禮恩派 (LEG) 2015 Q4 法說會逐字稿

Greetings, and welcome to the Leggett & Platt fourth-quarter 2015 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dave DeSonier, Senior Vice President of Strategy and Investor Relations for Leggett & Platt. Please go ahead.

Good morning, and thank you for taking part in Leggett & Platt's fourth quarter conference call. I'm Dave DeSonier, and with me this morning are the following, Karl Glassman, who is President and CEO, Matt Flanigan, our Executive VP and CFO, and Susan McCoy, our Vice President of Investor Relations.

The agenda for the call this morning is as follows. Karl will start with a summary of the major statements we made in yesterday's press release, and provide segment highlights. Matt will discuss financial details, and address our outlook for 2016. 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 Furnishings 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 express 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 addtional information, please refer to yesterday's press release, and the section in our 10-K entitled forward-looking statements. I'll now turn the call over to Karl Glassman.

Good morning, and thank you for participating in our fourth quarter call. As we reported yesterday, we are extremely pleased with our 2015 results, and expect continued strong performance in 2016. For the full year 2015, we achieved record sales from continuing operations, record EBIT, and record earnings per share. Sales grew 4% for the year to $3.92 billion, higher unit volume of 6%, and acquisitions 3%, added 9% to sales growth. These improvements were partially offset by raw material-related price decreases and currency impact, which combined to reduce sales by 5%.

Full-year sales benefited from ongoing content gains and new program awards in automotive, the continued shift in bedding to comfort core springs, and strong growth in our adjustable beds. Full-year adjusted earnings per share from continuing operations were $2.34, up 31% from $1.78 in the prior year. Earnings grew primarily from higher unit volume and pricing discipline. Adjusted EBIT grew 31%, and adjusted EBIT margin increased 270 basis points to 12.9%.

In the fourth quarter, sales from continuing operations were $945 million, down 1% from the prior year. Higher unit volume 3%, and acquisitions 1% added 4%, but were more than offset by raw material-related price decreases and currency impact, which combined to reduce sales by 5%. Earnings performance was stronger than expected during the fourth quarter. Adjusted earnings per share were $0.64, compared to $0.41 in the same quarter last year for an increase of 56%. Adjusted earnings grew primarily from pricing discipline, higher unit volume, and lower stock compensation expense.

Additional decreases in steel costs late in the year led to a larger than expected LIFO benefit in the fourth quarter. While the LIFO impact is typically offset within the segments, as the higher cost inventory flows through earnings, that offset did not fully occur in the fourth quarter. Because of the year-end timing of the cost decreases that triggered the additional benefit, part of the offsetting segment level impact will occur in early 2016. Fourth quarter EBIT, adjusted EBIT increased 44%, and adjusted EBIT margin improved to 13.8%, up 440 basis points over fourth quarter last year.

Late in the year, we completed the divestitures of the steel tubing business, the final store fixtures operation which had been reported in discontinued operations, and a small part of the commercial vehicle products business. Portfolio management will remain a strategic priority as we move forward. Over the past few years, we have enhanced our portfolio, and improved our margins by growing our stronger-performing businesses, and by exiting businesses that struggled to consistently deliver acceptable margins and returns.

Now onto the segment details. For the full year, margins improved in all four segments, and unit volume grew in nearly all of our major businesses. However, commodity deflation and currency impact offset some of this full-year sales growth. For the fourth quarter, margins improved in three of the four segments, with commercial product segment margins flat with last year. Volume growth continued in many of our businesses, but the offsetting impact from commodity deflation and currency also continued throughout the quarter.

In the residential furnishings segment, fourth quarter sales decreased 3%, with unit volume growth more than offset by raw material-related price decreases and currency impacts. Sales trends for the major businesses and product categories, excluding deflation and currency were as follows. US spring component dollar sales increased 4%. Inner spring unit volume grew 3%, with comfort core up 55% during the quarter. Box spring unit volume increased 7%.

International springs sales grew 10%. Furniture component sales were down slightly, with sales in the seating and sofa sleeper business up 4%, and motion hardware unit volume down 1%. Volume also grew in geo components and decreased in corporate cushion. Segment EBIT and EBIT margin increased in the quarter from significantly lower foam litigation expense. Excluding these charges, EBIT and EBIT margin improved primarily from pricing discipline, higher unit volume, and lower stock compensation expense.

For the full-year, total sales in this segment grew 5%. Higher unit volume and acquisitions increased sales by 10%, but were partially offset by the commodity deflation and currency impact. US inner spring units grew 8%, with comfort core units up 51% for the full year. We expect strong growth in this category to continue from our introduction of new comfort core products, and our customers' growing use of these components in their product lines. Adjusted EBIT for the year increased 11%, and EBIT margin improved 50 basis points to 10.2%, primarily from higher unit volume and pricing discipline.

In the commercial products segment, fourth quarter total sales increased 10%, primarily from an acquisition completed early in the year. Same-location sales were down slightly, with unit volume growth in adjustable bed and fashionable bed more than offset by lower volume in work furniture and currency impact. Our acquisition in this segment was a European private label manufacturer of high-end upholstered furniture for office, commercial and other settings. This business is complementary to our North American private label operation, and allows us to support our work furniture customers as they expand globally. The segment's EBIT increased slightly during the quarter, and EBIT margin flat for the prior year.

For the full year, total sales in this segment grew 21% with same-location sales up 12%. Strong performance in our adjustable bed and fashion bed businesses drove the majority of the same-location sales growth. Adjustable bed units grew 51% for the full year. The segment's EBIT increased 37%, and EBIT margin improved 80 basis points to 6.8%, primarily from higher sales and improved operational efficiency.

In the industrial materials segment, fourth quarter sales were down 16%, from steel-related price decreases, and lower unit volume in drawn wire and steel tubing. EBIT and EBIT margin increased during the quarter, with cost improvements partially offset by a $3 million loss on the divestiture of the steel tubing business. For the full year, total sales in this segment decreased 5%, with higher unit volume in drawn wire more than offset by steel-related price reductions, and lower trade sales from our rod mill. The segment's EBIT for the year increased 17%, and EBIT margin improved 120 basis points to 6.5%, as cost improvements more than offset an impairment charge of $6 million, and divestiture loss of $3 million related to the steel tubing business.

In the specialized product segment, fourth quarter sales increased 7% with a 12% volume improvement, partially offset by currency impact. Excluding currency changes, automotive sales increased 14%, machinery sales grew 15%, and commercial vehicle product sales were up 11%. Aerospace sales were down slightly in the quarter. The segment's EBIT increase and EBIT margin improved 250 basis points, primarily from higher volume.

Full-year total sales in the segment grew 4%, with a 9% volume increase partially offset by currency impact. Strong performance in our automotive and machinery businesses drove the majority of the sales growth. Excluding the currency changes, automotive sales grew 13% for the full year. The segment's EBIT increased 24%, and EBIT margin improved 260 basis points to 16.3%, primarily from higher sales. I'll now turn the call over to Matt Flanigan.

Thanks, Karl, and good morning, everyone. In 2015, we generated operating cash flow of $359 million, after paying $82 million to settle foam litigation. Full-year cash flow came in slightly below our prior forecast, due to the timing of the litigation payments, with a major part of those occurring just before year end. The substantial majority of these cases have now been settled and paid.

We ended the year with adjusted working capital as a percentage of sales of 9.5%. In November, we declared a quarterly dividend of $0.32 per share. At yesterday's closing price of $41.58, the current yield is 3.1%, which is one of the highest dividend yields among the 50 companies that comprise the S&P 500's dividend aristocrats.

We repurchased 700,000 shares of our stock in the fourth quarter at an average price of $44.36, and issued 200,000 shares, largely for employee benefit plans and option exercises. For the full year, we repurchased 4.3 million shares at an average price of $45.72, and issued 2.2 million shares. Our financial base remains very strong, and this gives us considerable flexibility when making capital and investment decisions. We ended the year with net debt to net capital at 34.5%, comfortably within our long-standing targeted range of 30% to 40%. We also monitor debt to EBITDA. At year end, our debt was 1.5 times our trailing 12 months adjusted EBITDA.

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 the S&P 500 over the long-term, which we believe will require an average TSR of 12% to 15% per year. For the three year period that just ended on December 31, 2015, we met our goal of producing top third TSR. We generated compound annual TSR of 20% per year over these past three years, significantly better than the S&P 500's 15% annual TSR for the same time period.

Before we discuss our 2016 guidance details, it may be helpful to remind everyone of the major macro drivers for our business. Consumer confidence is the primary indicator that we monitor, since it most significantly influences demand for bedding and furniture. Total housing turnover also affects demand in these businesses, but to a lesser degree than consumer confidence. Broadly favorable trends in these two indicators should result in positive market conditions for at least half of our revenue base.

Across our diversified businesses, we have no direct exposure to the oil industry. However, lower energy prices have historically been positive for demand in our residential markets, with consumers having more discretionary income available to spend on larger-ticket purchases. Lower fuel prices also typically support SUV and large vehicle demand, which is beneficial to our automotive business.

Geographically, our largest exposure by far is the US, followed by northern Europe. We produce in China, but the majority of that product is exported, in either component form or in our customers' finished product for consumption in North America or Europe. Chinese consumption patterns impact only about 3% of Leggett's total sales. Our automotive business is the only part of our portfolio that is meaningfully exposed to domestic Chinese demand, with about 20% of its revenue base remaining in that market.

While Chinese auto production slowed in 2015, the market still grew 3%, or roughly in line with growth in both North America and Europe. As Karl mentioned earlier, our automotive business grew its unit volume by 13% in 2015. Current automotive industry forecasts anticipate production in the major markets to grow by approximately 4% in 2016. We expect to continue outperforming global auto production by at least 10 percentage points for the foreseeable future, based upon content gains and new programs that we have been awarded.

With this collective backdrop for 2016, we once again expect sales growth, which should lead to another year of strong margins and earnings per share. Sales from continuing operations are expected to be $3.9 billion to $4.1 billion, or flat to 5% higher than in 2015. Unit volume growth should be in the middle to high single-digits, with continued strong demand in many of our product categories, and improvement expected in the majority of our end markets. As partial offsets to the volume growth, sales guidance includes a 2% to 3% reduction from commodity deflation, and a 2% decrease from the steel tubing divesture completed in late December.

We expect 2016 earnings per share of $2.30 to $2.50. Bridging from 2015's strong earnings performance, this guidance assumes that unit volume growth will generate typical 25% to 30% incremental margins, but that benefit is expected to be largely offset by the nonrecurrence of the 2015 pricing lag.

Based upon this guidance, we currently expect a full-year EBIT margin between 12.7% and 13%, roughly in line with our 2015 performance. Our guidance assumes that commodity prices, primarily steel, stabilize near current levels. We expect to generate operating cash of approximately $450 million in 2016.

Dividends should require about $175 million of cash, and capital expenditures should approximate to $130 million for the year. Our target range for dividend payout is 50% to 60% of earnings. Actual payout has been higher in recent years, and as a result, dividend growth has been modest at about 3% per year. With our strong earnings growth in 2015, we are now comfortably within our targeted payout range. This gives us greater flexibility to consider future dividend growth that more closely aligns with our EPS growth.

As has been our practice, after funding capital expenditures and dividends, remaining cash flow will be prioritized toward competitively advantaged acquisitions. Potential acquisitions must meet stringent strategic and financial criteria. Should no acquisitions come to fruition, and if excess cash flow is available, we have a standing authorization from the Board to repurchase up to 10 million shares each year. No specific repurchase commitment or time table has been established, however, we currently expect to repurchase 4 million to 5 million shares in 2016, and issue approximately 2 million shares primarily for employee benefit plans. With those comments, I'll turn the call back over to Dave DeSonier.

That concludes our prepared remarks. We thank you for your attention, and we will be glad to answer your questions. In order to allow everyone an opportunity to participate, we request that you ask only one question, and then yield to the next participant. If you have additional questions, you are welcome to re-enter the queue, and we will answer all the questions that you have. Kevin, we are ready to begin the Q&A.

Certainly.

(Operator Instructions)

Our first question today is coming from Daniel Moore from CJS Securities. Please proceed with your question.

Good morning.

Hi, Dan.

Hi, Dan.

Thank you for that color regarding the LIFO benefit. And maybe, is it possible to quantify the unusual margin benefit that you did experience in Q4, and how much of that do you -- you might, if commodity costs stabilize might be a reversal into Q1 and early 2016?

Yes, it's a good question, Dan. The way that I would encourage you to think about it is that in the fourth quarter, we recognized $15 million more in LIFO benefit than we anticipated at the end of the third quarter. That was caused by the steel deflation that took place in November and December.

Because of the timing of that deflation heading very late in the year, and in fact in the back half of the quarter, a meaningful part of that $15 million increase in LIFO was not offset during the quarter. And in fact, will carry over into the early part of 2016, with a lot of that being in the first quarter.

As you know, commodity moves impact LIFO pretty quickly, and it takes a little bit more time to work through the segments. We have to have -- usually a quarter, maybe a little bit more than that, for those higher cost materials to roll through. And for us to get to a point where we can actually revalue our inventories, and neither of those things fully happened in the fourth quarter. So a part of it would have been offset, but not all of it. And that will -- like I said, will carry over into the first quarter.

Great. Just a quick follow up. In terms of the revenue guide, the 0% to 5%, any sense of how you expect that growth to play out over the year? Is H1 likely to be a little bit softer, given the commodity cost inflation? Just wanted to get a sense of how you see that layering in over the year? Thank you again.

Thanks, Dan, we appreciate that question too. We will have some variation in the quarters, because of the year-over-year deflation. I knew we've already said this, but we expect our unit volume growth to be strong again in 2016. We're looking at mid to high single-digit unit volume growth. We do expect deflation to offset part of that.

And we now also have the impact from the divesture. When you look at our current full-year guidance at flat to 5%, and compare that to the framework that we put out there in October, what's changed is basically the divesture impact, and maybe a little bit more deflation. Otherwise, we're basically in line with what we thought at the end of October.

So taking that through the quarters, I would encourage you first to decide where you want to be in that full-year flat to 5% range. And then, in the first quarter, subtract 300 basis points from that full-year growth rate, in the second quarter, subtract 100 basis points, and in the third and fourth quarters, add 200 basis points each. So at the midpoint of the guidance range, which would be about 2% to 3% growth, in the first quarter, we'd be looking at sales that were flat to down 1%.

In the second quarter, we'd be looking at sales that would be up 1% to 2%. And in each of the third and fourth quarters, we should be in the 4% to 5% up range. You didn't specifically ask about margins, but I'll go ahead and throw that in here too. Qualitatively, in the first half of 2016, we should be ahead of 2015's EBIT margins in both the first and second quarter.

Third and fourth quarters in 2015, obviously, we had very strong margin performance in both of those quarters. We will likely be below those margin levels in the back half of the year, with the full-year margins essentially flat, which is what we already said. And I'll just reiterate that, that LIFO overhang if you will, or the FIFO impact in the segments will most significantly impact our first quarter, with the bulk of that being in our residential segment, with a little bit more in industrial.

No, that's great color. Thank you again.

Thank you. Our next question today is coming from Budd Bugatch from Raymond James. Please proceed with your question.

Good morning, and again, thank you for all that color. My question really reflects, just basically adjustables. And I know the adjustables were up 7% in the quarter. Maybe Karl, if you could go -- just give us a little bit of color on the cadence during the quarter, what was going on with adjustables, and maybe what the outlook is for that in 2016? Pardon me, pardon my voice.

No problem. I hope you feel better, Budd The adjustable business had a wonderful year. We, as we said, we were up 51% in units. We expect significant growth in 2016. We believe the market is growing in excess of 30%, so things are good.

What happened in the fourth quarter, as you know, we have a very large customer who did a wonderful job of giving color on their third quarter call, forecasting fourth quarter, saying that they were going through an ERP implementation. That implementation they said pulled some volume forward in the third quarter which we experienced, and softened fourth quarter. The volume -- or our demand strengthened, as the quarter went on, though we've -- as I said, we remain very, very bullish on the category.

All right. Thank you. Thank you for that. I'll get back in the queue.

Thank you. Our next question today is coming from David MacGregor from Longbow Research. Please proceed with your question.

Yes, congratulations on the good quarter, and again, thanks for all the detail and the color. It's very helpful. Karl, I wonder if I could just talk at a high level. Some of the manufacturers have announced a shift in product life cycle, embedding to three years from two years, and it appears to be good for them. But just trying to ascertain whether it's good for a key supplier like yourself?

Perry, do you want to take this?

Yes. This is Perry Davis. I can tell you that those life cycle are traumatic for the manufacturers and for the retailers, and I believe that this will be received positively. The every two-year refresh is almost a constant cycle of change for the manufacturers. And with the amount of floor samples, and sampling and product testing and everything that goes with that, as well as changes retailers as far as purchase and advertising, I think it'll be received positively, and looked upon as an adequate time span for any new product launch to be placed into the market.

Yes, David, I would agree. I would expect that there will be an expectation of more substantive innovation at each launch which is good for us, as you know, that we really are the driver of industry innovation in the bedding industry. So we see that -- I agree with Perry. I see this as a good thing.

Thanks. And just as an add-on, if you could just go back to Budd's question, and talk about the cadence within the quarter, that would be helpful?

Yes. David, I can address that. We had a -- unit shipments in the quarter, if you look by period. So in October shipments were off about 5% in November, up around 11%, and about 3% up in December, and for a total -- for the quarter of up about 3%. Now if you go back and you look at the ISPA numbers for that period, and we don't have the December numbers yet, obviously. But in October, ISPA reported a negative 2%, and then a positive 5% in November.

Yes. And, David, I want to take an opportunity to let all the listeners know, that ISPA has made a decision that we believe is very wise, and that's the elimination of monthly reporting. There are some irregularities in monthly, the timing of holidays, the pre-ship and pre-build to holidays. We only gave monthly quarter. We started it some time ago, because ISPA had. We are going to discontinue that, because we think that it just isn't sensible, for anyone to make investment decisions on what happens from a month-to-month basis. So we're happy to give you the color as Perry just did with the fourth quarter, but we just don't think it's prudent to do that in the future.

Understood. Thanks very much.

Thank you.

Thank you. Our next question today is coming from Keith Hughes from SunTrust. Please proceed with your question.

Yes. I had questions on the furniture brief, it was down 2% in the quarter. Just kind of commentary on trends there. I know you did fairly well in the seating, but there must have been some negative offsets.

Yes. Keith, this is Perry. There are negative offsets, with some deflationary pressures. I did a quick check of 2016. Obviously, we're early in the game here, but during the first three weeks of this year on a per-day basis, our furniture mechanism shipments are slightly up, just under 2%. They were slightly down in the fourth quarter, on furniture hardware units of about 1%, and then further offset by deflationary pressures.

Are the manufacturers, are they seeing -- I mean, it's kind of flattish demand, I guess, we average it out. Is that what they're expecting for this year, or is it expected to pick up?

There's some noise in the numbers. If you go back a year ago with the port strikes, and the shutdowns of the ports. There was actually a lot of business that we picked up incrementally last year, because we have a domestic presence, that would not necessarily repeat this year. So given the fact, that our unit shipments are as strong as they are to start off the year that says something I think, given the year-on-year comps, and what happened with all the port issues last year.

Okay. A final question on adjustables. I know you answered Budd's question earlier, but you've had several launches at the Las Vegas show. In this quarter, were there -- did new customers play a meaningful role in terms of the shipment cadence?

In the fourth quarter, Keith?

Fourth quarter, yes.

Yes. There was continued -- I wouldn't say so much new customers, there's been some good retail placement. But the industry continues to grow, that we feel that we're the largest producer in the category. And we -- and the quarter was good, absent the ERP noise and we expect that to continue. So we believe that we're well-positioned.

Yes, thank you.

You're welcome.

Thank you. Our next question today is coming from John Baugh from Stifel. Please proceed with your question.

John?

Perhaps your phone is on mute, sir? Mr. Baugh?

Thank you. Good morning. Congrats on a great quarter.

Thanks, John.

I was curious about the office furniture segment. I saw the 5% I believe same-location decline. Could you speak, maybe more specifically to the trends in the quarter, what you're seeing maybe in end markets there, or specific customer performance? And then, maybe the outlook for 2016 in that segment? Thank you.

Thank you, John. The majority of our organic softness in the quarter, was really outside the US, which is thus most impacted by the currency issues from -- and there were some mix issues, a little bit of softness in some domestic finished furniture. But from an industry perspective, BIFMA is forecasting 2016 growth in the 5% to 6% range. We feel that's appropriate, and we feel like we should grow at that rate from an organic perspective. Remember that we won't comp the European acquisition until April. So first quarter will grow, should grow at a little quicker rate of growth than that.

Okay. And maybe just as a quick follow up, any thoughts about how aggressive or not aggressive you may be towards acquisitions this coming year? You'll have, I think, even more free cash flow to deal with? Thank you.

John, I've got to kind of give a shout-out to our M&A team, that they had a fantastic year in 2015. And to close the European business that was -- that acquisition was really strategic. And then, to conclude divestures to get us completely out of the store fixtures business, which we'll declare victory on that one, to sell part of CVP, and then on Christmas Eve to get the steel tubing divesture done. All the while, they were looking at a number of acquisitions, doing very deep dives. And now in 2016, continuing to look at some additional divesture work and look at acquisitions. But I will say -- and we will be acquisitive. Matter of fact, I have every expectation that we'll close a small aerospace acquisition later this month, but it's small.

Our stated growth target, current stated growth target is 4% to 5% or really 2 times expectation of GDP growth. When we look at our strategic planned forecast for the next three years, so 2016, 2017 and 2018, we're looking today at a greater 7% CAGR. So 3 times our expectation of GDP. So we feel really good about where we're positioned from an organic perspective. So that allows us to be very systemic in our analysis of acquisitions.

So you're right, we'll throw off a lot of cash. How we apply that cash, we'll go through the normal usage. We'll continue to invest in organic growth. You see CapEx forecast for the first time, a little bit above depreciation and amortization.

That's an investment that we see in automotive, and continued growth in US and domestic -- US and European comfort core capability. We don't talk about Europe much. European spring had a fantastic quarter and is -- a year, and has sold out. So a long-winded answer, but we will continue to be acquisitive, but we have the luxury of continuing to be disciplined.

Great. Thanks for that color. Good luck.

Thank you.

(Operator Instructions)

The next question today is coming from Herbert Hardt from Monness Crespi Hardt. Please proceed with your question.

Good morning. A good year for you, and thank you. I have two questions, actually. One is aerospace was down. And is that just sort of a timing issue on shipments or something, because it's been a pretty good growth area for you?

Yes, Herb. The fourth quarter was a little bit of soft -- showed a little bit of softness. And we believe that there was a little bit of inventory true-up at the end of the year. We've seen pretty significant strength of recovery in January. The aerospace industry is always a little bit choppy, but our people have just done a tremendous job of execution in aerospace. That French business that we bought a 1.5 year or 2 years ago now, has performed well, well above any of our expectations. So we continue to remain very, very bullish, and expect from time to time, there'll be a little bit of softness.

Thank you on that. And the other question, regards residential and the consumer. I mean, if you look at the results in the last, four or five months, the high end people like Tiffany have had problems, the toy industry, the apparel industry. It's pretty mixed all over the place. And I am just curious as to, how you see this year playing out, other than auto which you've already emphasized?

Herb, this is Perry Davis. We went through a number of years, as you'll recall, where there was a real bifurcation in the market. And there was a lot of low-end product being sold, also at the high end, but not much in the middle. That seems to be where our business suffered during those years. Right now, and with the product introductions we recently saw at Las Vegas, we think there's room for growth at both the mid and the high end part of the market. We're seeing average unit retail prices, introductions there, some real strong introductions. And we believe that while the low end part of the business will remain, we think there's more upside in the mid to upper end price points.

Herb, at the risk of -- piling on a little bit to Perry's comments, the Las Vegas market that concluded last week, in my opinion, was the strongest showing that Leggett's had at any bedding furniture market. That the placement of product, comfort core primarily, but the addition of comfort core around the perimeter of mattresses, and in the comfort layer shows us that we will have significant bedding growth, content gains. The industry association ISPA is forecasting 4% unit growth. Our expectation is we'll exceed that. So we remain very, very bullish on the domestic bedding industry. And to be repetitive, on the European bedding industry, where we saw 28% unit growth last year.

Thank you.

You're welcome.

Thank you. Our next question today is coming from Allen Zwickler from First Manhattan. Please proceed with your question.

Good morning, gents.

Hey, Allen.

Good morning, Allen.

I had two questions that are totally unrelated. One, in the auto side, to what extent, or what percentage -- are you there?

Yes.

Yes.

Okay. Either to what extent or what percentage would you say, that your auto business is designed into a particular vehicle, versus ordering year by year depending on the style, if you understand where I am going?

Yes, Allen. All of our auto business, other than a little bit of cable business, is specifically designed into programs that are awarded a long time in advance. Our automotive team did a great job last year of landing awards, that will primarily start to ship the end of 2017, and be fully ramped up 2018 and 2019. So we're designed into programs that have very long tenures.

And, Allen, this is Matt. I would just add that, that's why there's such good confidence in our ability to say, we will grow 10 percentage points better than the market over the next several years, because of that visibility on those programs.

Well, that's what I was getting at, because 10% in the auto business is a nosebleed, but okay. And secondly, and I didn't look at the slides on the website, I apologize. But just if we were to look at operating results, operating profits versus operating profits from 2015 to 2016, and we get rid of what is atypical for Leggett with noise, what would you say your growth is expected to be, based on the projection that you made?

Well, our operating earnings growth will pretty much be synchronized with the adjusted EPS growth year-over-year. So this past year, as you well know, our EBITDA, for example, was about $600 million, and it will be up low to mid single-digits, based upon all sorts of things that might occur obviously, there in 2016, is our baseline expectation.

Okay. So all else being equal, that's what we should -- I mean, if one were to project out what your growth is, if you know what I'm saying, ex what we're [a lot] of items, there's nothing in the DA that's changed very much as usual, is that correct?

That is correct.

Okay. So it's a couple -- so you say, you're going to grow maybe a couple percent year-over-year on the operating line before. Are there any changes in the tax rate, or interest expense or anything like that, that we should be aware of?

Nothing dramatic. Our expected tax rate this year as you know, and they're on the slides. I know you'll have a chance to reference those.

I apologize then. I'll look at it. (multiple speakers)

29% is our expected tax rate this year. That's a little bit higher than it has been in previous years, but we hope there's a bias to bring that down. We'll see. But the big answer to your question there is, no, we don't expect any significantly dramatic changes in some of those operating earnings aspects this year. But it's, February 1 so.

Okay, great. Thank you so much, guys. Good job.

Thank you.

Thank you. Our next question today is coming from Daniel Moore from CJS securities. Please proceed with your question.

Thank you. I know you touched on auto quite a bit, but just curious, you mentioned the 4% projection in global growth. Just is that consistent with what you're seeing in the marketplace, kind of on the ground? Obviously, you're taking a ton of share, but how much confidence do you have in that projection, based on what you're hearing from customers?

Dan, at this point we feel pretty confident that, that 4% is HIS data for major market growth, which is -- it's really a kind of significant growth appreciation from the 2014 to 2015. And to break it down, North America at 4%, and Greater China at almost 7%, we have confidence in that data. That's there's too early in the year to say that we see anything different. And again, it's important that there are content gains within a vehicle, but market share gains aren't really that available to us, in that we believe that we touch about 85% of the vehicles produced in the major markets in the world. So we have really good visibility.

That's very helpful. I misspoke on content versus share, but that's great color. Thanks, again.

Thanks, Dan.

Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over to management for any further or closing comments.

Thank you for your participation. We do appreciate it, and we'll talk to you again next quarter.

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