J. Mitchell Dolloff
President and Chief Executive Officer at Leggett & Platt
Good morning, and thank you for participating in our call.
First, I would like to recognize Susan McCoy on what will be her final earnings call. She's retired at the end of March after 38 years with the company, including 22 years in Investor Relations. Susan has made enormous contributions to Leggett, including developing an outstanding IR function that has benefited both Leggett and the investment community over the past two decades. Susan, thank you so much for your service and congratulations on your retirement. In what has been a long-planned succession, Cassie Branscum stepped into the lead role as Vice President of Investor Relations, effective the beginning of 2024. Cassie joined the IR team in 2018 after serving in various roles across the company since 2005. She has tremendous financial skills and deep Leggett knowledge that will continue to serve us well as she leads the IR function going forward.
2023 was another challenging year, particularly within our residential end markets. Our employees once again persevered to accomplish some notable achievements, including preparing a restructuring plan for our Bedding Products and Furniture, Flooring & Textile Products segment. These efforts will drive improved operating efficiency and profitability while maintaining high quality products and services for our customers, driving strong cash flow with a continued focus on working capital management, and advancing our sustainability data collection efforts to establish baseline metrics and goals that we plan to share in our 2024 report. Thank you for your continued dedication to each other in Leggett & Platt. We have made some difficult but necessary decisions to support the company's long-term success. I sincerely appreciate your ongoing support, and thank you for your efforts each and every day.
Before we move on to our fourth quarter and full year 2023 financial results, I would like to walk through the restructuring plan we announced on January 16 that primarily impacts our Bedding Products segment. We're taking actions to create a more focused, agile organization with a portfolio of products that are most in demand and an operating footprint aligned with the markets we serve. These actions build upon work already underway to better position our bedding business for the future. Optimizing the bedding manufacturing and distribution footprint will drive most of the one-time cost and future EBIT benefits from the plan. The majority of bedding actions will be within our US Spring and specialty foam businesses. We will be winding down operations at our smaller US Spring distribution locations over the next few months and expect to shift innersprings production to four higher output facilities over the course of 2024.
Within Specialty Foam, we will be consolidating several manufacturing operations and driving more product synergies across specialty foam and innersprings, including private label and OEM hybrid mattress production over approximately the next 18 months. Few of the higher output manufacturing facilities, combined with an improved distribution network will allow us to manufacture and distribute our products more efficiently and serve our customers more effectively. While we are reducing capacity in certain product categories to align with consumer preferences that have shifted over-time, we are maintaining sufficient capacity to service our customers with the products they deserve most as market demand returns to more normalized levels in the future. Sales attrition from these initiatives is primarily due to discontinuing production of certain commodity bedding products in certain geographies.
We are also consolidating a small number of production facilities in our home furniture and flooring products businesses within the Furniture, Flooring & Textile products segment. The home furniture consolidation activity is underway and is expected to be completed in the first half of 2024. The flooring products efforts are also underway, but will likely extend into 2025 as multiple product lines are being shipped among locations. These actions are being taken to better align capacity with regional demand and drive operating efficiencies. In connection with the restructuring plan, we stepped away from our total shareholder return goal and financial targets, including revenue growth, EBIT margin and dividend payout ratio. We will issue revised financial targets in the future when our restructuring initiatives are implemented, and we have better visibility of further opportunities that could impact our long-term performance.
Now moving on to fourth quarter and full year 2023 results. Fourth quarter sales were $1.1 billion, down 7% versus the fourth quarter of 2022. Continued weak demand in residential end markets was partially offset by demand strength in our automotive, aerospace and hydraulic cylinders businesses. Fourth quarter EBIT was a loss of $367 million, resulting from a $444 million non-cash intangible asset impairment charge. This impairment was associated with the ECS and Kayfoam acquisitions and primarily related to customer relationships, technology and trademark intangible assets. Prolonged weak demand and changing market dynamics have created disruption and financial instability for some of our customers. As such, recent efforts by certain customers to improve their financial position are expected to reduce our future sales and earnings. This triggered an evaluation of intangible assets and resulted in the impairment charge in the fourth quarter of 2023.
Adjusted EBIT was $66 million in the quarter, down $25 million versus fourth quarter 2022, primarily due to lower metal margins in our Steel Rod business and lower volume in our residential end markets. Fourth quarter earnings per share was a loss of $2.18 due to the items discussed in yesterday's press release. Excluding these items, adjusted fourth quarter EPS was $0.26, a 33% decrease from fourth quarter 2022 EPS of $0.39. For the full year, 2023 sales decreased 8% to $4.7 billion, primarily from weak residential end market demand and raw material related selling price decreases, partially offset by acquisitions and demand strength in industrial end markets. EBIT decreased $575 million, primarily from the $444 million intangible asset impairment. Adjusted EBIT decreased $151 million to $334 million, primarily for metal margin compression and lower volume in our residential end markets. Full year EPS was a loss of $1 and adjusted EPS was $1.39, a 39% decrease from 2022 EPS of $2.27. Cash flow from operations was $497 million, a $56 million increase versus 2022.
Moving on to the segments. The US Bedding market continues to be in a deep recession with mattress consumption at levels comparable to 2016. We believe 2023 US mattress consumption was down high-single digits versus 2022 and expect mattress demand in 2024 to be flat to down slightly versus last year. Imported finished mattresses are putting additional pressure on US production in this low demand environment. Sales in our Bedding Products segment were down 14% versus fourth quarter of 2022 and decreased 17% for the full year. While volume in US Spring was down 12% in 2023, ComfortCore performance was consistent with overall mattress market trends. We expect 2024 volume in US Spring to be down modestly, primarily due to anticipated sales attrition from the restructuring plan and further declines in lower value open coil innersprings and wire grids. These declines are expected to be partially offset by growth in ComfortCore innerspring units, including growth in our new combination pocket and eco based products.
Metal margin declined slightly more than expected in 2023, primarily due to mix. We anticipate further modest declines in 2024. To stay competitive with global steel cost, both contract and non-contract innerspring pricing was adjusted in the back half of '23. Pricing impacts began in the fourth quarter, but will be fully realized in 2024.
Specialty Foam volume in 2024 is expected to be down high-single to low-double digits, primarily as a result of customer actions that led to the impairment charge we discussed earlier. These impacts are anticipated to be realized as we move through the course of the year. We expect 2024 adjusted segment EBIT to be modestly lower year-over-year from lower volume, pricing responses related to global steel cost differentials and modest metal margin depression, partially offset by approximately $45 million of lower amortization from the intangible asset impairment taken in the fourth quarter of 2023. Despite current challenging market dynamics, the actions we are taking aim to position our Bedding business for long-term success as we improve operating efficiencies and continue to drive valuable product solutions for our customers.
Sales in our Specialized Products segment increased 5% versus fourth quarter of 2022 and were up 14% for the full year. In our automotive business, the UAW strike impact on fourth quarter sales was approximately $5 million, and we do not expect any follow-on impacts from the strike in 2024. We continue to see volatility in certain regions due to geopolitical and supply chain impacts. We anticipate growth in 2024 and expect to outperform global automotive production, primarily due to new programs initiated production throughout the year.
We expect continued strong demand in our aerospace business in 2024 with commercial aerospace backlogs at historic highs. 2024 industry production is anticipated to be modestly above pre-pandemic levels. In hydraulic cylinders, US demand continues to be strong with backlogs driving growth through at least the first half of 2024. Domestic growth is expected to be mostly offset by softening demand in Europe. In 2024, we expect segment EBIT to be flat with 2023 as volume growth is anticipated to be offset by less benefit from a reduction to a contingent purchase price liability associated with the prior year acquisition.
Sales in our Furniture, Flooring & Textile Products segment were down 6% versus fourth quarter of 2022, and down 11% for the full year. Demand in home furniture continues to be soft. We expect 2024 to be similar to last year with improvements in low end market demand, offset by continued weakness in mid to high-end market demand. Work Furniture demand remains low in both contract and residential markets. We expect 2024 demand to be in line with 2023. In Flooring Products, we are anticipating another year of lower residential demand due to low existing home sales and renovation activity. Hospitality demand continues to slowly improve, but remains well below pre-pandemic levels. After weaker than expected demand in 2023, we anticipate Geo Components demand to improve through the course of the year, infrastructure and commercial spending in civil construction markets, while retail sales are expected to be flat. In 2024, we expect adjusted segment EBIT to be down modestly year-over-year from lower volume and moderate pricing pressure from deflation.
The largest headwind to earnings continues to be low volume levels in our residential end markets. In the near term, we are focused on improving operating efficiency across our businesses, driving cash flow and executing our restructuring plan. Additionally, we believe the longer term benefits from our refocused bedding strategy will advance key product growth, improve profitability and drive enhanced value for our customers and shareholders.
I'll now turn the call over to Ben.