of common stock, except with respect to (a) the satisfaction of exercise price or the tax withholding obligations in connection with the vesting, exercise and/or settlement of Company equity awards or (b) upon the forfeiture of outstanding Company equity awards pursuant to their terms upon the termination of the employment of the holder thereof or otherwise, in each case, unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld.
Acquisitions
We seek acquisitions that add capabilities to 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. We did not acquire any businesses in the first six months of 2026. For the full year 2026, we currently expect acquisition activity to be minimal. Pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, the Company may not make any acquisitions with consideration of $10 million or more individually or with aggregate consideration of $25 million (across all such acquisitions), unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld.
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. There have been no material changes in the second quarter of 2026 to our short-term or long-term cash requirements as previously reported in our cash requirements table on page 56 of our Form 10-K filed February 26, 2026. We expect to have adequate liquidity to meet our short-term and long-term cash requirements.
Capitalization
Capitalization Table
This table presents key debt and capitalization statistics for the periods presented: | | | | | | | | | | | |
| (Dollar amounts in millions) | June 30, 2026 | | December 31, 2025 |
| | | |
| Total debt excluding credit facility/commercial paper | $ | 1,498.3 | | | $ | 1,497.7 | |
Less: Current maturities of long-term debt and short-term debt | 1.5 | | | 1.5 | |
| Scheduled maturities of long-term debt | 1,496.8 | | | 1,496.2 | |
Average interest rates 1 | 3.8 | % | | 3.8 | % |
Average maturities in years 1 | 9.9 | | | 10.4 | |
| | | |
| | | |
Average interest rate during the period (2026-three months; 2025-twelve months) | 4.2 | % | | 5.0 | % |
| Total long-term debt | 1,496.8 | | | 1,496.2 | |
| Deferred income taxes and other liabilities | 244.5 | | | 242.6 | |
Total equity | 1,082.2 | | | 1,022.6 | |
| Total capitalization | $ | 2,823.5 | | | $ | 2,761.4 | |
Unused committed credit: 2 | | | |
| Long-term | $ | 1,000.0 | | | $ | 1,000.0 | |
| Short-term | — | | | — | |
| Total unused committed credit | $ | 1,000.0 | | | $ | 1,000.0 | |
| | | |
| Cash and cash equivalents | $ | 545.8 | | | $ | 587.4 | |
| | | | | |
1 | These rates include current maturities, but exclude commercial paper (when outstanding) 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 2025 and at the end of the second quarter of 2026, had a total authorized program amount of $1.0 billion. However, our borrowing capacity is limited by covenants to our credit facility and restrictions in the Somnigroup Merger Agreement. Reference is made to the discussion under Commercial Paper Program below and Credit Facility on page 42 for more details about our borrowing capacity at June 30, 2026. |
| |
Commercial Paper Program
Amounts outstanding related to our commercial paper program were:
| | | | | | | | | | | |
| (Amounts in millions) | June 30, 2026 | | December 31, 2025 |
| Total authorized program | $ | 1,000.0 | | | $ | 1,000.0 | |
| 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 | 332.4 | | | 291.0 | |
Total program available 2 | $ | 667.6 | | | $ | 709.0 | |
| | | | | |
1 | Our borrowing capacity is limited by covenants to our credit facility. Reference is made to the discussion under Credit Facility on page 42 for more details about our borrowing capacity at June 30, 2026. |
2 | Pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, the Company may not incur indebtedness for borrowed money under the credit facility or the commercial paper program, in the aggregate, in excess of $150 million unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld. |
| |
The average and maximum amounts of commercial paper outstanding during the second quarter of 2026 were $4 million and $58 million, respectively. At quarter end, we had no letters of credit outstanding under the credit facility, but we had issued $90 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. As a result of the announcement of the Somnigroup Merger Agreement, independent rating agencies have placed the Company's debt under a negative credit watch, which could lead to a downgrade and affect our ability to borrow in the commercial paper market. 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 matures in July 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. At June 30, 2026, 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 in our Form 10-K filed February 26, 2026. Our credit facility serves as back-up for our commercial paper program. At June 30, 2026, we had no commercial paper outstanding and had 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 June 30, 2026, our borrowing capacity under the credit facility was $668 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. Pursuant to the terms of the Somnigroup Merger Agreement, during the period after signing but prior to closing, the Company may not incur indebtedness for borrowed money under the credit facility or the commercial paper program, in the aggregate, in excess of $150 million unless consented to by Somnigroup, in writing, and such consent cannot be unreasonably withheld.
Long-Term Debt
Currently, we have $1.5 billion of senior notes outstanding in equal tranches maturing in 2027, 2029, and 2051. Given that we have no commercial paper borrowings at quarter end, we expect to realize lower interest
expense for the remainder of 2026. For more details on long-term debt, please refer to Note J on page 101 of the Notes to Consolidated Financial Statements in our Form 10-K filed February 26, 2026. 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. There were no newly identified critical accounting policies or estimates in the first six months of 2026, and there have been no material changes to our critical accounting policies and estimates as previously disclosed beginning on page 59 in our Form 10-K filed February 26, 2026. CONTINGENCIES
Litigation
Litigation Contingencies
We are exposed to litigation 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 litigation proceedings, we have recorded an immaterial aggregate litigation contingency accrual at June 30, 2026 (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, aggregate reasonably possible (but not probable, and therefore, not accrued) losses in excess of accruals for litigation contingencies are estimated to be $18 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 $18 million referenced above), which could have a material negative impact on our financial condition, results of operations, and cash flows. Also, we could be subject to future litigation of various types that could negatively impact our financial condition, results of operations, and cash flows.
China Withholding Tax Matters
China recently intensified its review of tax compliance among foreign enterprises. We underwent reviews in 2023 and 2024 resulting in no material assessments, while in 2025 and 2026, we have seen an increased number of these reviews initiated by various Chinese tax authorities. In 2026, we received three formal tax assessments for approximately $24 million, in the aggregate, each alleging failures to satisfy beneficial owner requirements for purposes of applying reduced dividend withholding tax rates. Although the outcome is uncertain, we believe we have valid defenses and are currently contesting each of the assessments through the administrative appeal process in China, and have not recorded any income tax expense associated with these matters. While we believe we will be successful, we could incur additional income tax expense that could have a material negative effect on our results of operations or financial condition.
Climate Change
Transition Risks
Change in Laws, Regulations, and Policies. 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 June 30, 2026, we had approximately 100 production facilities in 18
countries, primarily located in North America, Europe, and Asia. We also maintain a fleet of semi-trucks that emit GHG emissions. 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.
These long-standing market transitions have negatively impacted our market share, although not materially. However, 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 on our business and customers. As mentioned above, at June 30, 2026, we had approximately 100 manufacturing facilities in 18 countries, primarily located in North America, Europe, and Asia. We serve thousands of customers worldwide in over 70 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. 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 costs have 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 Emissions Reduction Strategy
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 2025. 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 2025, our total GHG emissions, measured using a market-based approach, were approximately 20% 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 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, nor the Leggett website constitute part of this Quarterly Report on Form 10-Q.
Our key initiatives for 2026 include undertaking a 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 Risks
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, including through the use of artificial intelligence or otherwise. 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 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.
Customer Accounts Receivable and Inventory
Weak demand and changing market dynamics have created disruption and financial instability for some of our customers. We have seen slower payment trends among certain customers, and we are actively managing and maintaining close oversight of these receivables. We also monitor potential inventory implications for customers experiencing financial challenges which may impact their ability to take delivery of previously ordered inventory.
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.
We recorded bad debt expense of $3 million and $2 million during the first six months of 2026 and 2025, respectively. We also recorded inventory write-downs of $7 million and $8 million during the first six months of 2026 and 2025, respectively.
If our customers are unable to pay us and take delivery of previously ordered inventory on a timely basis, or outcomes of bankruptcy proceedings are less favorable than estimated, larger reserves may be required and may result in a negative impact on our earnings, liquidity, cash flow, and financial condition.
NEW ACCOUNTING STANDARDS
The FASB has issued accounting guidance effective for current and future periods. See Note A Interim Presentation to the Consolidated Condensed Financial Statements on page 10 for a more complete discussion.