Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-07845

LEGGETT & PLATT, INCORPORATED

(Exact name of registrant as specified in its charter)



Missouri		44-0324630
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
No. 1 贝投贝投手机appapp官网 Road
Carthage,	Missouri	64836
(Address of principal executive offices)		(Zip code)

Registrant抯 telephone number, including area code: (417) 358-8131

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:



Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $.01 par value	LEG	New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (?32.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of 搇arge accelerated filer,?揳ccelerated filer,? 搒maller reporting company,?and 揺merging growth company?in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant (based on the closing price of our common stock on the New York Stock Exchange) on June 28, 2019 was $4,912,200,000.

There were 132,137,026 shares of the registrant抯 common stock outstanding as of February 5, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

Part of Item 10, and all of Items 11, 12, 13 and 14 of Part III are incorporated by reference from the Company抯 definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2020.

Table of Contents

TABLE OF CONTENTS

LEGGETT & PLATT, INCORPORATED桭ORM 10-K

FOR THE YEAR ENDED December 31, 2019



		Page Number
Forward-Looking Statements		1
PART I
Item 1.	Business	3

Item 1A.	Risk Factors	16

Item 1B.	Unresolved Staff Comments	22

Item 2.	Properties	22

Item 3.	Legal Proceedings	24

Item 4.	Mine Safety Disclosures	24

Supp. Item.	Information About Our Executive Officers	24
PART II
Item 5.	Market for Registrant抯 Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26

Item 6.	Selected Financial Data	27

Item 7.	Management抯 Discussion and Analysis of Financial Condition and Results of Operations	28

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	56

Item 8.	Financial Statements and Supplementary Data	57

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	57

Item 9A.	Controls and Procedures	57

Item 9B.	Other Information	58
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	59

Item 11.	Executive Compensation	62

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62

Item 13.	Certain Relationships and Related Transactions, and Director Independence	62

Item 14.	Principal Accounting Fees and Services	62
PART IV
Item 15.	Exhibits, Financial Statement Schedules	63

	Exhibit Index	126

Item 16.	Form 10-K Summary	131

Signatures		132

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Forward-Looking Statements

This Annual Report on Form 10-K and our other public disclosures, whether written or oral, may contain 揻orward-looking?statements including, but not limited to: profitable growth, operating performance and cash flow; projections of Company revenue, income, earnings, capital expenditures, dividends, capital structure, cash from operations, cash repatriation, restructuring-related costs, tax impacts or other financial items, effective tax rate; maintenance of indebtedness under the commercial paper program; litigation exposure; LIFO reserve; our ability to deleverage; possible plans, goals, objectives, prospects, strategies or trends concerning future operations; statements concerning future economic performance, possible goodwill, intangible or other asset impairments; and the underlying assumptions relating to the forward-looking statements. These statements are identified either by the context in which they appear or by use of words such as 揳nticipate,?揵elieve,? 揺stimate,?揺xpect,?搃ntend,?搈ay,?損lan,?損roject,?搒hould? "guidance" or the like. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by the cautionary statements described in this provision.

Any forward-looking statement reflects only the beliefs of the Company or its management at the time the statement is made. Because all forward-looking statements deal with the future, they are subject to risks, uncertainties and developments which might cause actual events or results to differ materially from those envisioned or reflected in any forward-looking statement. Moreover, we do not have, and do not undertake, any duty to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement was made. For all of these reasons, forward-looking statements should not be relied upon as a prediction of actual future events, objectives, strategies, trends or results.

Readers should review Item 1A Risk Factors in this Form 10-K for a description of important factors that could cause actual events or results to differ materially from forward-looking statements. It is not possible to anticipate and list all risks, uncertainties and developments which may affect the future operations or performance of the Company, or which otherwise may cause actual events or results to differ materially from forward-looking statements. However, the known material risks and uncertainties include the following:


?/SPAN>	inability to fully realize the benefits of the Elite Comfort Solutions, Inc. (ECS) acquisition;


?/SPAN>	inability to 揹eleverage? in the expected timeframe, due to increases or decreases in our capital needs, which may vary depending on a variety of factors, including, without limitation, acquisition or divestiture activity and our working capital needs;


?/SPAN>	inability to comply with the restrictive covenants in our credit agreement that may limit our operational flexibility and our ability to pay our debt when it comes due;


?/SPAN>	factors that could affect the industries or markets in which we participate, such as growth rates, market demand for our products, and opportunities in those industries;


?/SPAN>	adverse changes in consumer confidence, housing turnover, employment levels, interest rates, trends in capital spending and the like;


?/SPAN>	factors that could impact raw materials and other costs, including the availability and pricing of steel scrap and rod, chemicals and other raw materials, the availability of labor, wage rates and energy costs;


?/SPAN>	our ability to pass along raw material cost increases through increased selling prices;


?/SPAN>	our ability to maintain necessary supplies, maintain appropriate labor levels and ship finished products to customers due to the coronavirus named COVID-19;


?/SPAN>	a decline in the long-term outlook for any of our reporting units or assets that could result in impairment;


?/SPAN>	price and product competition from foreign (particularly Asian and European) and domestic competitors;


?/SPAN>	our ability to maintain profit margins if our customers change the quantity and mix of our components in their finished goods;


?/SPAN>	our ability to maintain and grow the profitability of acquired companies;


?/SPAN>	adverse changes in foreign currency, customs, shipping rates, political risk, and U.S. or foreign laws, regulations or legal systems (including tax law changes);


?/SPAN>	our ability to realize deferred tax assets on our balance sheet;


?/SPAN>	tariffs imposed by the U.S. government that result in increased costs of imported raw materials and products that we purchase;


?/SPAN>	our ability to maintain the proper functioning of our internal business processes and information systems through technology failures or otherwise;


?/SPAN>	our ability to avoid modification or interruption of our information systems through cybersecurity breaches;

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?/SPAN>	the loss of business with one or more of our significant customers;


?/SPAN>	our ability to collect debts due to customer bankruptcy, financial difficulties or insolvency;


?/SPAN>	our borrowing costs and access to liquidity resulting from credit rating changes;


?/SPAN>	business disruptions to our steel rod mill;


?/SPAN>	risks related to operating in foreign 贝投贝投手机appapp, including, without limitation, credit risks, increased customs and shipping rates, disruptions related to the availability of electricity and transportation during times of crisis or war, and political instability in certain 贝投贝投手机appapp;


?/SPAN>	uncertainty related to the governing trade provisions between the United States, Mexico and Canada;


?/SPAN>	risks relating to the United Kingdom抯 exit from the European Union (commonly known as 揃rexit?;


?/SPAN>	the amount and timing of share repurchases;


?/SPAN>	the costs of restructuring-related activities, including our ability to realize gain from the sale of real estate;


?/SPAN>	changes or elimination of the London Interbank Offered Rate (揕IBOR? on our borrowing costs;


?/SPAN>	risks associated with climate change and related regulations;


?/SPAN>	risks associated with environmental, social and governance regulations or requirements; and


?/SPAN>	litigation accruals related to various contingencies including antitrust, intellectual property, product liability and warranty, taxation, environmental and workers? compensation expense.

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PART I

Item 1. Business.

Summary

贝投贝投手机appapp官网 & Platt, 贝投贝投手机appapp ("贝投贝投手机appapp官网 & Platt," "Company," "we," "us" or "our") was founded as a partnership in Carthage, Missouri in 1883 and was incorporated in 1901. The Company, a pioneer of the steel coil bedspring, has become an international diversified manufacturer that conceives, designs and produces a wide range of engineered components and products found in many homes and automobiles. As discussed below, our operations are organized into 15 business units, which are divided into 10 groups under our four segments: Residential Products; Industrial Products; Furniture Products; and Specialized Products.

See the discussion on page 8 which provides a revised segment structure of the Company effective as of January 1, 2020.

Overview of Our Segments

Residential Products Segment

BEDDING GROUP

U.S. Spring

International Spring

Specialty Foam ¹

FABRIC & FLOORING PRODUCTS GROUP

Fabric Converting

Geo Components

Flooring Products

MACHINERY GROUP

Machinery

¹ Formed January 2019 with the acquisition of ECS

Our Residential Products segment began in 1883 with the manufacture of steel coil bedsprings. Today, we supply a variety of components and machinery used by bedding manufacturers in the production and assembly of their finished products, as well as produce private-label finished mattresses for bedding brands and retailers. Our range of products offers our customers a single source for many of their component and finished product needs. We also produce or distribute carpet cushion, hard surface flooring underlayment, fabric, and geo components.

Innovative proprietary products and low cost have made us the largest U.S. manufacturer in many of these businesses. We strive to understand what drives consumer purchases in our markets and focus our product development activities on meeting end-consumer needs. We believe we attain a cost advantage from efficient manufacturing methods, internal production of key raw materials, purchasing leverage, and large-scale production. Sourcing components from us allows our customers to focus on designing, merchandising and marketing their products.

In January 2019, we completed the acquisition of ECS for cash consideration of approximately $1.25 billion. ECS, headquartered in Newnan, Georgia, is a leader in proprietary specialized foam technology, primarily for the bedding and

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furniture industries. With 16 facilities across the United States, ECS operates a vertically-integrated model, developing many of the chemicals and additives used in foam production, producing specialty foam, and manufacturing private-label finished products. These innovative specialty foam products include finished mattresses sold through both traditional and online channels, mattress components, mattress toppers and pillows, and furniture foams. ECS has a diversified customer mix and a strong position in the high-growth compressed mattress market segment.

PRODUCTS

Bedding Group



	?/SPAN>		Innersprings (sets of steel coils, bound together, that form the core of a mattress)
	?/SPAN>		Proprietary specialty foam for use primarily in bedding and furniture
	?/SPAN>		Private-label finished mattresses, often sold compressed and boxed
	?/SPAN>		Ready-to-assemble mattress foundations
	?/SPAN>		Wire forms for mattress foundations
	?/SPAN>		Machines that we use to shape wire into various types of innersprings

Fabric & Flooring Products Group



	?/SPAN>		Structural fabrics for mattresses, residential furniture and industrial uses
	?/SPAN>		Carpet cushion and hard surface flooring underlayment (made from bonded scrap foam, fiber, rubber and prime foam)
	?/SPAN>		Geo components (synthetic fabrics and various other products used in ground stabilization, drainage protection, erosion and weed control)

Machinery Group



	?/SPAN>		Quilting machines for mattress covers
	?/SPAN>		Industrial sewing/finishing machines
	?/SPAN>		Conveyor lines
	?/SPAN>		Mattress packaging and glue-drying equipment

CUSTOMERS



	?/SPAN>		Manufacturers of finished bedding (mattresses and foundations)
	?/SPAN>		Bedding brands and mattress retailers
	?/SPAN>		Big box retailers and home improvement centers
	?/SPAN>		Flooring retailers and distributors
	?/SPAN>		Contractors, landscapers, road construction companies, and government agencies using geo components
	?/SPAN>		Manufacturers of upholstered furniture, packaging, filtration and draperies

Industrial Products Segment

WIRE GROUP

Drawn Wire

Steel Rod

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The quality of our products and services, together with low cost, have made 贝投贝投手机appapp官网 & Platt a leading U.S. supplier of high-carbon drawn steel wire. Our Wire Group operates a steel rod mill with an annual output of approximately 500,000 tons, of which a substantial majority is used by our own wire mills. We have two wire mills that supply virtually all the wire consumed by our other domestic businesses. We also supply steel wire to trade customers that operate in a broad range of markets.

PRODUCTS

Wire Group



	?/SPAN>		Drawn wire
	?/SPAN>		Steel rod

CUSTOMERS

We used about 70% of our wire output to manufacture our own products in 2019, with the majority going to our bedding components operations.

The Industrial Products segment also has a diverse group of trade customers that include:



	?/SPAN>		Mechanical spring manufacturers
	?/SPAN>		Wire distributors
	?/SPAN>		Packaging and baling companies

Furniture Products Segment

HOME FURNITURE GROUP

Home Furniture

WORK FURNITURE GROUP

Work Furniture

CONSUMER PRODUCTS GROUP

Consumer Products

In our Furniture Products segment, we design, manufacture, and distribute a wide range of components and finished products for the residential furniture, office and commercial furniture, and specialty bedding markets. We supply components used by home and work furniture manufacturers to provide comfort, motion and style in their finished products, as well as select lines of private-label finished furniture. We are also a major supplier of adjustable beds, with domestic manufacturing, distribution, e-commerce fulfillment and global sourcing capabilities.

PRODUCTS

Home Furniture Group



	?/SPAN>		Steel mechanisms and motion hardware (enabling furniture to recline, tilt, swivel, rock and elevate) for reclining chairs, sofas, sleeper sofas and lift chairs
	?/SPAN>		Springs and seat suspensions for chairs, sofas and loveseats

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Work Furniture Group



	?/SPAN>		Components and private-label finished goods for collaborative soft seating
	?/SPAN>		Bases, columns, back rests, casters and frames for office chairs, and control devices that allow chairs to tilt, swivel and elevate

Consumer Products Group



	?/SPAN>		Adjustable beds
	?/SPAN>		Fashion beds and bed frames (business exited in 2019)

CUSTOMERS



	?/SPAN>		Manufacturers of upholstered furniture
	?/SPAN>		Office furniture manufacturers
	?/SPAN>		Mattress and furniture retailers
	?/SPAN>		Department stores and big box retailers
	?/SPAN>		E-commerce retailers

In 2017 and 2018 our Fashion Bed and Home Furniture businesses underperformed expectations primarily from weaker demand and higher raw material costs. Accordingly, we began to exit low margin business, reduce operating costs and eliminate excess capacity. In 2018, we incurred restructuring-related charges of $16 million ($7 million cash and $9 million non-cash) primarily attributable to the Fashion Bed and Home Furniture businesses. In 2019, we incurred an additional $15 million ($8 million cash and $7 million non-cash) in restructuring-related charges primarily attributable to these businesses. The restructuring activity was substantially complete by the end of 2019, including the closure of the Fashion Bed business.

Specialized Products Segment

AUTOMOTIVE GROUP

Automotive

AEROSPACE PRODUCTS GROUP

Aerospace Products

HYDRAULIC CYLINDERS GROUP

Hydraulic Cylinders

Our Specialized Products segment designs, manufactures and sells products including automotive comfort and convenience components, tubing and fabricated assemblies for the aerospace industry, and hydraulic cylinders for the material handling, construction and transportation industries. In our automotive business, our technical capability and deep customer engagement allows us to compete on critical functionality, such as comfort, size, weight and noise. We believe our reliable product development and launch capability, coupled with our global footprint, makes us a trusted partner for our Tier 1 and OEM customers.

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PART I

PRODUCTS

Automotive Group



	?/SPAN>		Mechanical and pneumatic lumbar support and massage systems for automotive seating
	?/SPAN>		Seat suspension systems
	?/SPAN>		Motors and actuators, used in a wide variety of vehicle power features
	?/SPAN>		Cables

Aerospace Products Group



	?/SPAN>		Titanium, nickel and stainless-steel tubing, formed tube and tube assemblies, primarily used in fluid conveyance systems

Hydraulic Cylinders Group



	?/SPAN>		Engineered hydraulic cylinders

CUSTOMERS



	?/SPAN>		Automobile OEMs and Tier 1 suppliers
	?/SPAN>		Aerospace OEMs and suppliers
	?/SPAN>		Mobile equipment OEMs, primarily serving material handling and construction markets

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PART I

Revised Segment Structure

Our reportable segments are the same as our operating segments, which also correspond with our management organizational structure. To reflect how we manage our newly aligned businesses and in conjunction with the change in executive officer leadership, our management organizational structure and all related internal reporting changed effective January 1, 2020. As a result, our segment reporting will change to reflect the new structure beginning with our 2020 first quarter 10-Q. The modified structure will consist of three segments, seven business groups, and 15 business units organized as follows:



Bedding Products ¹	Specialized Products	Furniture, Flooring & Textile Products ²
BEDDING GROUP	AUTOMOTIVE GROUP	HOME FURNITURE GROUP
Steel Rod	Automotive	Home Furniture
Drawn Wire
U.S. Spring	AEROSPACE PRODUCTS GROUP	WORK FURNITURE GROUP
Specialty Foam	Aerospace Products	Work Furniture
Adjustable Bed
International Spring	HYDRAULIC CYLINDERS	FLOORING & TEXTILE
Machinery	GROUP	PRODUCTS GROUP
	Hydraulic Cylinders	Flooring Products
		Fabric Converting
		Geo Components

¹ The new segment consists of the Residential Products and Industrial Products segments, plus the current Consumer Products Group (which is renamed the Adjustable Bed business unit), minus the Fabric & Flooring Products Group (which is renamed the Flooring & Textile Products Group)

²The new segment consists of the Furniture Products segment, plus the Fabric & Flooring Products Group (which is renamed the Flooring & Textile Products Group) minus the Consumer Products Group (which is renamed the Adjustable Bed business unit).

Strategic Direction

Primary Financial Metric

Total Shareholder Return (TSR), relative to peer companies, is a primary financial measure that we use to assess long-term performance. TSR = (Change in Stock Price + Dividends)/Beginning Stock Price. Our goal is to achieve TSR in the top third of the S&P 500 companies over rolling three-year periods through an approach that employs four TSR drivers: revenue growth, margin expansion, dividends, and share repurchases.

Our incentive programs reward return and cash generation, and profitable growth. Senior executives participate in a TSR-based incentive program (based on our performance compared to a group of approximately 300 peers).

For information about our TSR targets, see the discussion under "Total Shareholder Return" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations on page 29.

Disciplined Growth

The expected long-term contribution to TSR from revenue growth is 6-9%. Over the last three years, we generated combined unit volume and acquisition growth of 7% per year on average. We also benefited slightly from commodity inflation, resulting in total revenue growth of 8% per year on average.

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We will continue to make investments to support expansion in current businesses and product lines where sales are growing profitably. We also envision periodic acquisitions that add capabilities in these businesses or provide opportunities to enter more diverse, faster-growing, and higher margin markets. 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.

Returning Cash to Shareholders

During the past three years, we generated $1.55 billion of operating cash, and we returned much of this cash to shareholders in the form of dividends ($584 million) and share repurchases ($286 million). Our top priorities for use of cash are organic growth (capital expenditures), dividends, and strategic acquisitions. Historically, after funding those priorities, we generally repurchased stock with remaining available cash. Currently, because of the debt level increases in connection with the ECS acquisition, we expect to focus instead on deleveraging by temporarily limiting share repurchases, controlling the pace of acquisition spending, and using operating cash flow to repay debt.

For information about dividends and share repurchases, see the discussion under "Pay Dividends" and "Repurchase Stock" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on page 43.

Acquisitions

2019

In January 2019, we completed the acquisition of ECS for cash consideration of approximately $1.25 billion. ECS is a leader in proprietary specialized foam technology, primarily for the bedding and furniture industries. ECS operates a vertically-integrated model, developing many of the chemicals and additives used in foam production, producing specialty foam, and manufacturing private-label finished products. These innovative specialty foam products include finished mattresses sold through both traditional and online channels, mattress components, mattress toppers and pillows, and furniture foams. ECS operates as a new business unit titled Specialty Foam within the Residential Products segment.

In December 2019, we acquired a manufacturer and distributor of a wide range of geosynthetic fabrics, grids and erosion control products for cash consideration of approximately $21 million. The acquisition is reported in our Geo Components business unit within the Residential Products segment.

2018

In January 2018, we acquired Precision Hydraulic Cylinders (PHC), a leading global manufacturer of

engineered hydraulic cylinders primarily for the materials handling market. The total consideration paid was $87 million. PHC serves a market of mainly large OEM customers utilizing highly engineered components with long product life-cycles that represent a small part of the end product抯 cost. PHC represents a new growth platform and formed a new business group titled Hydraulic Cylinders within the Specialized Products segment.

We also acquired two small Geo Components businesses for total consideration of $22 million. They manufacture and distribute silt fencing and home and garden products.

2017

We acquired three businesses and the remaining interest in a joint venture for total consideration (including cash and stock) of $56 million. The first was a Canadian geosynthetic products distributor and installer for civil engineering and construction applications. The second was a U.S.-based surface-critical bent tube manufacturer supporting our private-label seating strategy in Work Furniture. We also acquired a U.S. manufacturer of rebond carpet cushion. Finally, we acquired the remaining 20% ownership in an Asian joint venture in our Work Furniture business.

For more information regarding our acquisitions, please refer to Note S on page 117 of the Notes to Consolidated Financial Statements.

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Divestitures and Discontinued Operations

There were no divestitures in 2019 or 2018. In 2017, we divested our final Commercial Vehicle Products (CVP) business for total consideration of $9 million, and it did not meet the discontinued operations criteria. This business unit was engaged in the manufacture of van interiors, including the racks, shelving and cabinets installed in service vans. Also, in 2017, we completed the sale of real estate formerly associated with this operation, realizing a pretax gain of $23 million.

For further information about divestitures and discontinued operations, see Note C on page 80 of the Notes to Consolidated Financial Statements.

Foreign Operations

The percentages of our trade sales related to products manufactured outside the United States for the previous three years are shown below. Sales by ECS (acquired in January 2019) are not included in 2017 and 2018 in the table below. Substantially all ECS sales are in the United States.

2017 - 37% ; 2018 - 37% ; 2019 - 34%

Our international operations are principally located in Europe, China, Canada and Mexico. Our products in these foreign locations primarily consist of:

Europe



?/SPAN>	Innersprings for mattresses
?/SPAN>	Lumbar and seat suspension systems for automotive seating and actuators for automotive applications
?/SPAN>	Seamless and welded tubing and fabricated assemblies for aerospace applications
?/SPAN>	Select lines of private-label finished furniture
?/SPAN>	Machinery and equipment designed to manufacture innersprings for mattresses

China



?/SPAN>	Lumbar and seat suspension systems for automotive seating
?/SPAN>	Cables, motors, and actuators for automotive applications
?/SPAN>	Recliner mechanisms and bases for upholstered furniture
?/SPAN>	Work furniture components, including chair bases and casters
?/SPAN>	Innersprings for mattresses

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Canada



?/SPAN>	Lumbar supports for automotive seats
?/SPAN>	Fabricated wire for the furniture and automotive industries
?/SPAN>	Work furniture chair controls and bases

Mexico



?/SPAN>	Lumbar and seat suspension systems for automotive seating
?/SPAN>	Adjustable beds
?/SPAN>	Innersprings and fabricated wire for the bedding industry
?/SPAN>	Select lines of private-label finished furniture

Geographic Areas of Operation

As of December 31, 2019, we had 140 manufacturing facilities; 87 located in the U.S. and 53 located in 17 foreign 贝投贝投手机appapp, as shown below. We also had various sales, warehouse and administrative facilities. However, our manufacturing plants are our most important properties.



	Residential Products	Industrial Products	Furniture Products	Specialized Products
North America
Canada	n		n	n
Mexico	n	n	n	n
United States	n	n	n	n
Europe
Austria				n
Belgium				n
Croatia	n
Denmark	n
France				n
Hungary				n
Italy	n
Poland			n
Switzerland	n
United Kingdom	n			n
South America
Brazil	n
Asia
China	n		n	n
India				n
South Korea				n
Africa
South Africa	n

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Sales by Product Line

The following table shows our approximate percentage of trade sales by product line for the last three years:



Product Line	2019		2018		2017
Bedding Group ¹	32	%	21	%	21	%
Automotive Group	17		19		20
Fabric & Flooring Products Group	16		17		18
Consumer Products Group	9		11		10
Home Furniture Group	8		9		10
Wire Group	6		9		7
Work Furniture Group	6		7		7
Aerospace Products Group	3		4		4
Hydraulic Cylinders Group ²	2		2		?/SPAN>
Machinery Group	1		1		2
Commercial Vehicle Products Group ³	?/SPAN>		?/SPAN>		1

¹The Company acquired ECS, a leader in proprietary specialized foam technology, primarily for the bedding and furniture industries, in January 2019.

² Formed in January 2018 with the acquisition of a manufacturer of hydraulic cylinders.

³The remaining Commercial Vehicle Products operation was sold in 2017.

Distribution of Products

In each of our segments, we sell and distribute our products primarily through our own personnel. However, many of our businesses have relationships and agreements with outside sales representatives and distributors. We do not believe any of these agreements or relationships would, if terminated, have a material adverse effect on the consolidated financial condition, operating cash flows or results of operations of the Company.

Raw Materials

The products we manufacture require a variety of raw materials. We believe that worldwide supply sources are readily available for all the raw materials we use. Among the most important are:



?/SPAN>	Various types of steel, including scrap, rod, wire, sheet and stainless
?/SPAN>	Chemicals used in foam production
?/SPAN>	Foam scrap
?/SPAN>	Woven and non-woven fabrics
?/SPAN>	Titanium and nickel-based alloys and other high strength metals
?/SPAN>	Electronic systems

We supply our own raw materials for many of the products we make. For example, we produce steel rod that we make into steel wire, which we then use to manufacture innersprings and foundations for mattresses.

We supply a substantial majority of our domestic steel rod requirements through our own rod mill. Our wire drawing mills supply nearly all of our U.S. requirements for steel wire.

Customer Concentration

We serve thousands of customers worldwide, sustaining many long-term business relationships. In 2019, our largest customer accounted for approximately 5% of our consolidated revenues. Our top 10 customers accounted for

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approximately 34% of these consolidated revenues. The loss of one or more of these customers could have a material adverse effect on the Company as a whole, or on the respective segment in which the customer抯 sales are reported, including our Residential Products, Specialized Products and Furniture Products segments.

Patents and Trademarks

The chart below shows the number of patents issued, patents in process, trademarks registered and trademarks in process held by our operations as of December 31, 2019. No single patent or group of patents, or trademark or group of trademarks, is material to our operations as a whole. Substantially all of our patents relate to products manufactured by the Specialized Products, Furniture Products, and Residential Products segments, while over half of our trademarks relate to products manufactured by the Residential Products segment.

1,534 patents issued, 600 patents in process, 1,036 trademarks registered, 114 trademarks in process

The above patents and trademarks include intellectual property acquired with ECS in January 2019 related to the protection of technology around various foam applications. These include specialty polyols and additives that enhance foam performance by reducing heat retention, improving durability and diminishing odor.

Some of our most significant trademarks include:



?/SPAN>	ComfortCore^?/SUP>, Mira-Coil^?/SUP>, VertiCoil^?/SUP>, Quantum^?/SUP>,Nanocoil^?/SUP>,Softech^?/SUP>, Lura-Flex^?/SUP>,Superlastic^?/SUP> and Active Support Technology^?/SUP> (mattress innersprings)
?/SPAN>	Energex^?Coolflow^?(specialty foam products)
?/SPAN>	Semi-Flex^?/SUP> (box spring components and foundations)
?/SPAN>	Spuhl^?/SUP>and Fides^?/SUP>(mattress innerspring manufacturing machines)
?/SPAN>	Wall Hugger^?/SUP> (recliner chair mechanisms)
?/SPAN>	No-Sag^?/SUP> (wire forms used in seating)
?/SPAN>	LPSense^?/SUP> (capacitive sensing)
?/SPAN>	Hanes^?/SUP> (fabric materials)
?/SPAN>	Schukra^? (automotive seating products)
?/SPAN>	Gribetz^?/SUP>and Porter^?/SUP> (quilting and sewing machines)

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Product Development

One of our strongest performing product categories across the Company is ComfortCore^?/SUP>, our fabric-encased innerspring coils used in hybrid and other mattresses. Our ComfortCore^?/SUP> volume continues to grow, and represented over 55% of our U.S. innerspring units in 2019. A growing number of our ComfortCore^?/SUP> innersprings contain a feature we call Quantum^?/SUP> Edge. These are narrow-diameter, fabric-encased coils that form a perimeter around an innerspring set, replacing a rigid foam perimeter in a finished mattress. In 2019, over 45% of our ComfortCore^?/SUP> innersprings in the U.S. had the Quantum^?/SUP> Edge feature, and Quantum^?/SUP> Edge continues to grow.

With the January 2019 acquisition of ECS, we gained important proprietary technologies in the production of specialty foams, primarily for the bedding and furniture industries. ECS formulates many of the chemicals and additives used in foam production. These branded, specialty polyols and additives enhance foam performance by reducing heat retention, improving durability and diminishing odor. These innovations enable us to create quality mattresses that can be compressed, and we have a significant amount of intellectual property around these specialty chemical formulations.

Many of our other businesses are engaged in product development activities to protect our market position and support ongoing growth.

Employees

At December 31, 2019, we had approximately 22,000 employees, of which 15,700 were engaged in production. Approximately 12,000 were international employees (5,200 in China). Also, 16% of our employees are represented by labor unions that collectively bargain for work conditions, wages or other issues. We did not experience any material work stoppage related to contract negotiations with labor unions during 2019. Management is not aware of any circumstances likely to result in a material work stoppage related to contract negotiations with labor unions during 2020.

7,100 Residential, 7,900 Specialized, 4,800 Furniture, 1,100 Industrial, 900 Corporate/Other

At December 31, 2018, we also had approximately 22,000 employees.

Competition

Many companies offer products that compete with those we manufacture and sell. The number of competing companies varies by product line, but many of the markets for our products are highly competitive. We tend to attract and retain customers through innovation, product quality, competitive pricing and customer service. Many of our competitors

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try to win business primarily on price but, depending upon the particular product, we experience competition based on quality and performance as well. In general, our competitors tend to be smaller, private companies.

We believe we are the largest U.S.-based manufacturer, in terms of revenue, of the following:



?/SPAN>	Bedding components
?/SPAN>	Automotive seat support and lumbar systems
?/SPAN>	Specialty bedding foams and private-label finished mattresses
?/SPAN>	Components for home furniture and work furniture
?/SPAN>	Flooring underlayment
?/SPAN>	Adjustable beds
?/SPAN>	Bedding industry machinery

We continue to face competitive pressure as some of our customers source a portion of their components and finished products from low cost 贝投贝投手机appapp. In addition to lower labor rates, competitors benefit (at times) from lower raw material costs. They may also benefit from currency factors and more lenient regulatory climates. We typically remain price competitive, even versus many foreign manufacturers, as a result of our efficient operations, automation, vertical integration in steel and wire, logistics and distribution efficiencies, and large scale purchasing of raw materials and commodities.

For information about antidumping duty orders regarding innerspring, steel wire rod and mattress imports, please see "Competition" in Item 7, Management抯 Discussion and Analysis of Financial Condition and Results of Operations on page 30.

Seasonality

As a diversified manufacturer, we generally have not experienced significant seasonality. However, unusual economic factors in any given year such as inflation and deflation, along with acquisitions and divestitures, can create sales variability and obscure the underlying seasonality of our businesses. Historically, our operating cash flows are stronger in the fourth quarter primarily related to the timing of cash collections from customers and payments to vendors.

Backlog

Our customer relationships and our manufacturing and inventory practices do not create a material amount of backlog orders for any of our segments. Production and inventory levels are geared primarily to the level of incoming orders and projected demand based on customer relationships.

Working Capital Items

We are not required to carry significant amounts of inventory to meet rapid 贝投贝投手机appappy requirements of customers or to assure ourselves a continuous allotment of goods from suppliers. In addition, we have not provided rights to return merchandise or extended payment terms to customers where those activities could have a material impact on our business. For additional information regarding working capital items, please see the discussion of "Cash from Operations" in Item 7, Management抯 Discussion and Analysis of Financial Condition and Results of Operations on page 40.

Government Contracts

The Company does not have a material amount of sales derived from government contracts subject to renegotiation of profits or termination at the election of any government.

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Environmental Regulation

Our operations are subject to federal, state, and local laws and regulations related to the protection of the environment. We have policies intended to ensure that our operations are conducted in compliance with applicable laws and regulations. While we cannot predict policy changes by various regulatory agencies or unexpected operational or other developments, management expects that compliance with these laws and regulations will not have a material adverse effect on our competitive position, capital expenditures, financial condition, liquidity or results of operations.

Internet Access to Information

We routinely post information for investors under the Investor Relations section of our website (www.hbfenshaolu.com). Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are made available, free of charge, on our website as soon as reasonably practicable after electronically filed with, or furnished to, the SEC. In addition to these reports, the Company抯 Financial Code of Ethics, Code of Business Conduct and Ethics, and Corporate Governance Guidelines, as well as charters for the Audit, Compensation, and Nominating & Corporate Governance Committees of our Board of Directors, can be found on our website under the Corporate Governance section. Information contained on our website does not constitute part of this Annual Report on Form 10-K.

Industry and Market Data

Unless indicated otherwise, the information concerning our industries contained in this Annual Report is based on our general knowledge of and expectations concerning the industries. Our market share is based on estimates using our internal data, data from various industry analyses, internal research, and adjustments and assumptions that we believe to be reasonable. We have not independently verified data from industry analyses and cannot guarantee their accuracy or completeness.

Item 1A. Risk Factors.

Investing in our securities involves risk. Set forth below and elsewhere in this report are risk factors that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. We may amend or supplement these risk factors from time to time by other reports we file with the SEC.

Inability to fully realize the benefit of the ECS acquisition could negatively impact our ability to achieve our anticipated cash flows, results of operations, earnings per share, and stock price.

We completed the acquisition of ECS for a cash purchase price of approximately $1.25 billion in January 2019. Our combined financial performance may not meet expectations due to a variety of factors, some of which may be outside of our control. We may fail to realize the anticipated benefits of the transaction. Moreover, we may experience difficulties and delays in achieving revenue synergies associated with the transaction, or we may not achieve these synergies at all. Our inability to successfully and fully realize the benefits of the ECS acquisition could negatively impact our cash flows, results of operations, earnings per share, and stock price.

Our credit agreement contains covenants that may limit our operational flexibility. Furthermore, if we default on our obligations under the credit agreement, our operations may be interrupted and our business, results of operations and financial condition could be adversely affected.

We entered into the Third Amended and Restated Credit Agreement among us, JPMorgan Chase Bank, N.A., as administrative agent (揓PMorgan? and twelve other lenders in our bank group (the 揅redit Agreement? in 2018. The Credit Agreement is a five-year multi-currency credit facility providing us the ability, from time to time subject to certain customary conditions, to borrow, repay and re-borrow up to $1.2 billion. The Credit Agreement also provides for a one-time draw of up to $500 million under a five-year term loan facility, which we fully borrowed in January 2019 to

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consummate the ECS acquisition. The Credit Agreement acts as support for the marketability of our commercial paper program.

The Credit Agreement contains certain covenants, including a covenant that requires us to maintain, as of the last day of each quarter beginning March 31, 2019, a leverage ratio of consolidated funded indebtedness to consolidated EBITDA (each as defined in the Credit Agreement) for the trailing four fiscal quarters of not greater than 4.25 to 1.00, with a single step-down on March 31, 2020 and thereafter, to 3.50 to 1.00. This covenant may restrict our current and future operations, including (i) our flexibility to plan for, or react to, changes in our businesses and industries; and (ii) our ability to use our cash flows, or obtain additional financing, for future working capital, capital expenditures, acquisitions or other general corporate purposes.

Also, if we fail to comply with the covenants specified in the Credit Agreement, we may trigger an event of default, in which case the lenders would have the right to: (i) terminate their commitment to provide additional loans under the Credit Agreement, and (ii) declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. Additionally, our Senior Notes contain cross-default covenants, which could make outstanding amounts under the Senior Notes immediately payable in the event of a material uncured default under the Credit Agreement. If the debt under the Credit Agreement or Senior Notes were to be accelerated, we may not have sufficient cash to repay this debt, which would have an immediate material adverse effect on our business, results of operations and financial condition.

Costs of raw materials could negatively affect our profit margins and earnings.

Raw material cost increases (and our ability to respond to cost increases through selling price increases) can significantly impact our earnings. We typically have short-term commitments from our suppliers; accordingly, our raw material costs generally move with the market. When we experience significant increases in raw material costs, we typically implement price increases to recover the higher costs. Inability to recover cost increases (or a delay in the recovery time) can negatively impact our earnings. Conversely, if raw material costs decrease, we generally pass through reduced selling prices to our customers. Reduced selling prices combined with higher cost inventory can reduce our profit margins and earnings.

Steel is our principal raw material. The global steel markets are cyclical in nature and have been volatile in recent years. This volatility can result in large swings in pricing and margins from year to year.

With the acquisition of ECS, we now have greater exposure to the cost of chemicals, including TDI, MDI, and polyol. Our other raw materials include woven and non-woven fabrics and foam scrap. At times, these chemicals and other raw materials are subject to significant fluctuation and may negatively impact our profit margins and earnings.

As a producer of steel rod, we are also impacted by volatility in metal margins (the difference between the cost of steel scrap and the market price for steel rod). If market conditions cause scrap costs and rod pricing to change at different rates (both in terms of timing and amount), metal margins could be compressed and this would negatively impact our results of operations.

Higher raw material costs could lead some of our customers to modify their product designs, changing the quantity and mix of our components in their finished goods and replacing higher cost components with lower cost components. If this were to occur, it could negatively impact our results of operations.

Competition could adversely affect our market share, sales, profit margins and earnings.

We operate in markets that are highly competitive. We believe that most companies in our lines of business compete primarily on price, but, depending upon the particular product, we experience competition based on quality and performance. We face ongoing pressure from foreign competitors as some of our customers source a portion of their components and finished products from Asia and Europe. 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. If we are unable to purchase key raw materials (such as steel) at prices competitive with those of foreign suppliers, our ability to maintain market share, sales, profit margins and earnings could be harmed by foreign competitors.

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The coronavirus named COVID-19, which was first detected in China, could adversely impact our operations?ability to obtain necessary supplies, maintain appropriate labor levels and ship finished products to customers which could negatively impact our results of operations and cash flow.

Governments and health organizations have identified an outbreak of a respiratory illness caused by a new coronavirus which has been named COVID-19. The World Health Organization has declared the outbreak a global public health emergency. It was first detected in Wuhan City, Hubei Province, China, but has spread within China and to multiple other 贝投贝投手机appapp. Chinese officials have instituted a quarantine for parts of central China. We operate facilities in or near the Hubei Province, China which are subject to the quarantine. Since the outbreak, all of our Chinese facilities were temporarily closed for a period of time. Most of these facilities have been reopened. Depending on the progression of the outbreak, our ability to obtain necessary supplies and ship finished products to customers may be partly or completely disrupted not only in our Chinese facilities but globally. Also, our ability to maintain appropriate labor levels could be disrupted. If the coronavirus continues to progress, it could have a material negative impact on our results of operations and cash flow.

Our goodwill and other long-lived assets are subject to potential impairment which could negatively impact our earnings.

A significant portion of our assets consists of goodwill and other long-lived assets, the carrying value of which may be reduced if we determine that those assets are impaired. At December 31, 2019, goodwill and other intangible assets represented $2.17 billion, or 45% of our total assets. In addition, net property, plant and equipment, operating lease right-of-use assets, and sundry assets totaled $1.11 billion, or 23% of total assets. If actual results differ from the assumptions and estimates used in the goodwill and long-lived asset valuation calculations, we could incur impairment charges, which would negatively impact our earnings.

We review our reporting units for potential goodwill impairment in the second quarter as part of our annual goodwill impairment testing and more often if an event or circumstance occurs making it likely that impairment exists. In addition, we test for the recoverability of long-lived assets at year end and more often if an event or circumstance indicates the carrying value may not be recoverable. We conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations. The annual goodwill review performed in the second quarter of 2019 indicated no goodwill impairments. However, three of our reporting units had fair value in excess of carrying value of less than 100%, and those units are discussed below.

? Fair value for our Machinery reporting unit only exceeded carrying value by approximately 12%. Machinery sales have been adversely impacted by rapid market shifts from traditional bedding to compressed mattresses. The goodwill associated with the Machinery reporting unit was $33 million at December 31, 2019.

?Fair value for our Hydraulic Cylinders reporting unit exceeded carrying value by 29%. We acquired this business in the first quarter of 2018, and it has goodwill of $26 million at December 31, 2019. This reporting unit is dependent upon capital spending for material handling equipment, and we have seen market softness in the industries served by this reporting unit.

?Fair value for our Bedding reporting unit exceeded carrying value by 50%. Our first quarter 2019 $1.25 billion acquisition of ECS is part of our Bedding reporting unit, and goodwill for our Bedding reporting unit was $723 million at December 31, 2019.

If we are not able to achieve projected performance levels, future impairments (particularly in our Machinery and Hydraulic Cylinders reporting units) may be possible, which would negatively impact our earnings.

For more information regarding potential goodwill and other long-lived asset impairment, please refer to Note D on page 81 of the Notes to Consolidated Financial Statements.

Interruption in our customers?businesses due to bankruptcy, financial difficulties or insolvency could result in their inability to pay their debts to us, and could adversely affect our sales, financial condition, results of operations or cash flows.

Bankruptcy, financial difficulties or insolvency can and has occurred with some of our customers which can impact their ability to pay their debts to us. We have extended trade credit to some of these customers in a material amount, particularly in our Bedding Group. Our bad debt reserve contains uncertainties because it requires management to estimate

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the amount of uncollectible receivables based upon the financial health and payment history of the customer, industry and macroeconomic considerations, and historical loss experience.

Some bedding manufacturers and retailers that use or sell our products or our customers? products may undergo restructurings or reorganizations because of financial difficulty. Also, certain of our customers have filed bankruptcy, and others, from time to time, have become insolvent and/or do not have the ability to pay their debts to us as they come due. If our customers suffer significant financial difficulty, they may be unable to pay their debts to us, they may reject their contractual obligations to us under bankruptcy laws or otherwise, or we may have to negotiate significant discounts and/or extend financing terms with these customers.

Any of these risks, if realized, could adversely affect our sales and increase our operating expenses by requiring larger provisions for bad debt, which could have a material adverse effect on our financial condition, results of operations or cash flows.

Tariffs by the United States government could result in increased costs of imports and could have a material adverse effect on our results of operations.

The United States government has imposed broad-ranging tariffs on imports of steel and aluminum products. The U.S. has also imposed tariffs on a broad variety of products imported from China. Additional tariffs may be imposed, or current tariffs increased, in the future. Any tariffs that result in increased costs of imported products and materials could require us to increase prices to our domestic customers or, if we are unable to do so, result in lowering our gross margins on products sold. As a result, the tariffs could have a material adverse effect on our results of operations.

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 and believe that we have valid bases to contest all claims made against us, we have recorded an immaterial aggregate litigation contingency accrual at December 31, 2019. Based on current facts and circumstances, aggregate reasonably possible (but not probable) losses in excess of the recorded accruals for litigation contingencies (which include Brazilian value-added tax and other matters) are estimated to be $15 million. If our assumptions or analyses regarding these contingencies are incorrect, or if facts and circumstances change, we could realize loss in excess of the recorded accruals (and in excess of the $15 million referenced above) which could have a material negative impact on our financial condition, results of operations and cash flows. For more information regarding our legal contingencies, please see Note U on page 121 of the Notes to Consolidated Financial Statements.

We are exposed to foreign currency risk which may negatively impact our competitiveness, profit margins and earnings.

We expect that international sales will continue to represent a significant percentage of our total sales, which exposes us to currency exchange rate fluctuations. In 2019, 34% of our sales were generated by international operations. Certain of our operations experience currency-related gains and losses where sales or purchases are denominated in currencies other than the local currency. Further, our competitive position may be affected by the relative strength of the currencies in 贝投贝投手机appapp where our products are sold. Foreign currency exchange risks inherent in doing business in foreign 贝投贝投手机appapp may have a material adverse effect on our competitiveness, profit margins and earnings.

Technology failures or cybersecurity breaches could have a material adverse effect on our operations.

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. Technology failures or security breaches of a new or existing infrastructure could create system disruptions or unauthorized disclosure of confidential information. If this occurs, our operations could be disrupted, or we may suffer financial loss because of lost or misappropriated information. Also, we may incur remediation costs, increased cybersecurity protection costs, lost revenues resulting from unauthorized use of proprietary information, litigation and legal costs, reputational damages, damage to our competitiveness, and negative impact on our stock price and long-term shareholder value. We cannot be certain that advances in criminal capabilities will not compromise our technology protecting information systems. If these systems are interrupted or damaged by these events or fail for any extended period of time, then our results of operations could be adversely affected.

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We may not be able to realize deferred tax assets on our balance sheet depending upon the amount and source of future taxable income.

Our ability to realize deferred tax assets on our balance sheet is dependent upon the amount and source of future taxable income. Economic uncertainty or a reduction in the amount of taxable income or a change in the source of taxable income could impact our underlying assumptions on which valuation allowances are established and negatively affect future period earnings and balance sheets.

We have exposure to economic and other factors that affect market demand for our products which may negatively impact our sales, operating cash flows and earnings.

As a supplier of products to a variety of industries, we are adversely affected by general economic downturns. Our operating performance is heavily influenced by market demand for our components and products. Market demand for the majority of our products is most heavily influenced by consumer confidence. To a lesser extent, market demand is impacted by other broad economic factors, including disposable income levels, employment levels, housing turnover and interest rates. All of these factors influence consumer spending on durable goods and drive demand for our components and products. Some of these factors also influence business spending on facilities and equipment, which impacts approximately one quarter of our sales.

Demand weakness in our markets can lead to lower sales and earnings in our businesses. Several factors, including a weak global economy, low consumer confidence levels, or a depressed housing market could contribute to reduced spending by consumers around the world. Short lead times in most of our markets allow for limited visibility into demand trends. If economic and market conditions deteriorate, we may experience material negative impacts on our sales, operating cash flows and earnings.

Changes in tax laws or challenges to our tax positions could negatively impact our earnings and cash flows.

We are subject to the tax laws and reporting rules of the U.S. (federal, state and local) and several foreign jurisdictions. Current economic and political conditions make these tax rules (and governmental interpretation of these rules) in any jurisdiction, including the U.S., subject to significant change and uncertainty. There have been recent proposals, most notably by the Organization for Economic Cooperation and Development, to reform tax laws or change interpretations of existing tax rules. These proposals, if adopted, could significantly impact how multinational corporations are taxed on their earnings and transactions. Although we cannot predict whether or in what form these proposals will become law, or how they might be interpreted, such changes could have a material adverse effect on our earnings and cash flows.

On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (TCJA), which resulted in significant changes to U.S. federal income tax law, including the reduction of the statutory federal income tax rate for corporations and the transition from a worldwide tax system to a modified territorial system. The U.S. Treasury continues to issue guidance relative to certain key aspects of the TCJA and when complete, recognized impacts on the Company could differ materially from our current interpretation of the legislation. Other factors, including actions the Company may take as a result of TCJA, could also have a material adverse effect on earnings and cash flows.

Business disruptions to our steel rod mill, if coupled with an inability to purchase an adequate and/or timely supply of quality steel rod from alternative sources, could have a material negative impact on our Residential Products and Industrial Products segments and Company results of operations.

We purchase steel scrap from third party suppliers. This scrap is converted into steel rod in our mill in Sterling, Illinois. Our steel rod mill has annual output of approximately 500,000 tons, a substantial majority of which is used by our two wire mills. Our wire mills convert the steel rod into drawn steel wire. This wire is used in the production of many of our products, including mattress innersprings.

A disruption to the operation of, or supply of steel scrap to, our steel rod mill could require us to purchase steel rod from alternative supply sources, subject to market availability. Ongoing trade action by the United States government, along with the existence of antidumping and countervailing duty orders against multiple 贝投贝投手机appapp, could result in reduced market availability and/or higher cost of steel rod.

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If we experience a disruption to our ability to produce steel rod in our mill, coupled with a reduction of adequate and/or timely supply from alternative market sources of quality steel rod, we could experience a material negative impact on our Residential Products and Industrial Products segments and the Company's results of operations.

Our borrowing costs and access to liquidity may be impacted by our credit ratings.

Independent rating agencies evaluate our credit profile on an ongoing basis and have assigned ratings for our short-term and long-term debt. With the debt financing of the ECS acquisition, one rating agency lowered our long-term debt credit rating by one notch. Another rating agency has placed our long-term debt rating on negative outlook. If our credit ratings further decline, our borrowing costs could increase, including increased costs under our commercial paper program and costs and fees under our credit facility. Further, our access to future sources of liquidity may be adversely affected.

We are exposed to risks associated with operating in foreign 贝投贝投手机appapp that could result in cost increases, reduced profits, the inability to carry on certain foreign operations and may negatively impact our results of operations, financial condition and cash flows.

In 2019, 34% of our sales were generated by international operations. Further, many of our businesses obtain products, components and raw materials from global suppliers. Accordingly, our business is subject to the political, regulatory, and legislative risks inherent in operating in numerous 贝投贝投手机appapp. These laws and regulations are complex and may change. If the foreign governments adopt or change laws or regulations, this could negatively impact our results of operations, financial condition and cash flows. Our international locations also face risks associated with operating in a foreign country. These risks include:



?/SPAN>	Credit risks
?/SPAN>	Increased costs due to tariffs, customs duties and shipping rates
?/SPAN>	Potential problems obtaining raw materials, and disruptions related to the availability of electricity and transportation during times of crisis or war
?/SPAN>	Inconsistent interpretation and enforcement, at times, of foreign tax laws and regulations, and capital requirements
?/SPAN>	Political instability in certain 贝投贝投手机appapp

Our Specialized Products segment, which derives roughly 82% of its trade sales from products manufactured in foreign 贝投贝投手机appapp, is particularly subject to the above risks. These and other foreign-related risks could result in cost increases, reduced profits, the inability to carry on certain foreign operations and other adverse effects on our business.

The governing trade provisions between the United States, Mexico and Canada may become less favorable to the Company resulting in increased costs, reduced competitiveness and a negative impact on our results of operations.

On November 30, 2018, the United States, Mexico, and Canada signed the United States-Mexico-Canada Agreement (USMCA), the intended successor agreement to the North American Free Trade Agreement (NAFTA). Each country must follow its domestic procedures before the agreement can be ratified and take effect. To date, both the United States and Mexico have ratified the agreement, but it is still under consideration by the Canadian Parliament. There is uncertainty as to (i) whether the United States will withdraw from NAFTA, (ii) whether the USMCA will be fully ratified, or (iii) if the United States withdraws from NAFTA, but the USMCA is not ratified, what trade provisions will govern the relationships between the 贝投贝投手机appapp. If the governing trade provisions between the United States, Mexico and Canada become less favorable to the Company, this could increase our costs, reduce our competitiveness and negatively impact our results of operations.

The United Kingdom's withdrawal from the European Union could adversely affect us.

In June 2016, the United Kingdom (UK) held a referendum in which voters approved an exit from the European Union (EU), commonly referred to as 揃rexit.? In January 2020, the Withdrawal Agreement Act was passed by the UK Parliament and the Brexit deal was ratified by the EU Parliament. This allowed the UK to formally leave the EU on January 31, 2020, with a transition period through December 31, 2020, while the EU and UK negotiate a trade agreement, among other things. Because we conduct business in the UK and in the EU, the results of Brexit could cause disruptions and create uncertainty to our businesses, including affecting our relationships with customers and suppliers, altering tariffs and currencies, and fluctuating the value of the British Pound and the Euro relative to the U.S. Dollar and other currencies.

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Such disruptions and uncertainties could adversely affect our financial condition, results of operations and/or cash flows from operations.

Changes affecting the availability of LIBOR may have a negative impact on our results of operations.

We have outstanding debt that contains variable interest rates based on LIBOR, which has been subject to regulatory proposals for reform. The U.K. Financial Conduct Authority announced that it intends to stop persuading or requiring banks to submit rates for calculation of LIBOR after 2021. These reforms may cause LIBOR to be performed differently and LIBOR may ultimately cease to exist after 2021. Alternative benchmark rates replacing LIBOR could affect some of the Company's debt agreements which terminate after 2021. In addition, any changes to benchmark rates may have an impact on our borrowing costs. These factors could negatively impact our results of operations.

Climate change laws and related regulations could negatively impact the Company抯 business, capital expenditures, results of operations, financial condition and competitive position.

Climate change has received increased attention worldwide. Many scientists, legislators and others attribute global warming to increased levels of greenhouse gas emissions, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit such emissions. Either the enactment of, or change to existing laws and regulations could mandate more restrictive standards or require such changes on a more accelerated time frame. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. To the extent our customers are subject to any of these or other similar proposed or newly enacted laws and regulations, additional costs by customers to comply with such laws and regulations could impact their ability to operate at similar levels in certain jurisdictions, which could adversely impact their demand for our products and services. Also, if these laws or regulations impose significant operational restrictions and compliance requirements on us, they could increase costs associated with our operations, including costs for raw materials and transportation. In either event, they could negatively impact our business, capital expenditures, results of operations, financial condition and competitive position.

Regulator, shareholder and customer focus on environmental, social and governance responsibility could expose us to additional costs or risks and adversely impact our business, the market value of our stock and our results of operations.

Regulators, shareholders and customers have focused increasingly on the environmental, social and governance practices of companies. This has led to an increase in regulations and may cause us to be subject to additional regulations in the future. Our customers or other interested parties may also require us to implement certain environmental, social or governance procedures or standards before doing or continuing to do business with us. This increased attention on environmental, social and governance practices could have a material adverse effect on our business, the market value of our stock, and our results of operations.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The Company抯 corporate office is located in Carthage, Missouri. As of December 31, 2019, we had 140 manufacturing locations, of which 87 were located across the United States and 53 were located in 17 foreign 贝投贝投手机appapp. We also had various sales, warehouse and administrative facilities. However, our manufacturing plants are our most important properties.

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Manufacturing Locations by Segment



	Company- Wide	Subtotals by Segment
Manufacturing Locations	Company- Wide	Residential Products	Industrial Products	Furniture Products	Specialized Products
United States	87	56	4	21	6
China	16	2	?/SPAN>	4	10
Europe	15	6	?/SPAN>	1	8
Canada	8	3	?/SPAN>	2	3
Mexico	8	3	1	2	2
Other	6	3	?/SPAN>	?/SPAN>	3
Total	140	73	5	30	32

For more information regarding the geographic location of our manufacturing facilities refer to 揋eographic Areas of Operation? under Item 1 Business on page 11.

Manufacturing Locations Owned or Leased by Segment



	Company- Wide	Subtotals by Segment
Manufacturing Locations	Company- Wide	Residential Products	Industrial Products	Furniture Products	Specialized Products
Owned	75	41	5	16	13
Leased	65	32	?/SPAN>	14	19
Total	140	73	5	30	32

Upon the acquisition of ECS in January 2019, we added 13 manufacturing facilities located across the United States, of which five are owned. All of these facilities are held within Residential Products and are included in the above totals.

We lease many of our manufacturing, warehouse and other facilities on terms that vary by lease (including purchase options, renewals and maintenance costs). For additional information regarding lease obligations, see Note L on page 94 of the Notes to Consolidated Financial Statements. Of our 140 manufacturing facilities, none are subject to liens or encumbrances that are material to the segment in which they are reported or to the Company as a whole.

None of our physical properties are, by themselves, material to the Company抯 overall manufacturing processes, except for our steel rod mill in Sterling, Illinois, which is reported in Industrial Products. The rod mill consists of approximately 1 million square feet of production space, which we own. It has annual capacity and output of approximately 500,000 tons of steel rod, of which a substantial majority is used by our own wire mills. Our wire mills convert the steel rod into drawn steel wire. This wire is used in the production of many of our products, including mattress innersprings. A disruption to the operation of, or supply of steel scrap to, our steel rod mill could require us to purchase steel rod from alternative supply sources, subject to market availability. Ongoing trade actions by the United States government, along with the existence of antidumping and countervailing duty orders against multiple 贝投贝投手机appapp, could result in reduced market availability and/or an increase in the cost of steel rod. If we experience a disruption to our ability to produce steel rod in our mill, coupled with a reduction of adequate and/or timely supply from alternative market sources of quality steel rod, we could experience a material negative impact on our Residential Products and Industrial Products segments and the Company's results of operations.

In the opinion of management, the Company抯 owned and leased facilities are suitable and adequate for the manufacture, assembly and distribution of our products. Our properties are located to allow timely and efficient 贝投贝投手机appappy of products and services to our diverse customer base. Although our manufacturing facilities are generally operated at relatively high utilization rates, we do have excess production capacity in certain businesses.

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