Leggett & Platt, Incorporated (LEG) Q4 2014 Earnings Report, Transcript and Summary

Greetings, and welcome to the Leggett & Platt Fourth Quarter 2014 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference being recorded. It is now my pleasure to introduce your host, David DeSonier, Senior Vice President, Strategy and Investor Relations for Leggett & Platt. Thank you, Sir. You may begin.

Good morning and thank you for taking part in Leggett & Platt's fourth quarter conference call. I am Dave DeSonier and with me this morning are the following; Dave Haffner, our Board Chair and CEO; Karl Glassman, who is President and Chief Operating Officer; Matt Flanigan, our Executive VP and CFO; and Susan McCoy, our VP of Investor Relations. The agenda for the call this morning is as follows. Dave Haffner will start with a summary of the major statements we made in yesterday's press release; Karl Glassman will provide segment highlights; Matt Flanagan will discuss financial details and address our outlook for 2015. And finally, the Group will answer any questions that you have. Perry Davis, who is Senior Vice President of the Company and President of the Residential Furnishing segment is also joining us this morning to participate in Q&A. This conference is being recorded for Leggett & Platt and is copyrighted material. This call may not be transcribed, recorded or broadcast without our expressed permission. A replay is available from the IR portion of Leggett's website. We posted to the IR portion of the website a set of PowerPoint slides that contain summary financial information along with segment details. Those slides supplement the information we discuss on this call, including non-GAAP reconciliations. I need to remind you that remarks today concerning future expectations, events, objectives, strategies, trends or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties and the company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the section in our 10-K entitled Forward-Looking Statements. I will now turn the call over to Dave Haffner.

Thank you, Dave. Good morning and thank you for participating in our call. 2014 was a record year and we're pleased to have ended on a very strong note. Full year sales from continuing operations grew 9% from a combination of strong organic growth in many of our major businesses and acquisitions. Fourth quarter sales grew 11% with same location sales up 6% and acquisitions adding 5%. While demand in the majority of our markets improved in 2014, we also benefitted from the continued shift in bedding to Comfort Core springs, new adjustable bed programs that ramped up during the year and ongoing content gains and new program awards and automotive. Importantly, nearly all of our businesses are seeing positive sales momentum as we begin 2015. Full year adjusted earnings per share from continuing operations were a record $1.78, up 19% versus the adjusted $1.50 we earned in 2013. Full year earnings largely benefited from higher sales. Fourth quarter adjusted earnings per share from continuing operations grew to $0.41, up from an adjusted $0.38 per share in the fourth quarter of the prior year. Earnings in the current quarter benefited from sales growth and lower LIFO expense, but this was partially offset by a higher adjusted tax rate and higher than expected stock compensation expense that resulted in large part from the significant increase in Leggett share price versus the market since late October. Matt will discuss this further in his comments. Our adjusted EBIT and EBIT margin improved for both the fourth quarter and full year, largely due to strong sales growth. We ended the year with adjusted EBIT margin at 10.2% up 60 basis points over the full year 2013. From a reported GAAP earnings perspective, the fourth quarters in both years were impacted by large unusual items. In the fourth quarter of 2014, we recognized an additional $0.21 per share litigation accrual. This charge reduced fourth quarter earnings from continuing operations by $0.09 per share and earnings from discontinued operations by $0.12 per share. By far the largest portion of the accrual is for the foam antitrust cases. We believe the accrual is sufficient to resolve all of the pending foam antitrust cases. In the fourth quarter of 2013, we recognized a $67 million or $0.31 per share non-cash charge related to the goodwill and intangible assets of our commercial vehicle products business. A major component of our strategy since 2007 has been the optimization of our portfolio of businesses by increasing investments in businesses that posses strong competitive advantage and reducing our exposure to businesses and markets that are less attractive. In 2014, we made good progress on both fronts. We required three Tempur Sealy innerspring plants, invested in machinery to support the significant growth of comfort core innerspring, expanded our operations in China to support rapid growth of our automotive business and acquired a small German-based designer of motion furniture components. In early November, we also completed the divestiture of the majority of our store fixtures operations and continue to pursue the sale of the two remaining facilities in that business. The divestiture resulted in a $0.03 per share loss that was recognized in discontinued operations during the fourth quarter. We assess our overall performance by comparing our total shareholder return to that of peer companies on a rolling three-year basis. Our target is to achieve TSR in the top one third of S&P500 over the long term, which we believe will require an average TSR of 12% to 15% per year. For the three-year period that ended on December 31, 2014, we generated compound annual TSR of 28% per year, which placed us within the top quarter of the S&P500. Our stock price increased 38% during the year from about $31 to $43, with much of the increase occurring in the fourth quarter. Assuming dividends are reinvested, 2014 TSR was 43%, which ranks in the top 7% of the S&P500. I'll now turn the call over to Karl, who will provide some additional segment comments.

Thank you, Dave and good morning. Most of our businesses continue to perform extremely well in the fourth quarter and we ended the year very strong. In the Residential Furnishing segment, fourth quarter total sales increased 21%. Same-location sales increased 12% with each of the major businesses growing. Excluding acquisitions, U.S. Spring component dollars increased 18%. Innerspring unit volume grew 13% with the Comfort Core premium category up 59% during the quarter. Boxspring unit volume increased 9%. Sales grew 4% in International Spring, primarily from market share gains and increased Comfort Core sales in Europe. Excluding acquisitions, furniture components sales increased 8% in the fourth quarter. Volume in our seating and sofa sleeper businesses grew 8% and motion hardware unit volume increased 14%. Adjustable Bed units grew 127% in the quarter from a combination of new programs and strength in ongoing customer programs. Sales also increased meaningfully in fabric converting, geo components and carpet underlay. Fourth quarter segment EBIT was negatively impacted by a $22 million litigation accrual. Excluding this charge, adjusted EBIT increase and EBIT margin was essentially flat with fourth quarter of 2013. The benefit from higher sales during the quarter was partially offset by increased stock compensation expense of $10 million. Full year total sales in the segment grew 13% with same location sales up 9%. Adjusted EBIT for the year increased 27% and adjusted EBIT margins improved 110 basis points versus 2013 ending 2014 at 9.7%. In the Commercial Fixturing & Components segment, same-location sales increased 15% in the fourth quarter. Sales grew in the quarter from improved market demand in our work furniture business. EBIT increased slightly with the benefit from higher sales, largely offset by higher stock compensation expense. For the full year, total sales in the segment grew 7%. EBIT for the year increased 21% and EBIT margin improved. Segment margins continues to be below our target level due to a number of factors, including underutilized capacity and operational challenges with a Chinese joint venture. With industry demands still depressed from lower business and government spending, our plans continue to operate well below optimal utilization levels. While our cost reductions have been implemented over the past few years, we are working to identify more opportunities to improve efficiency. In addition, our business development activities are focused on identifying opportunities to improve our sales mix through higher-valued products. In the Industrial Materials segment, fourth quarter same-location sales increased 5%, primarily from higher unit volume within our wire operations that was largely driven by strong bedding demand. EBIT and EBIT margin increased with a benefit from higher sales and other smaller factors, partially offset by higher stock compensation expense of $3 million. 8 Full year total sales in the segment increased 3% primarily from acquisitions. Same-location sales were down slightly. EBIT and EBIT margins for the year decreased primarily from reduced metal margins and weather related costs and inefficiencies early in the year. In the Specialized Products segment, same-location sales grew 5% in the fourth quarter. Automotive sales increased 13% versus a strong fourth quarter of 2013 from a combination of expanded content, participation in new vehicle platforms and demand strength in North America and Asia. This growth was partially offset by an 18% sales decrease in Commercial Vehicle Products. Machinery sales were essentially flat during the quarter. The segment's EBIT and EBIT margin increased versus 2013 primarily due to the non-reoccurrence of last year’s CVP impairment charge. Operationally EBIT and EBIT margin increased in the second quarter -- in the current quarter with a benefit from higher sales, partially offset by higher stock compensation expense of $4 million. For the full year, total sales in this segment grew 9%. Adjusted EBIT for the year increased 26% and adjusted EBIT margins improved a 180 basis points versus 2013 ending 2014 at 13.6%. I'll now turn the call back over to Matt, who will discuss some of the additional financial details along with our outlook for 2015.

Thanks, Karl, and good morning, everyone. Well as you've already heard, fourth quarter earnings were impacted by an unusually high accrual related to our stock-based incentive compensation plans, which in total, represented $80 million or $0.08 per share. Approximately two-thirds of this cost was due to the significant increase in our relative TSR performance late in the year as our share price increased from approximately$35 to $43 during the fourth quarter. The remainder of the higher cost was driven by recent strong growth in operating margin improvement in many of our businesses. In accordance with GAAP, we record our incentive compensation accruals each quarter to reflect the related performance metrics. For the TSR-based incentive plan, we measure our TSR performance over three-year periods compared to an 320 member peer group. For the three-year measurement period that ended in 2014 our relative TSR through the end of September was at roughly the midpoint of the peer group. As a result we had accrued for our two and three quarter year assuming an estimated payout of approximately 71% of the incentive target. Our fourth quarter increase in share price and relative TSR moved us into the top third of the peer group and caused payout percentage to more than double. Consequently, all of the incremental cost for the entire three-year period occurred and was duly recognized in the fourth quarter. A significant adjustment was also required for the three-year period that will conclude in 2015. At the end of December, we were delivering top TSR performance for that measurement period as well. In 2014 our stock compensation expense for all programs totaled $48 million, nearly half of which was recognized in the fourth quarter. Our forecast for 2015 anticipates total cost of approximately $44 million at the current share price and assuming our relative TSR does not change. If our TSR moves into a lower performance level in relation to the peer group, then we will reduce our accruals for open measurement periods to reflect the corresponding lower payouts estimates. Now on to a few other topics. Operating cash flow was once again seasonally strong in the fourth quarter at $166 million. For the full year, we generated operating cash $382 million. We ended the year with working capital at an usually low 7.9% of annualized sales. The third and fourth quarter litigation accruals caused a sizeable increase in current liabilities by year end. Excluding this accrual, working capital was 10.3% of annualized sales. In November, we declared a quarterly dividend of $0.31 per share and 2014 marked our 43rd consecutive annual dividend increase at a compound annual growth rate of 13%. At yesterday’s closing price of $45.07, our current yield is 2.8%, which is one of the highest dividend yields among the 54 companies that comprise the S&P500's dividend aristocrats. We repurchased 700,000 shares of our stock in the fourth quarter at an average price of $41.14 and issued one million sales largely for employee option exercises. For the year, we repurchased 5.4 million shares at an average price of $33.76 and issued 3.9 million shares. Our financial base remains very strong and this gives us considerable flexibility when making capital and investment decisions. We entered the year with net debt and net capital at 31.5%, which is comfortably within our longstanding targeted range of 30% to 40%. In 2015, we again expect strong sales growth, which should lead to another year of record earnings per share from continuing operations. As we announced yesterday, we expect 2015 earnings from continued operations to be between a $1.90 and $2.10 per share. With improving demand, market share gains and recent acquisitions, sales from continued operations are expected to be $3.9 billion to $4.1 billion. This range represents a 3% to 8% increase versus our $3.78 billion of sales from continued operations in 2014. Based upon this guidance range, we currently expect a full year EBIT margin between 10.7% and 11.2%. We expect to again generate operating cash flow of approximately $350 million in 2015. Dividend should require about $170 million of cash and capital expenditure should approximate $120 million per year. We continue to make investments to support growth in business and product lines where sales are strong and for efficiency improvement and maintenance. Our incentive plans emphasize returns on capital, which include net fixed assets and working capital. This emphasis we believe helps ensure that we're efficiently utilizing our asset base and invest in capital dollars for the highest return potential exist. Consistent with our stated priorities for the use of excess cash flow, we will prudently buy back our stock, bearing in mind our level of cash generation other potential opportunities to strategically grow the company and the overall outlook for the general economy. We have a standing authorization from the Board to repurchase up to 10 million shares each year; however, no specific repurchase commitment or timetable has been established. We currently expect to issue between two million and three million shares in 2015, primarily from employee stock option exercises and repurchase an amount that at least offsets shares issued. With those comments, I'll turn it back over to Dave Haffner.

Thanks Matt. I would like to close my prepared comments this morning by extending a very sincere thank you to the thousands of dedicated employee partners who have collectively contributed to Leggett's record performance in 2014 and have helped us to position the company for strong performance in 2015 and beyond. I would also like to sincerely thank our many customers for trusting us with their business and allowing us to assist them as they work to achieve their respective long-term goals. Dave, I’ll turn the call back to you.

That concludes our prepared remarks. We appreciate your attention and we will be glad to answer any questions. In order to allow everyone an opportunity to participate, we request that you ask only your one best question and then yield to the next participant. If you have additional questions, you're welcome to reenter the queue and we will answer those questions as well. Christine, we're ready to begin the Q&A

Thank you. We will now be conducting a question-and-answer session [Operator Instructions] Thank you. Our first question comes from line of Budd Bugatch with Raymond James. Please proceed with your question.

Good morning everybody. This is actually Bobby filling in for Budd. Thank you for taking my questions and congrats on the strong revenue quarter.

Thanks Bobby.

First off, on the innerspring units up 13%, can you please give us a sense of how that trended during the quarter and maybe what you see so far in that segment or that business unit year to date?

Bobby, this is Perry Davis. Yes. I can give you some color around that and during the quarter in October we were up roughly 7%. November similarly about 7% and then in December we saw a really strong surge with Innerspring shipments up about 24%.

Thank you. And then is there a little color on how January has trended so far?

Yes. So far in January through basically the end of last week for the period, we are up year on year about 16.6%. Now would caution for some of that because you recall in 2014, we faced some underlying weather issues that probably dampened shipment somewhat, but overall still we're seeing strong unit volumes as we progress through the quarter.

Perfect. Appreciate the color. And lastly on the Chinese joint venture in the commercial segment gave you some operational challenges again. Can you talk about how that has progressed versus last quarter and what the outlook looks like for working through those challenges?

Bobby this is Karl. It continues to be a challenge for us. We were in a complicated Chinese legal situation with that joint venture partner that's distasteful to all of us. So we're continuing to make progress. The margins are not quite as bad as they once were, but the business is losing money as we speak. So we're doing everything we can within our power in a tough environment to remediate those issues.

Thank you. And best of luck going forward.

Thank you, Bobby.

Our next question comes from the line of Josh Borstein with Longbow Research LLC. Please proceed with your question.

All right. Good morning everyone thanks for taking my questions. Could you provide us an update on what scrap costs are doing and where pricing is and the spread between those two right now?

Good. Josh, this is Karl. Scrap is a little bit of a challenge for us and our outlook has changed pretty dramatically in the last 30 days. The scrap traded up about $5 from December to early January and now the expectation for February scrap prices is down about $30 a ton which ballpark is 10%. What's driving that forecast of scrap deflation is significant availability of U.S. scrap. Iron ore costs they are falling pretty dramatically around the world and then currency exchange rates. The impact of that is probably more, will be more significant on the flat products, because of availability of both Russian and Chinese flat steel products against scrap is driving that currency exchange issues also into the flat steel products. From a wire rod perspective, there is less availability of high carbon rod around the world that is of quality enough to utilize in our products or our customers or competitors products. The low carbon is somewhat protected now because of commerce filing, or finding of guilt of antidumping claims by the U.S. wire rod producers, specifically the low carbon. They've levied duties effective mid-December of between 100% and 200% depending on the importer of those products, but rod will probably deflate some because of the correlation to scrap. Now the impact on Leggett is, there may be depending on how scrap actually does trade, some pricing pressure on some of our products there'll probably be a lag of certain 30 to 60 no really 60 to 90 days which will pressure selling prices, pressure margin dollars, but actually should have a positive impact on margin percentage. And for those of you that are trying to quarterize our guidance this is probably a bit of a headwind to the first quarter, because we, again if scrap falls off we will have to revalue our rod, or bill it, our rod, our wire inventories and our flat product inventories, so that reevaluation will be a headwind to our EBIT and the respective benefit or the LIFO benefit based on GAAP accounting we won't book that benefit until each one of the quarters and based on a year in 2015 forecast. So the pain is upfront. The remedy is spread equally amongst the remaining quarters of the year.

Okay, thanks for that color Karl and so just overall for the year would you anticipate to see margin improvement in the industrial segment?

Yes, I would expect so.

Okay, and just you talked a little bit about the flat steel, can you remind us how much you buy annually in flat steel and the potential against either savings I'm imagining you might realize there?

About 400,000 tons, josh that's changed pretty significantly because of our Store Fixtures business consumed a lot of flat products that is no longer part of us.

Okay, I see and then maybe for Susan, one question for you with respect to the revenue guidance, just wondering if you could provide us at the midpoint what it implies for each of the segments? Thanks.

Yeah, sure, Josh and this is admittedly qualitative that it will give you some framework to think about. In Residential I would assume something in the mid-to-high single-digit revenue growth. For Commercial, closer to mid single-digit and Industrial low single-digit and Specialized high single-digit. All of that collectively decide where you want to be with each of the segments, but the midpoint of our revenue guidance which are just short of 6%.

Okay great, I appreciate the color, thanks a lot, I'll hop back in the queue.

Our next question comes from the line of Dan Moore with CJS Securities. Please proceed with your question.

Good morning. This is [Robert Magic] [ph] in for Dan Moore. Innerspring volumes picked up materially in 2014. Do you see this as being the front end of a longer-term upswing in demand for mattresses and innersprings? And on the flip side do you see that spike as creating somewhat of a tough comp for growth in 2015?

Well Robert, I think as the year goes along, this is Perry Davis, we will see the comps become more difficult. We obviously had a lot of challenges as I mentioned earlier last year in the first quarter particularly, with me and the major selling weakens basically a washout. But as the year progressed we saw those unit volumes continue to expand and by the end of the year again we were at a run rate that was extremely high. And if you go back and you look at the statistics that ISPA put out in October, they were showing 7.5% innerspring picked up year-on-year. We were around 7%. Go to November, they showed a smaller little over 3%. We were at 7% again and then like I said, as the quarter ended we had a terrific "period" with heavy unit shipments 24% up year-on-year.

Thank you.

Our next question coming from the line is Keith Hughes with SunTrust. Please proceed with your question.

Thank you. On the Commercial business strong revenue growth in the quarter, just if you give us any qualitative statements on what you're hearing from your customers on store, excuse me, on office furniture there in terms of order pace picking up what they are expecting for the year and just kind of any sort of outlook, that will be great?

Keith this is Karl. It certainly was a good fourth quarter. That is not an indicator of the industry. We are definitely gaining some share. We're positioning ourselves very well in Europe which was an area that we weren’t geographically strong in the past. Domestically there was uptick from, like I said new programs. The bit more forecast is 4% growth this year. I would expect us to probably double that, so we'll see, you know you see what the public report from a demand perspective it varies by each one of those customers depending on where they are in the product chain.

Okay and real I'll just sneak one and real quick here on the Comfort Core, another great quarter on Comfort Core, when you start hitting the big numbers that you're putting up the last couple of quarters in Comfort Core, are there more customers to go to or is that naturally just going to slow down?

It will naturally slow down somewhat as we get later in the year Keith, but we have seen just a week ago in the Las Vegas market numerous new introductions in the Comfort Core category that continue to drive growth. And if you look at all of last year, compared to the prior year I mean we're talking 50% growth, 2014 over 2013. So will we be 50% again this year? I doubt it, but we continue to see huge shifts and not only at the higher price points, but we'll begin to see it in more of the midrange product and that's basically where the Vegas market was focused this time with new introductions was at those medium to medium upper high price points.

Okay, thank you.

Our next question comes from the line of John Baugh with Stifel. Please proceed with your question.

Good morning and congratulations to the team on a great year. My questions are as follows: if we could talk about cash flow and I'm particularly interested in the forecast for 2015 the puts and takes there and maybe you could touch on among others the legal settlement dollars to go out? And then perhaps Karl on working capital which has been so tightly managed in 2014? Thanks.

Yeah John, this is Matt. I'll jump in and take that one. If you take the midpoint of our guidance for the net earnings contribution that's a pretty straightforward number, something in the neighborhood of 280 million this year. Still we have about 140 million shares out. Our D&A this coming year should be about 120 million. The working capital, here is a key piece of what does move around based upon what's happening in those various categories and operations has done a superb job in the last several years of freeing up a lot of capital in that regard. As you've heard what you adjust for the years end accruals relative to the litigation we were trading at about 10% working capital level of investment, we would anticipate that that would be about the level of investment this coming year as sales continue to grow, which therefore means, we would use some cash and working capital and that sort of gearing in 2015. And then specifically, relative to the accruals that we have taken on the litigation, we would anticipate that most of that activity would take place in 2015, but of course, that's one again hard to predict. You throw all that together and we continue to feel very good that about $350 million with a hope to do better than that should be the working operating cash flow assumption you should have in your models.

So Matt, roughly is there a range or guess on the litigation amount?

Hard to guess that. We now -- we'll say this that we'll first of all, due to confidentiality considerations, we rarely ever comment on any pending litigation as you might imagine. And during the past few months we've had additional developments that occurred in that litigation to help us come up with the estimate that obviously we book now here in the fourth quarter, as Dave mentioned in his comments. And we believe that is sufficient for resolution of these issues. Don't know for sure, but that's certainly our best estimate at this time. So, relative to win, would that cash go out the door? We just don't know. We would -- it's carried as a current liability. That's how GAAP require us to record it, which implies that within 12 months that is likely to occur and that's where you will find it on our balance sheet.

John, I suspect that a meaningful majority of it will be here in 2015 with some trail into early 2016.

Great. Thank you. And then, if I could just may be ask you to comment as you look at '15 versus '14, and this is, you know, a complicated question I guess, but more you simplify the better. What in general you think raw material changes made due to your P&L and currency. What due to your P&L, the headwinds and tailwinds. Thanks.

John, the raw material is really the steel issue that I spoke of earlier. If graph does trade down in February like the market expects, there will be some impact on our pricing, but it should be a positive again from a margin percentage perspective. It's very difficult to forecast steel cost into the back half of the year right now, but all-in-all, I would expect that they will end the year somewhat and possibly significantly lower than they ended 2014. As it relates to currency that from a transactional perspective, we do a pretty darn good job of matching manufacturing and manufacturing cost in the geography of consumption; and then augment that by a pretty rigorous hedging program. Our finance folks and operations folks worked really well together to adequately hedge ourselves. From a translational perspective, we did an analysis just the other day on currency exchange rates that are current, so just two days ago. And the impact on automotive, which is our most internationally diverse business, is about $25 million in top line and about $2.5 million from an EBIT perspective. If you multiply that by two is probably too aggressive for the rest of the company just because of Auto being, like I said, the most geographically dispersed. So we'll see those rates literally change every day every minute, but currency is a bit of the headwind.

And John, I'd just add relative to currency that just in the fourth quarter, as a frame of reference, sales were negative about $9 million relative to that translation aspect on the U.S. dollar, and EBIT very modest impact south of it, obviously. But $9 million was the top line headwind in the fourth quarter company-wide.

Great. Thanks for that color. I'll get back in queue.

Our next question comes from the line of Herb Hardt with Monness Crespi Hardt. Please proceed with your question.

Good morning. I was curious, if you could give us operating rates, the lowest and highest, of course, the divisions in the company.

Herb, you mean capacity utilizations?

Yes.

You have those. I've got them here too, Karl, if you don't have in hand. Highest; Herb, is always going to be the steel mill. Though it's near 100%, it wasn't light in the fourth quarter of last year as we did some process improvements and took some outages to implement some new systems. After that it would be Adjustable Beds in our U.S. Spring operations today where volume is so good automotive would follow that. There is a little bit around the globe, but utilization rates are high. From the lowest perspective, it would be our commercial vehicle products business. After that, it would be our work furniture business where we made comment that we're underutilized, the rest would be somewhere in between all of that.

And U.S. Spring is, of course, the upper end of that, Herb. And I know you've heard Karl and Terry say in the past that we're busily building new higher speed, more efficient equipment to put into our U.S. Spring business to accommodate that demand.

Okay. Thank you very much.

Thanks Herb.

[Operator Instructions] Our next question is a follow-up question from Josh Borstein with Longbow Research. Please proceed with your question.

Thanks again. Just to make sure I understand what's going on in the residential segment on the margin side. The adjusted margins were down 10 basis points despite a nice step up in revenue. I realized some of that's the acquisition revenue for Sealy, but is that all -- the relatively flat margins, is that just due to the stock-based compensation, or is there something else in there?

Yes, Josh, that is. I think we expanded in our comments that there's about $10 million of that stock comp that hit the segment. If not for that charge, the margins would have expanded pretty nicely.

I see, okay. Thanks for that. And then, you've talked a little bit about capacity additions in several of your businesses, how should we think about contribution margins for 2015?

It’s a good question, Josh. And I think the discussion that just went through relative to were our utilization levels are higher, helps to set the backdrop for that. We should be comfortable in that 25% to 35% range that we've talked about for a long time, but much of the growth that we're getting in 2015 is coming in those businesses that are already very busy until we're making incremental investments to support that growth. And therefore, it would be reasonable to assume that we might be in the lower half of the historical range versus the higher half. Still good at incrementals and good businesses that we're very happy to have the growth occur.

Yeah. Thanks for that, Susan.

It appears we have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Now, we'll just say thank you for your participation and we'll talk to you again next quarter.

One additional comment, I apologize to interrupt. But investors often ask us what separates Leggett from other public companies? And it's the -- the areas of business that we play in are our product, but when you step back for just a second and think about 2014, Adjustable Beds in the third quarter were up 75%. They were up 127% in the fourth quarter, Comfort Core up 75% in the third quarter, 59% in the fourth quarter. That's our people. So the thing that separates Leggett truly is our people. It's the experts that we have in accounting, the experts that we have in our logistics that make this happen in a very, very difficult environment. So, I just wanted to stop for a second and echo Dave's prepared comments that our people had a great year and every company has people. They don't have our people, so that's the point of differentiation. So I personally wanted to thank our people for doing an outstanding job. That’s all Dave. Thanks.

And with that we'll close. Thanks.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.