Greetings, and welcome to the Leggett & Platt's Second Quarter 2014 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dave DeSonier. Thank you, sir. You may begin.

Good morning, and thank you for taking part in Leggett & Platt's second quarter conference call. I’m Dave DeSonier, the Senior Vice President of Strategy and Investor Relations, and with me today 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 Staff 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; Matt Flanigan will discuss financial details and address our outlook for the remainder of 2014; Karl Glassman will provide segment highlights; and finally, the group will answer any questions that you have. 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 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.

Thanks, Dave. Good morning, and thank you all for participating in our call. We’re very pleased with second performance in the majority of our operations and are seeing improved sales momentum in nearly all of our key businesses. Same-location sales grew 4% during the quarter with strength in all of our residential markets, Office Furniture Components and Automotive, partially offset by lower volume in Store Fixtures and Commercial Vehicle Products. Excluding the weak performance in Store Fixtures and CVP, growth during the second quarter was strong with sales up 10%. From a reported GAAP earnings perspective, as announced on July 14, we recognized a $108 million or $0.65 per share non-cash charge for the complete write-off of the goodwill associated with the Store Fixtures Group. Excluding this charge, second quarter earnings per share were $0.48, a 9% increase versus continuing operations earnings per share of $0.44 in the second quarter last year. This increase is primarily due to sales growth, reduced share count, and a lower adjusted tax rate. Second quarter adjusted EBIT improved slightly versus second quarter last year with the benefit from broad-based sales growth, largely offset by weak performance in Store Fixtures and the non-recurrence of prior-year gains from asset sales. Adjusted EBIT margin for the quarter was 10.1%. As we announced last week, we have engaged an investment banker to help explore strategic alternatives for the Store Fixtures business, including the possible divestiture of that unit. In a very positive long-term development, on July 1, we jointly announced with Tempur Sealy, the purchase of their three U.S. innerspring component production facilities. In conjunction with this purchase, we also expanded and extended our supply relationship and became the exclusive long-term provider in the U.S. and Canada of wire-based innersprings for Tempur Sealy and boxsprings for Sealy. We are very pleased to have completed this transaction and we look forward to the expanded long-term strategic partnership. The additional production should enhance economies of scale, benefit from our vertical integration in steel rod and wire and allow manufacturing optimization across a broad asset base. We expect this agreement to add approximately 2% to sales and be neutral to EPS over the first year as we execute our integration plan. 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. So far, for the three-year period that will end on December 31, 2014, we’ve generated TSR of 20% per year on average, which places us just below the midpoint of the S&P 500 over that same time frame. I’ll now turn the call over to Matt Flanigan who will discuss some additional financial details along with our outlook for the remainder of 2014. Matt?

Thanks, Dave, and good morning, everyone. Well, as expected, operating cash flow returned to strong positive territory in the second quarter and grew to $103 million, up 4% versus the same quarter last year. We ended the quarter with working capital at 12.5% of annualized sales, consistent with the second quarter of 2013 and notably better than our 15% target. Based upon our current annual forecast and our normal seasonality, we expect to again generate operating cash of over $350 million for the full year. Dividends should require about $170 million of cash in 2014 and capital expenditures approximately $100 million. Our depreciation and amortization expense should total about $120 million. We continue to make investments to support growth in businesses and product lines where sales are strong and for efficiency improvement and maintenance. As volumes improve, we expect capital expenditure levels to increase, but longer-term they will likely remain at or below total depreciation and amortization. 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 investing capital dollars where the highest return potential exists. Returns should continue to improve as we expand EBIT margins while controlling invested capital. In May, we declared a quarterly dividend of $0.30 per share. As such, 2014 marks our 43rd consecutive annual dividend increase at a compound annual growth rate of 13%. At yesterday’s closing price of $32.87, the current yield is 3.7%, which is the fourth highest among the 54 companies that comprise the S&P 500’s Dividend Aristocrats. We repurchased 2.3 million shares of our stock in the second quarter at an average price of $33.33 and issued 700,000 shares. Consistent with our stated priorities for the use of excess cash flow, we…

Thank you, Matt, and good morning. As Dave mentioned, most of our businesses performed extremely well in the second quarter. In the Residential Furnishings segment, same-location sales increased 9% with each of the major businesses growing during the quarter. In U.S. spring, component dollar sales increased 4%. Innerspring unit volume was down 3%, however, growth in the Comfort Core premium innerspring category continued with those higher-priced and higher-margin units up 48% during the quarter. Boxspring unit volume was essentially flat. Sales grew 8% in International spring, primarily from market share gains and increased Comfort Core sales in Europe. In Furniture Components, sales increased 7% in the second quarter. Volume in our seating and sofa sleeper businesses grew 4% and motion hardware unit volume was up 14%. Adjustable bed units grew 35% in the quarter. New adjustable bed programs have begun to ramp up and should continue to drive significant volume growth in the back half of the year. Segment EBIT and EBIT margin for the quarter increased versus second quarter of 2013 primarily from higher sales and favorable product mix, partially offset by the non-reoccurrence of last year’s gain from a building sale. In the Commercial Fixturing & Components segment, same-location sales decreased 24% in the second quarter. Store Fixture sales declined significantly due to the non-recurrence of major retailer programs from second quarter 2013 and unanticipated weak overall market demand. Volume in Office Furniture Components grew 8% during the quarter, largely from new programs that we have been awarded and gradually improving market demand. Segment EBIT and EBIT margin, adjusted to exclude the goodwill impairment charge, decreased versus the second quarter of 2013, primarily due to lower sales. In the Industrial Materials segment, second quarter same-location sales decreased 4% primarily from lower unit volume in wire and industrial tube.…

Thanks, Karl. As we look ahead at the balance of 2014 and beyond, we continue to be very encouraged by the opportunities we are seeing in many of our markets. Enhancing our portfolio of businesses by identifying opportunities to grow competitively advantaged positions while reducing our exposure to businesses that don’t provide long-term strategic value remains a top priority. We believe these actions are keys to our long-term success and consistent achievement of our top third TSR goal. And with those comments, I’ll turn the call back to Dave DeSonier.

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

(Operator Instructions) Our first question today is coming from Josh Borstein from Longbow Research. Please proceed with your question.

Good morning, everyone. Thanks for taking my questions here. Dave, you mentioned some broad-based growth which you haven’t seen in some time, but when you back out the $40 million from the Sealy spring business, the revenue guidance seems a little less optimistic than those comments would suggest, can you help reconcile those two things, it is mainly just the Fixtures and CVP business that’s causing the variance there?

That’s correct, Josh. Even if you back out the imputed $40 million in the back half, we’re seeing growth that we haven’t seen in a long time and it’s extraordinarily encouraging. All the rest of the business units within Leggett are experiencing strong upward bias in demand except for those two that we mentioned.

Great, thank you. And then, maybe Susan, this is for you, I know you updated us on your guidance by segment at the midpoint if guidance is changed, the segment guidance changed since we last spoke?

Yes, Josh. From the midpoint, I think your question is sales growth related, but at the midpoint of our guidance, which is 5% sales growth. For Residential, that would be somewhere in that 8% to 9% growth range and that includes 3% growth from the acquisition. Commercial would be down in the mid-to-high teens again on weakness in Store Fixtures. Industrial would be up around 3% with that basically being the growth we’re getting from the acquisitions that were completed last year in Aerospace. And Specialized up in the 10% to 11% range. And if you aggregate all that, that should get to about 5% midpoint growth. You can decide if you want to be high or low in our 4% to 6% range, but that’s the midpoint.

Great, that’s helpful. And then, if I can just sneak one more and I think maybe for Karl, you had some nice growth in adjustable foundations and I know you had some nice program wins helping that business, how much of that growth was selling given the new wins and looking past that, how do you see growth in the business over the next quarter or so?

Good morning, Josh. You are right, there are two major customer wins. That growth was phased in as the quarter progressed, trying to be fully in place by Memorial Day. So, you should see a greater rate of growth going forward than even the 35% that we experienced in the second quarter. I will also say that our legacy businesses, those customers, they continue to grow as well too. So it’s a combination of the strength of the historic customer base and these new big customer wins. Our adjustable bed people have really done a good job of executing on these programs.

Great, thanks. I’ll hop back in the queue and I know I’ll see at least some of you on Monday. Thanks.

We look forward to, Josh.

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

Good morning, and nice to see the volume gains here. I was wondering after that comment, if we can jump right into CVP and Store Fixtures, I’m curious on a couple of things. One, where are they valued on the balance sheet? And then, can you give us some frame of reference for current run rate of sales for each business and EBITDA?

I’ll take the latter part of that John. Not sure that we’re going to give you the valuation from a balance sheet perspective, but I’ll give you the trends and the best way to think about those two businesses is our current expectation for Store Fixtures is that the sales for full-year 2014 will be about $80 million less than they were in ‘13, which gives us a run rate of, say, $185 million. CVP, it looks like full-year sales will be off about $13 million for a run rate of about $113 million. Going forward, from a model perspective, assume that - backup. Second quarter F&D was off $34 million, CVP was off $9 million. Third quarter, our current forecast show Store Fixtures off another $19 million and CVP off another $1 million. So, CVP is now anniversarying that real strength that we experienced in the first half of last year that you’ll recall. Store Fixtures is a bit of a challenge for us from the standpoint that we were pretty optimistic when we were on this call in April in that most of the Store Fixtures volume, as you know, is shipped in the third quarter and those are based on orders that are taken as the second quarter progresses. Those orders didn’t take place, so that’s caused this weakness. So it’s been a step function change in demand expectations since our April call. I want to make it clear though, we do not believe we’re losing market share that many of the brick and mortar retailers are continuing to struggle with their investments in brick and mortar versus their e-commerce investments. And weakness in this business isn’t a testimony to Leggett or our people. We have outstanding people that are trying to find every opportunity as they possibly can, the market is just depressed.

And John, this is a, relative to the first part of your question, we’re going to respectfully decline to give out that detail at this time.

Okay. Any comment around the profitability of those businesses and then as a follow-up, curious or would love more color on Residential Furniture, in particular Motion being up so strong. But it looks like your overall Components were up 7% as well, any wins there or do you think that’s in line with market or any color there? Thank you.

John, your questions are longer than my answers. And that’s a challenge. The first part of F&D and CVP profitability, Store Fixtures was not profitable in the second quarter, it’s expected to be profitable in the third quarter and as you know, the fourth quarter is always a challenge. So our current forecast would show that we will lose money in the fourth quarter as we always do. CVP was profitable in the second quarter, should be marginally profitable in the third. And the outlook there is better. We think we found bottom in that business. We’ve done a lot of tactical activities to improve the margins at this lower demand level. So we’re optimistic on CVP going forward. As it relates to the Residential businesses, boy Dave said it, there is good demand across all the businesses, the trends are positive from a bedding units perspective, you’ll remember, Perry Davis mentioned on the April call that the April trend was soft. It was. Units were off about 13%, remember we had one less shipping day in April this year because of the Easter holiday move. May units were down, this is innerspring units, were down about 2%, but June up 4%. The Comfort Core trend, those units were up 62% in June. So we feel like that there is a lot of momentum in those businesses. The Furniture Hardware business for their units to be up 14%, I don’t believe the furniture industry in this country is up as strong us our sales results show, we’re gaining share and the motion market is very, very strong. So the fact that we’re heavy weighted to motion, lesser weighted to stationery, stationery is important, but not as important as motion, is a good thing. Carpet underlay, there has been real strength in recovery and top line and bottom line of carpet underlay. Those businesses, Geo Components, we saw strength, significantly improving margins there. Things are good in the residential markets and we expect them to continue.

Great. Thanks for that color. I think your answer is longer than my question by the way.

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

Good morning, David, David, Susan and Karl and Matt, thank you for taking my questions and most of my questions have now been addressed. I guess the one that I’m confused about is the adjusted tax rate change in guidance. If I remember right, I think last call the tax rate guidance for the balance of the year was around 29% or 29.5%, if I remember right and now it seems to be that full-year tax rate on an adjusted basis is 27%, so can you tell us what’s happened there and why?

Yeah. This is Matt. Good question. There is not a lot of magic dust there, it really reflects where the earnings are coming from now as the year continues to progress. For example, as you hear and read about automotive doing particularly well, that’s our most global footprint. In general, earnings generated outside of the United States tend to be at a bit lower tax, effective tax rate, than they do here domestically. So that’s just one example. But the grand scheme of it is that the mix and match of the earnings and where they are coming from is now driving our best estimate for tax rate for the full year to be a tad lower than the 29% we talked about 90 days ago and 27% is our best estimate as we sit here today.

I see. And for the out years, Matt, what should we use on that?

Budd, another good question. Typically, we’ve used about 30% as our working assumption to begin most of these recent years. I would say there is a bias slightly down from that as we see the lay of the land today, but it would be something around 29% to 30% if we had to tee up our best guess right now for 2015, but we’ll sure refine that as we get closer to the end of this year and looking with better clarity into 2015.

Okay. So I’m using 29.5% and that sounds like it’s a reasonable number on that? And my last question goes to the Store Fixtures group, you have engaged an outside banker to look at that, what is the time frame on that, when does -- I don’t know how I call patience, but when do you think that gets done?

Budd, it’s going to be dependent upon the overall interest that we stir up in that particular business. I believe that it’s likely to take six to nine months, if I had to venture a guess.

We’ll go through this year, David, before we know --. You have - now, the Board has not made a resolution to declare that as disc-ops, right, so that’s going to continue to be reported in operating results?

What’s going to happen, Budd, is I’m going to encourage the Board to resolve the approval of divestiture of that business. And once that happens, then of course the accounting classification will change. That is likely to happen at our upcoming Board meeting here in a couple of weeks. Once that resolution is made, assuming that it is, then we do have a Gantt chart of activity and I think I’m being fairly conservative when I give you that time frame.

Okay, but that time frame, then we have to - we’ll have to reclassify that for our modeling purposes?

Yeah. That’s right, Budd.

Okay, thank you, David. Good luck on the balance of this quarter and the rest of the year.

Thanks.

Thanks. Our next question is coming from Daniel Moore from CJS Securities. Please proceed with your question.

Good morning.

Hi, Dan.

Lot of ground has been covered. Maybe expand a little on the transaction with Tempur Sealy, what factors do you think pushed them over the edge and decide to exit innerspring and are there other opportunities, significant number of other opportunities, for other bedding furniture companies that might want to outsource components to you?

Dan, this is Karl. The conversations with Tempur Sealy have been, or let’s call it Sealy, have been - it’s been a long process. We first started talking to their management teams in 1960. So many of these relationships in these conversations take place over a number of years and outcomes develop as circumstances change. I don’t want to speak for Tempur Sealy. On their conference call yesterday they talked about the rate of speed of innovation, and certainly, I think that they respect how innovative our people are and the capability of our machinery. So I would think that the triggering mechanism was simply that. The bedding industry, demands, rapid-fire product innovation and frankly our people are very, very good at that augmented by some very capable machinery as I said. As regards to other opportunities, we’re always talking to people, we are in conversations today on some small, what we call, the verticalizations in Europe, they are small, we’ll see. It’s a small world. We have the same capability outside this country as we do in this country. So we’re hopeful, but certainly nothing is imminent, nothing to announce.

Okay, very helpful. And maybe just lastly, expand a little bit on or updated us on pressure in the wire rod pricing, you said it was starting to ease a bit given the legislative changes, maybe just update us on what you’re seeing in that market?

We’d be happy to. Dan, on a year-on-year basis, the rod price dropped very slightly, about 40 basis points while scrap costs increased somewhat slightly but meaningful but at 240 basis points. At the same time, we’ve experienced increased cost as it relates to energy and transportation logistics costs. So unlike in a historical situation, if we had a move in raw material, we’re darn good at passing through selling price cost changes. It was difficult this time because of the influx of significant amounts of dumped rod from China, both high and low carbon, and you remember on the April, we talked about the impact that that had starting, say, last September or October, so it’s compressed those margins. There was an anti-dumping countervailing duty filing in January of this year. That’s going through the process. There was a significant amount of material that was on order. We believe that that is -- all hit this country late May. So those inventory stockpiles are being worked through, but we’re no longer -- the industry is no longer under the threat of those dumped materials. So we feel like that we’ll start to see some recovery in the back half and that margin squeeze will be mitigated.

And I’ll squeeze one more in. Cash flow improved, but receivables and DSO still up a little bit. Just talk about what are the main levers that gave you confidence in the ability to still hit or exceed the $350 million for the full year?

Yeah, Dan, this is Matt. We certainly feel very good about that. Our DSO metric, for example, in the second quarter came down to 52, but we certainly see that. As seasonality and collection activity unfolds, that will see some improvement between now and the end of the year. Our inventories continue to trend down over the last two quarters. We’re now at 69 days, but that also has some potential to ratchet downward. And our payables continues its ascension on purpose and smartly and so you start at least those for APs, the working capital equation together and we feel really good about where we think in 2014, we’ll end the year in terms of working capital investment in the company. Certainly, all of our modeling for the back half of the year is giving us lots of comfort that $350 million plus will be what our operating cash flow we’ll generate and a big piece of that is what happens in working capital. And as a reminder, last year, we ended the year at $417 million and we were very similar in the run rate as to where we sit today in that regard, a tad behind that, but again for good reason because some of the growth opportunities happening in the company right now that were not prevailing a year ago.

Very good. Thank you again.

Thank you. (Operator Instructions) Our next question is coming from Keith Hughes from SunTrust. Please proceed with your question.

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Yeah. Keith, this is Dave. Relatively speaking, the short answer would be yes. I believe and I know the rest of the team believes that we are being significantly more diligent upfront before we invest capital in new business units that we add to the portfolio. Also, we are being -- we’ve been way too patient way too long with some underperforming businesses and not that we’re calloused; it’s just that we recognize the value to the shareholder base by improving the overall efficiency of the portfolio. So bad on us for being too patient in the past for some businesses, but I do believe that we’re significantly more diligent in identifying these strategic value of existing businesses, as well as prospective businesses.

One quick follow-up. On the adjustable bed number of 35%, I think I heard you correctly, you believe that growth is going to accelerate in the near term, is that due to just more placements or just the products not fully in the retail channel, where is that coming from?

Yeah, Keith, this is Karl. It’s really the latter. The floors weren’t fully placed through all of the second quarter, so we are in place as the third quarter starts going into the very important Labor Day holiday, so that’s really what our thinking was.

Those numbers are probably -- we don’t have adjustable bed growth numbers on this calendar year basis, but this appears to be well above the industry. Do you think the industry though is still seeing adjustable attach rates go up and dependent of your share gain here?

Yes.

All right, thank you.

Thank you. Our next question today is coming from Herb Hardt from Monness, Crespi, Hardt. Please proceed with your question.

Good morning. Other than on capital gains side, are there any tax savings from this recent write-off?

Herb, this is Matt. Not significant.

The second question is on the Aerospace, you made, I believe, four acquisitions now, any more on the offing?

Herb, we are looking at some other small businesses that could be complementary. I think you know that the component and sub-assembly businesses are relatively fragmented around the world, but, yeah, there are some others that we’re taking a look at.

Okay. Thank you.

Thank you. Our next today is a follow-up from Josh Borstein from Longbow Research. Please proceed with your question.

Thanks. A question on comfort cores, there’s some nice growth there and I think Karl mentioned in June, up 62% on top of some already robust growth, were there any new program wins there, is this growth primarily coming just from sell-through?

Josh, primarily from sell-through. The industry is moving towards that comfort core category. There’s certainly some small gains, but it really is the industry growing to a consumer preference. The growth of hybrids certainly have accelerated and augmented that.

And I know that growth in comfort core, it’s been robust in the U.S. for some time, it seems like you are also starting to see a pickup now in comfort cores in Europe, how far behind is Europe versus the U.S. in terms of this growing trend towards either hybrids or the use of more comfort cores?

Actually, it’s -- the reverse is true. There is significantly larger percentage of total sales of comfort core, pocketed coil type products in Europe than there are in the United States. So it’s really the growth in Europe, it has been market share wins and an improving economy and a healthier comfort core mix, but the comfort core product has always been significantly more popular in Europe. The U.S. is kind of late to the party. That’s why we expect again augmented by the hybrid product that we expect comfort core growth will continue to be significant. To put it in numbers, at the end of the second quarter comfort core was about 17% of our total unit sales in the United States. I don’t, off of the top of the head, know what that number is in Europe, but it’s probably two times that, so we would expect continued growth in the U.S.

Hey, Josh, this is Dave. One other thought, I know we’ve mention it to you and some of the other colleagues, but Leggett enjoys a very nice advantage because of our ownership of [Speidel] [ph] and Speidel, I believe, is the undisputed leader in producing equipment that then subsequently wraps those coils at the speeds and with the quality consistency that all of our customers need. That’s been very helpful in Leggett’s participation of this overall movement towards pocketed coils.

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The tax rate is coming down. We last time said 29% as an average for the year. Now, closer to 27% and otherwise, Josh, this is just kind of the catchall bucket go from last year to what the midpoint of the guidance is obviously at this point. It’s our best guess of what’s going to happen.

Okay. Great. Thank you for that. And good luck.

Thank you. We’ve 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.

We’ll just say thank you and we’ll talk to you again next quarter. Bye.