Leggett & Platt, Incorporated (LEG) Q4 2007 Earnings Report, Transcript and Summary

David M. DeSonier – VP ofStrategy and Investor Relations Felix Wright –Chairman and Consultant David Haffner – CEO and President Matthew Flanigan – Chief Financial Officer, Sr. VP Karl Glassman – Exec. VP Susan McCoy – Dir. of Investor relations

David Macgregor – LongbowResearch Budd Bugatch – Raymond James Laura Champine – Morgan, Keegan & Company, Inc. Joel Harvard – Hilliard Lyons Keith Hughes – Suntrust Robinson Humphrey John Baugh – Stifel Nicolaus & Company, Inc Cory Arman – Sprice Volker Marc Heilweil – Spectrum Advisory Services Fred Spiece – Spiece Dorson-Thorton Capital Growth

Welcome to the Leggett & Platt Fourth QuarterEarnings Call. (Operator Instructions) I know now like to turn theconference over to our host, David DeSonier.

Good morning and thank you for taking part in Leggett & Platt Fourth Quarter Conferencecall. I am David DeSonier the Vice President of Strategy and Investor Relations and with me this morning are thefollowing. David Haffner our CEOand President, Karl Glassman our Chief Operating Officer, Felix Wright who is Leggett’s Chairman of the board,Matt Flanigan our CFO, and Susan McCoy our Director of Investor relations. The agenda for today’s call is as follows, Dave Haffner willstart with the summary of the major statements we made in yesterday’s press release. Karl Glassman will discuss trends in ourvarious markets. Dave will then addressour outlook for 2008 and finally the group will answer any questions you have. This conference is being recorded for Leggett & Plattand it is copyrighted material. Thiscall may not be transcribed, recorded or broadcasted without our expressedpermission. A replay is available fromthe IR portion of Leggett’s Website. In addition, I need to remind you that remarks todayconcerning future expectations, events, objectives, strategies, trends, orresults constitute forward-looking statements. Actual results and events may differ materially due to a number of risksand uncertainties and the company undertakes no obligation to update or revisethese statements. For a summary of these risk factors and additionalinformation please refer to yesterday’s press release in the section in our10-K entitled forward-looking statements. I will now turn the call over to Dave Haffner.

As anticipated yesterday, we reported a net loss for the fourthquarter as a result of implementing our strategic plan. In our November and December Press release,as we told investors that we would incur a significant non-cash charges. Consistent with our forecast during the quarterwe recorded $143 million of goodwill impairment in our fixture and displayoperations and $132 million of asset impairment associated with businesses weintend to divest. As a result we have now incurred virtually all of theone-time cost associated with our strategic plan. Operationally for the quarter are ongoingbusinesses performed in line with the guidance we issued in December versusFourth Quarter 2006, earnings from the ongoing operations declined primarilydue to lower sales in our domestic residential related businesses, increasedmedical and energy cost and currency impacts. For the full year 2007, we reported a net loss of $0.6 pershare, reflecting the large non-cash impairment charges previouslymentioned. Operationally, earningsdecreased versus the prior year, primarily from lower organic sales. We experienced soft demand throughout 2007 inour US homerelated and retail markets but these declines were partially offset by strengthin international markets and the non-dealer portion of the domestic commercialvehicle products business. Despite lower earnings in 2007, our financial profileremains very strong. We generated recordannual cash from operations during the year of $614 million. A 28% increase over 2006. In a large part due to our on going emphasison working capital management. Wecontinued to have an excellent balance sheet in the end of the year with Net ofVAT at 28% of net capital below our long-term target level of 30% to 40%. In November, we increased our annual dividend by 39% to$1.00 per share, which equates to a current yield of 5.5%. This year 2008, marks the 37th consectutiveannual dividend increase for Leggett and an average compound growth rate ofover 14% and we also purchased 11 million shares in 2007 and reduced ouroutstanding shares by 5%. Several markets remained soft as we entered 2008, with novisible catalyst to aggressively alter demand in the next few quarters. We are focused on creating long-term value byimplementing in our strategic plan and our efforts should benefit share holderseven as the economic and market conditions remain challenging. As announced in November, we adopted TotalShareholder Return or TSR as our primary as our primary strategic objective andexpect to achieve 12% to 15% annual TSR over the long term. We aim to generate TSR and roughly equal amounts from threedifferent sources. Earning’s growth,dividend yield and share repurchases. Weexpect that more balanced three-prong TSR strategy to generate higher returnsat considerably lower risk. We haveadopted role based portfolio management with different roles for each businessunit based upon competitive advantages, strategic position and financialhealth. We have begun implementing in amuch more rigorous strategic planning process in part to continually assesseach business unit’s role in the portfolio. Businesses that remain in the portfolio, need to generatereturns in excess of the companies cost of capital. Though most of our business units aregenerating adequate returns, each has opportunities to improve. We are eliminating 1/5 of our portfoliolargely through the divestitures, which are proceeding as planned. Investment bankers are assisting with the sale of thealuminum product segment and three of the other business units. We have already received expressions ofinterest from numerous potential buyers. We continue to believe that the divestitures will occur during 2008 andexpect after tax proceeds of approximately $400 million. Given the market’s interest in small to mid-sizedtransactions in the tangible assets associated with these operations, webelieve our expectations are reasonable. We expect to generate significantly more cash as a result of thesechanges and we intend to return much of this cash to shareholders. For the next few years we will need about $300 millionannually to fund collectively capital expenditures and dividends. That need should readily be met withoperating cash flow. As I mentionedearlier we generated $614 million of operating cash in 2007. We anticipateusing much of our excess cash, including divestiture proceeds to repurchaseshares, pending board approval for purchase over the current 10 million shareauthorization. Given our strong consistent cash flow, even during softeconomic cycles, we are confident we can meet these priorities. And with those comments I will turn the callover to Karl Glassman who will discuss the segments in more detail.

In my segment comments this morning, of the addressing resultsrelated to our continuing operations, as we mentioned in yesterdays, pressrelease, the businesses we plan to divest in 2008 are now reflected in thefinancial statements is discontinued operations. So the results for the quarter and full yearare not included in this discussion. With that said, in the residential furnishing segmentorganic sales decreased 7% in both the Fourth Quarter and the Full Yearprimarily due to soft demand in the USresidential markets and very strong prior year cons in our carpet underlaybusiness. International demand for betting and upholstery furniturecomponents remained strong throughout the year. Fourth Quarter EBIT and EBIT margins decreased versus the prior yearreflecting higher impairments and restructuring the related charges. Lower sales in the carpet underlay anddomestic betting businesses and increased medical expense energy cost and legalreserve. Full year EBIT declines alsoreflect the higher impairments and restructuring the related charges and lowersales. In commercial fixturing and components, organic salesdeclined slightly in the fourth quarter primarily due to lower demand and storefixtures and our decision to walk away from sales with unacceptablemargins. Non cash, goodwill impairmentcharges of $143 million and other restructuring related cost of $9 million leadto a substantial fourth quarter EBIT loss in the segment. For the full year, sales decreased 3%primarily due to lower store fixtures volume but also from slightly lowerdemand for office furniture components. Declines and full year EBIT primarily reflect the goodwill impairmentand restructuring the related charges and lower sales. Late in 2007 we completed the acquisition of an officefurniture component’s business located in Chinawith annual sales of approximately $20 million, this operation gives us anAsian presence for producing and supplying our customers who source a portionof their finished products and components offshore. In industrial materials, organic sales weredown 3% for both the Fourth Quarter and Full Year 2007. Continued softness in the USresidential markets lead to lower unit volume but this decline was partiallyoffset by inflation of the steel prices. EBIT and EBIT margins in fourth quarter also declined slightly versus fourthquarter 2006. Lower volume and highersteel scrap cost were the main factors behind the EBIT decline, but we arepartially offset by earnings from an acquisition completed early in 2007. EBIT for the full year was roughly flat asthe impact for lower organic sales was offset by earnings from acquiredbusiness. In specialized products, weposted strong organic sales in both the fourth quarter and full year,reflecting worldwide growth in our automotive business and continued strong performancethan of the non-dealer portion of commercial vehicle products. Despite strong sales growth, fourth quarter EBITdecreased versus the prior year reflecting currency impacts, non-recurrence ofprior year one-time benefits in higher restructuring related cost. For the full year 2007, EBIT and EBIT marginsimproved significantly, reflecting higher organic sales in the segment inearnings from a company acquired early in 2007, which were partially offset bycurrency barriers. With those comments,I will turn the call back over to Dave.

As we announced inyesterday’s press release, we expect Full Year 2008 Earnings from continuingoperations to be $0.95 to a $1.30 per share. This includes $0.05 to $0.10 per share in restructuring related cost,but does not account for potential earnings from discontinued operations norany possible gains or losses from the divestitures. We expect to use the entire 10 million sharerepurchase authorization during 2008 and have reflected the resulting sharereduction in our full year guidance. Sales from continuing operations are expected to be approximately $4.2billion or about 2% lower than in 2007. This decrease reflects the planned elimination by the end of 2008 ofapproximately $100 million of revenue with unacceptable profit margins in ourstore fixtures business. It alsoreflects minimal acquisition revenue in essentially flat sales collectivelyfrom operations other than store fixtures. Despite the factthat 2008 will be a complicated reporting year as the divestitures arecompleted, we are confident in our execution of this strategic plan. Shareholder returns have suffered for thepast few years, but we believe our actions will re-establish Leggett as a moreprofitable company, one that generates above average total shareholder return. With those comments I will now turn the callback over to Dave DeSonier.

That concludes ourprepared remarks, we appreciate your attention and we will be glad to answeryour questions. In order to alloweveryone an opportunity to participate, we again request that you ask yoursingle best question and then voluntarily yield to the next participant. If you have additional questions pleasere-enter the queue and we will answer all the questions you may have.

(Operator givinginstruction) Our first question comes from David Macgregor with LongbowResearch.

A question and a clarification, just first on theclarification, on the shared purchase authorization, do you begin the year witha fresh 10 million authorization or there is something back from the fourthquarter.

We had about $1million of the ten million share authorization we acquired in the fourthquarter David, so we have a run rate now of 9 million for the rest of thisyear.

For 2008 and I was not clear on the actual end of quartershare count, was it 175, 175.4 was your average, but another point in your pressrelease, you made reference, 169 million shares. What was the actual quarter end of sharecount?

The end of quarteroutstanding shares at end of quarter is 169, but the average deluded for theyear was 180, the average basic was 179, the average outstanding was 174, sothere is lot of ways to report that.

But, the actual outstanding atthe end of the quarter, can you give that fully diluted?

Those are twodifferent things, outstanding was 169 and if you move that to a diluted basisyou probably have to add about 6 million shares.

We had to do. We makereference in the press release to medical and energy cost. Can you quantify those forces, the percentageof your overall costs, just to give us a sense of proportion?

Okay. For the FourthQuarter, our energy costs were up $11.5 million and medical costs were up $6.4million, David.

That is building year-over-year cost,right?

Yes, right, Fourth Quarteryear-over-year. Yes.

Okay, great. I will get back on the queue. Thank you very much

Our next question is from BuddBugatch with Raymond James. Please goahead, sir.

Talk a little bit about your guidance in terms of therevenue guidance and how that breaks down by segment, if you would? You have had obviously, a significant impactwith the consumer-related businesses and yet, specialized at a remarkablyinteresting positive same location growth in the fourth quarter. How surely do you think about it for theentire year? I know you are not givingquarterly guidance but talk a bit about what you think the year looks like – itsinternal growth on those four segments.

Budd, on the specialized side, let us kind of take some ofthe price for the growth of the table. There was strength certainly, in the automotive, mostly internationalmarkets. A mix between Europe and Asiaand then also, on the fleet side of commercial vehicle products, there wassignificant strength in that business that were defined programs in 2007 thatwe do not expect to repeat at the same velocity of 2008. But also, we were from a tough linestandpoint and specialized positively impacted by about a third of that growthof currency, knowing that international mix of those businesses, in terms of ourguidance going forward by segments.

I am getting them here. For ongoing operations, residential should be about 49%, commercialshould be about 16%, industrial materials should be about 17%, and remainderwhatever that would be should be about 17%.

That is of net trade sales, not grosssales, right?

Total gross sales beforeeliminations?

Before eliminations, that is correct. And in general, residential about flat, theseare total sales, commercial is about a hundred million or less, this is what wetalked about in the press release, in industrial materials is about $30 millionto $40 million or more, and in specialized, about $60 million to $70 millionmore.

And, much in the way ofacquisition in any of those?

We had four-year impact in both industrial and specializedof some approximately April timeframe acquisitions. Those are fairly small income.

Yes. Just somerunoff, and then you get the full year of that $20 million commercial acquisition.

Alright, I will get back inqueue as well.

Altogether Budd, there is about $40 million in those numbersfor acquisitions across the company.

Our next question is from LauraChampine. Please go ahead. Laura Champine – Morgan, Keegan & Company, Inc. : A couple of things that I am wondering if you will provideat some point in 8-K, it is tough for me doing that P&L that gets me tothat 23-cent positive number. Thecontinuing ups from the profit loss that we see as a loss of $0.71. And it is tough to tell what blind item thatcharges the impact and also, I am wondering if you will give us a segmentbreakout for the quarters last year at some point to help us forecast this yearon a continuing basis.

Yes, Laura if you called me or Susan we have got all thatdata and be glad to share it with you. Laura Champine – Morgan, Keegan & Company, Inc: Okay, and then this $100 million that is coming out of the commercialbase root. How does that compared to —Ithought there was about $300 million in total business that you are walkingaway from in 2008.

Laura, it was a split—If in yesterday you will recall therewas about a $100 million that came out of F&D, so we are consistentthere. There is another about $200million that we earmarked as business that we were going to eliminate in whatwe call the under performing operations. We are in the process of doing that, some of that top-line waseliminated in the fourth quarter. Theremainder of it to various degrees will be eliminated for small divestitures as2008 progresses.

Our next question is from JoelHarvard with Hilliard Lyons. Joel Harvard – Hilliard Lyons: The pace of acquisitions, it looks like it picked up inQ4. The Chinaoffice was interested against two parts to this question. Were there any other particularly noteworthyindividual acquisitions in the bucket for Q4, and more over, is this moreindicative of the pace you think the company is getting back to or was this bitof an outlier?

Big or small, Joel of course, we are pulling back fromacquisitions relative to the phase we had in the past. On the other hand, it is repeating myself, buton the other hand we are very interested in those opportunities that comealong-whenever they come along that sits extremely well with these newstrategic plans. Although, I know I am talking out of both sides of my mouth… I hate to say we are going to make any significantacquisitions as you know we have certain things on our radar screen butgenerally speaking we are backed away from our previous rate of acquisition atleast for the time being, and we are being much more critical of the evaluationof those acquisition and the strategic fit of those acquisitions. Joel Harvard – Hilliard Lyons: If you allow me one little followup on that, I know for awhile management had been talking about looking outside of the old core. Is 2008 not a year to think about then?

That would be reasonable to think about that in the futurebut 2008 would not be the year to think about that.

Our next question is from Keith Hughes with Suntrust. Please go ahead sir.

I have a question on the residential segments. Was the same store sale declined there? Werethere any notable deviations from that either positive or negative from thenegative 7% you discussed in press release?

Yes, let me put some parameters on it, Keith. USspring was down approximately 9%. International spring was up about 15%. Furniture was flattish with international being up 8% to 9% offsettingthe domestic weakness. Consumerproducts was negative about 4% to 5%. Carpet cushion was the biggest issue, it was off about 26% interestinglyenough, and when I have given you all in terms of revenue. In units carpet cushion was actually slightlypositive in the fourth quarter. So there has been a significant decrease in averaging thatselling price at a rate that actually closely parallels a decrease in the costof the basic raw material which is bone scrap. There is movement all over. Generally what we saw was strength in international and offsettingweakness in the US.

Could you give us just kind of a brief ranking of those, ofwhere they stand now in terms of top two or three segments, I assume springsare number one.

Springs collectively, when you blend international anddomestic, certainly is the largest furniture, is getting close because of thatinternational footprint, but they all continue to be extremely important to us.

A final question on the furniture, is the international andthe domestic – Are getting relatively close in size or is internationalstill a lot smaller?

International is still muchsmaller.

(Operator instructions) Our next question comes from David Macgregor- LongbowResearch. Please go ahead, sir.

Yes. Just a followup, just concerned a little about this cost in 2008 and watching the scrapmarket to push up to $400 here and just wondering what influence you mentionedin your prepared remarks that scrap costs have been a factor, and your EBITmargins to that industrial material segment. I am wondering as you look to 2008, how this comes into play, I guess bothin terms of industrial materials but also in the spring business?

We share your concern that scrap moves significantly inDecember and then open in January with the same sort of upward movement that wepassed or in the process of passing through some wire price increases. We announced an industry increase effectiveearly January and now a second increase effective early February. Scrap has a gone wild. We expect it to stabilize going forward but actually your visibilityprobably is better than ours at this point, we are concerned. We do not see a 2004 like run up, but theearly characteristics feel very similar to what we experienced to thatpoint. We do not think that they willbeat us. The steepness of the slope or theduration of the time but it is a concern at this point. Our costumers are all unnoticed; their largeincreases were seeing the same dynamics now in the flat products where with thescrap surcharges that have been imposed on us by the large steel producers bothinternational and domestic. We are infor Mr. Toad’s Wild Ride again.

“Mr. Toads Wild Ride,” Well, if you talk about the priceincreases you have planed for January and February are you going to cover thosehigher costs? Is it going to be anefficient pass through at this point or how much do you think are you going toearn on this?

David, as usual, there is a bit of a delay. It seems like our suppliers are much-muchquicker and maybe a little more ruthless with us than we tend to be with ourcostumers. So there is a little bit of adelay but as we historically do with some pain, we will pass them through. We do not expect significant margindeterioration in the wire products or the flat products.

I would add, Dave, that the budgets that we put togetherwhich are the foundation of this forecast, take that delay into account andbased upon our best assumptions on what rod cost are going to do and scrap costare going to do. So we have taken a bitof negative variance already into account because of that delay that Karlmentioned.

Are you seeing similar inflation in any of the others, sortof non middle class or maybe your non fairest cost?

You know absent from a raw material perspective, we areseeing a little up take in the petrochemical based cost, but nothing of thatmagnitude.

Our next question is from BuddBugatch with Raymond James.

I got a couple of - just financial statement kind ofquestions. When you do the math on netof assets held for disposal, I come over about $481 million net number. How does that comport with your $400 millionafter-tax expectation and proceeds, should we expect another $80 million write downat some point in time?

No! But it is a very good question. The $400 million is a tax affected cashamount we expect to receive, that is the asset base that associate with that wewould hope to do better but certainly from our perspective that $400 million isthe right bar to hold this to, and again, that is tax affected number.

But the financial statementshave got a forerating number and that is also tax affected, right Matt?

Well; it is not anticipated tax effect based on what wesell, one of these business units for versus another one. They all have their own tax basis.

But for those who are pre-taxasset numbers.

Okay, alright. So that is helpful.

Well, and 400 is an after taxnumber is the key, but yes…

And Budd this is Dave. We feel that it is important to be conservative in the forecast of thoseproceeds.

Okay. And when I lookat the cash flow statement and the $600 million plus that generated this year,a $180 million of that came from working capital changes, $107 million from netincome plus depreciation with— I think the balance through theadjustments. How do you think thatbreaks out for 2008? What should we lookat? What should we plan for workingcapital changes and the other segments of that cash flow from operations?

Good question. We arereally pleased obviously to see that happen in 2007 and just so you have, onlyyou can not see it on the statement here, but you would in the 10-K when itcomes out. But the pieces that reallyhelped the working capital flush of cash in 2007 was about $100 million dollarsrelated to receivables. Better collections, a bit of the sales drop phenomenonhappening there, but largely better collections, $65 million associated withinventory and about $13 million related to payables management. So as you go to 2008, a good estimate on operating cash flowwill be poor working capital changes would be about $400 million dollars. We certainly would expect to be able togenerate some additional working capital cash this coming year. It would not be anything we do not believenear the magnitude it was in 2007 for a variety of reasons, but it certainlyshould be paused at maybe zero to $50 million. We are very dedicated to it obviously.

Our next question is from John Baugh with Stifel Nicolaus,please go ahead sir. John Baugh - Stifel Nicolaus & Company, Inc: It sounds like you have lost the adjustable bed business toTemper-Pedic that you are supplying. Ifthat is true, I am not particularly interested in the dynamics of thatspecifically, but I am wondering what parameters that speak to in terms withgeneral business if there is something going on in China,in subsidies, on those types of products. In what kind of competitive positioning does an event like that speakto?

First off, you are correct. We have been notified by that costumer that we have lost thatbusiness. Steel prices in Chinaare inflating, are there subsidies in Chinawe certainly believe that that is the case within our springs or we would nothave filed the anti dumping petition. Do they flow over to their adjustable bed supplier? Cannot answer, the dynamics in that market,we are fully dedicated to the adjustable bed market. We see it as significant growth area. What we have done is, historically, we havedistributed that product through an intermediary, which is, probably would noteven try to use it again, which has been through the bedding manufacturer,which has been our typical mode to market. And now, we are switching to a strategy of direct to retail, speaking toretailers, taking that sale is one that is difficult for a bedding manufacturerto handle because of the size and bulk of that product. We have long have provided the serviceelement of that sale. So, we will seehow Temper does with their change. Thereis some risk in conversion with the offshore supplier who does not havewarranty and service that is domestic. We will see how they do, but we are fully dedicated to thatbusiness. We will continue to service itand expect it to grow, going forward. John Baugh - Stifel Nicolaus & Company, Inc: Do you have not the capability to make that product in Chinayourselves? Would you have access to steelper cost over there that are similar to your competitors over there?

Yes, actually because we are major producer of steel-formproducts in Chinathat we understand those deal economics very, very well. The price of steel from a flat perspective isequivalent in China to the USprices and I know, we do not believe because we own and operate those, ouroperation in China, we do not believethat there is a competitive advantage to making that product, the steel portionof that product in China. Our electronics that service that product are sourcedinternational already, so we designed, blend and assembled that productdomestically as it is. We believed weare very efficient to market. John Baugh - Stifel Nicolaus & Company, Inc: As a follow-up on the worth 9% of US spring decline. It sounds like it retailed in betting thingsreally tanked in December and continued to be very soft in January. Did you see that in your order pattern, youmentioned flat, I think it was your comment for residential in 2008. Curious as to what you seeing and betting andwhat your assumptions for betting, specifically, are in 2008.

You are correct, business actually November, December weretough and I would say January is at the same level, we have not really seen anyfurther deterioration. It seems like thelarger manufactures continue to perform relatively well in mid-sized andsmaller manufactures are getting squeezed a little bit, so that is where thatsoftness is. Our assumption goingforward in units in 2008 is flat, up a couple of piece of percent and webelieved that we will regain some market shares through our product developmentinitiatives. We do not believe that themarket will be positive in units, in 2008. I do not believe it will deteriorate significantly, either.

Our next question comes from CoryArman with Sprice Volker please go ahead sir. Cory Arman –Sprice Volker: I just had one quick question. You guys had mentioned a legal reserve inyour December press release. Is thatmaterial and how much is it and what is it related to?

It is not material, for a premise, it is sort of $45 millionand it has to do with a dispute relative to a purchase and supply agreement andthe exclusivity of that. It is in arbitration,as we speak. Cory Arman –Sprice Volker: This is not a question, it is just a comment. I know you got a question earlier aboutreconciliation of the core EPS to GAAP EPS, it would be great to have that inprint for everybody to see, rather than having that taken offline, that is justa comment.

Our next question comes fromMarc Heilweil with Spectrum Advisory Services. Marc Heilweil – Spectrum Advisory Services: I wrote the Board Chairman, I think about a year and a halfago or two years ago and I think that just maybe the board needs a littlefreshening up. They really have not – I do not think that it is still a job thatis providing the kind of guidance that the management needs and obviously youare hiring consultants now and investment bankers and alike. Would you care to comment on giving the longtenure, maybe you need some fresh perspectives on your board? I know that is a difficult thing for you tocomment in public, but I was curious I never did get an answer to that query.

Marc that is a good question. I apologize if you did not get an answer tothe query. Felix and I are both here andI will start and then, I will ask Felix to give his perception, but I can sayfrom my perspective, the board has been extremely helpful in the recent patyears, as we have addressed the need for these strategic changes. The board in many ways was arm-and-arm withus and in some ways, in fact, behind us, the operating management goosing usinto some of the necessary introspective analysis that we have done. Marc, the use of that outside consultant was primarily fortwo reasons, one was speed and the other was for independent thoroughness, sowe did not limit our perspective on the analysis, because of any internalbiases. They were very, very helpful,but I will just repeat myself, we have got a range of board members, relativeto tenure. We have got some extraordinarily good, relatively, new board members that bring marketing, brandingand retailing. So I for one feel verygood about the support in your management has got from the board and the pushthat they put us through, but Felix, you are here; you should give yourperspective.

Marc, obviously Dave certainly, saying what he feels and etcetera and I think that you have heard it, but the only thing that I would echo,I would hope you and anybody else did not think that there has been boardentrenchment or anything there that has kept anything from heading to pureindependence on this board. Dave wassaluting to we have eight outside independent directors. Obviously, we could have nine if you want toclassify one of them in that way. We goteight purely, outside independent directors. As Dave stated, they bring a number of skill sets to thiscompany that are outstanding, running their own companies, doing their ownprofessional services and et cetera, and I think that as Dave has expressed, theyhave been hand and gloved with management for quite sometime in bringing to forththe new initiatives that have brought the new strategic initiative going forthto the company and I believe that probably, if you were inside that board, youwill try as progressive and a board in trying to help and guide management intheir decisions as there probably is, but we appreciate your comment.

Our next question is from FredSpiece with Spiece Dorson-Thorton Capital Growth. Fred Spiece – Spiece Dorson-Thorton Capital Growth: I think your quote operating EBIT margin was about 8.5 thisyear and in your forecast, going forward to 95 to 130. Is that operating margin as you defineit? Is it going to go up or down?

Fred, our operating margin or EBIT margin for 2007 oncontinuing operations is closer to 7.8, about that. And, looking forward the mid-point of ourrange roughly anticipates about an 82% or 83% EBIT margin, so we are definitelylooking for some improvement year-over-year, in continuing operations. Fred Spiece – Spiece Dorson-Thorton Capital Growth: And then, one comment, consultants are wonderful to have fora short period of time, but they never go away. I think it would be terrific if they went away and you went back torunning the company without too much help from them. I think you read the operators who you likeand those people - their usefulness is short term.

Yes, Fred you know us very welland you know my background.

There are no further questionsat this time.

We will just say thank you. If you have follow-up questions please call Susan or me and I thank DaveHaffner.

Ladies and gentlemen this concludes the Leggett & Platt Fourth Quarter EarningsConference Call, you may now disconnect. Thank you for using ACT Conferencing.