Q3 2021 Leggett & Platt Inc Earnings Call
Greetings and welcome to the Leggett and Platt third quarter 2021 webcast an earnings conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now my pleasure to introduce your host Susan Mccoy Senior Vice President of Investor Relations. Thank you. Mr. Cohen you may begin.
Good morning, and thank you for taking part and I guess, what third quarter conference call on the call today are Karl Glassman, Chairman and CEO, Mitch <unk>, President and C O O, Jeff Tate Executive Vice President and CFO, Steve Henderson.
EVP and president of the specialized products and furniture flooring and textile products segments, and Cassie Branscum senior director of IR.
The agenda for our call. This morning is as follows Karl will start with a summary of the main points. We made in yesterday's press release, Mitch will discuss operating results and demand trends and Jeff will cover financial details and address our updated outlook for 2021.
This conference call is being recorded for Leggett <unk> Platt and is copyrighted material. This call may not be transcribed recorded or broadcast without our expressed permission a replay is available from the IR portion of <unk>.
Website.
We posted to the IR portion of the website yesterday's press release and set of Powerpoint slides that contain summary financial information along with segment details those documents supplement 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 most recent 10-K and subsequent 10 Qs entitled Risk factors and forward looking statements I'll now turn the call over to Carl.
Good morning, and thank you for participating in our third quarter call.
Yesterday, we reported record quarterly sales from continuing operations of $1, three 2 billion EBIT of $144 million and earnings per share of <unk> 71 cents sale.
Sales in the quarter were up 9% versus third quarter 2020, and reflect the pass through of significant inflation in 2021, partially offset by lower volume in several of our businesses.
When comparing to the pre pandemic results of the third quarter 2019 trade sales grew 6% adjusted EBITDA increased 1% and adjusted EPS was flat.
Like many other companies, we continue to navigate a myriad of macro market challenges, including supply chain issues related to semiconductor shortages.
Foam chemical shortages labor availability and freight challenges as well as higher cost associated with each of these issues.
Given this very challenging operating environment. We are extremely pleased that our teams were able to deliver a third quarter earnings in line with a pre pandemic and relatively strong third quarter 2019.
We narrowed our full year guidance range for both sales and EPS, primarily reflecting lower expected volume in our automotive business due to declines in global production forecast, Jeff will provide more detail on the updated guidance later in the call.
Leggett remains well positioned both competitively and financially to capitalize on long term opportunities in our various end markets are enduring long term fundamentals give us confidence in our ability to continue creating long term value for our shareholders with that.
I'll turn the call over to Mitch.
Okay.
Thank you Carl and good morning, everyone.
First I would like to thank our employees for leading us through another challenging quarter with great success, your determination and agility helped us to navigate the material labor and transportation issues that Karl mentioned, allowing us to better serve our valued customers.
I greatly appreciate your commitment ingenuity and forward looking viewpoint I'm proud to be a part of your team and of all that we've accomplished together.
Sales in our bedding products segment were up 13% versus the third quarter of 2020 and up 10% versus the third quarter of 2019, primarily from raw material related selling price increases from inflation in steel chemicals and non woven fabrics.
Volume was down in both the one and two year periods, primarily due to chemical shortages labor availability availability and transportation issues, which continued to constrain U S. Mattress production negatively impacting component demand and our finished goods production.
Availability of chemicals used in our specialty foam operation is slowly improving but remains challenging and dynamic we import chemicals to supplement domestic supply, but port delays and logistics issues are limiting access to those products. We now see chemical challenges continuing into 2022.
Our European bedding business softened during the third quarter as consumer demand returned to more normal seasonal levels in third quarter last year market demand was very strong as Oems and retailers built inventory and COVID-19 restrictions began to ease.
We anticipate long term growth opportunities in Europe from the <unk> acquisition, we completed in June.
Similar to the trends we've seen in the U S betting market over the past several years European consumers are purchasing more mattresses online and in compressed form increasing demand for specialty foam in hybrid mattresses, we are well positioned to support our branded mattress customers as a supply chain partner for components and private label finished mattress needs.
Adjusted EBITDA margins in the segment improved over third quarter 2019, primarily from expanded metal margins in our steel rod business and fixed cost actions taken last year.
Margins were lower versus third quarter of 2020, primarily from lower volume production inefficiencies.
Production inefficiencies driven by supply chain constraints and higher freight costs.
Sales in our specialized products segment were down 3% from third quarter, 2020, and down 12% from third quarter 2019, due to lower volumes in automotive and aerospace partially offset by growth in hydraulic cylinders.
In our automotive business volumes were down volume was down over the one and two year periods. The semiconductor issues that have impacted many industries remains a major challenge for the automotive industry with global production forecast for the balance of 2021 declining dramatically this past quarter and again in October.
Tober.
Industry production was impacted to a much larger degree than expected with many oems, reducing or completely shutting down production of some models for extended periods.
Consumer demand remains strong and vehicle inventory remains at a record low levels, one supply chain stabilized the industry should see improving production.
Industry forecast indicate recovery starting in the back half of next year and continuing through 2023.
In our aerospace business demand for fabricated duct assemblies as near third quarter, 2019 levels, but demand for welded and seamless two products is still well below pre pandemic levels.
With the lingering impact from pandemic related disruptions in air travel and resulting buildup of aircraft and supply chain inventories. The industry is not anticipated to return to 2019 demand levels until 2024.
End market demand in hydraulic cylinders is very strong and order backlogs continue to grow however, global supply chain constraints and labor availability has hampered the ability of our OEM customers to ramp up production.
We expect our sales to increase as OEM production increases, but supply chain constraints in this business could persist into 2022.
EBITDA margins in the segment declined over the one and two year periods, primarily from lower volume, partially offset by fixed cost actions taken last year.
Sales in our furniture flooring and textile products segment were up 12% versus third quarter, 2020, and up 13% versus third quarter 2019, primarily from raw material related selling price increase increases and demand strength in home furniture.
We expect strong demand in our home furniture business for the remainder of the year and into 2022.
While demand remains below 2019 levels, where furniture sales continued sequential improvement for the fifth consecutive quarter with strong demand for products sold for residential use and improving demand in the contract market.
Volume was down in our Geo components business as retail activity returned to more normalized levels. After a surge in demand last year from the consumers focus on home improvements.
Volume was also down in fabric converting due to the non recurrence of the surge in medical and filtration sales last year.
And Florida products residential end market demand is above pre pandemic levels, whereas hospitality demand remains well below 2019 levels.
Volume was down in the quarter due to limited chemical supply labor.
Labor availability and transportation disruptions.
Did EBITDA margins in the segment improved over the third quarter of 2019, primarily from improvements in our home furniture business and fixed cost actions taken last year margins were lower versus third quarter 2020, primarily from lower volume.
Yeah.
Overall, the fixed cost actions, we took last year reduced our third quarter costs by approximately $20 million versus the third quarter of 2019.
Across all of our businesses, we remain focused on controlling our costs by only adding fixed cost as necessary to support higher volumes and future growth opportunities.
With fluctuating demand and limited labor availability, we are making short term investments to attract and retrain retain our labor force.
We have rebuilt inventory in our steel rod drawn wire in U S. Spring businesses. Following severe depletion in 2020 and are holding slightly higher levels of inventory inventory in order to meet anticipated customer demand as foam and labor availability improves across the industry.
We will take our Rod mill out of operation for approximately three weeks near the end of this year to replace the reheat furnace at our holding additional safety stock as a precautionary measure.
As a result higher levels of inventory and these businesses are expected through the remainder of the year and will likely altered our normal seasonal cash flow cycle to some degree.
I'll now turn the call over to Jeff.
Thank you Mitch and good morning, everyone.
In the third quarter for our cash from operations was $50 million.
Down from last year's third quarter record of $261 million, primarily due to planned working capital investments to build and maintain the higher inventory levels that Mitch discussed earlier as well as inflation in the cost of those inventories.
With the expectation of carrying higher inventories through the end of the year and lower forecasted earnings we have reduced our full year operating cash estimate.
We now anticipate cash flow from operations to approximate $350 million in 2021.
At the end of the quarter adjusted working capital as a percentage of annualized sales was 14, 3%.
Through September we brought back $232 million of offshore cash and currently expect to return over $240 million of cash for the full year.
In August we increased the quarterly dividend by two to <unk> 42 per share.
At an annual indicated dividend of $1 68 the.
The yield of three 6% based upon Fridays closing price of $46 85.
One of the higher yields among the S&P 500 dividend aristocrat.
This year marks our fifth consecutive year of annual increases we're proud of our dividend record and we plan to extend it.
During the third quarter, we used our commercial paper program to repay the remaining $280 million of the term loan a issued when we acquired ECS.
We also amended the terms of our $1 2 billion revolving credit facility and extended the maturity to September of 2026.
Our strong financial base, along with our deleveraging efforts over the last two years give us flexibility when making capital and investment decisions.
We ended the quarter with net debt to trailing 12 month EBITDA of two one times.
And $965 million of total liquidity.
Our long term priorities for use of cash are unchanged. They include in order priority funding organic growth paying dividends funding strategic acquisitions and share repurchases with available cash.
For the full year 2021, we expect capital expenditures of approximately $120 million.
Dividends should approximate $220 million and acquisition spending of approximately $150 million.
We do not expect any significant share repurchases as we continue to focus on deleveraging.
As announced yesterday, we are narrowing our sales and earnings per share guidance ranges.
2021 sales are now expected to be $5 billion to $5 1 billion or.
Or up 17% to 19% over 2020.
Guidance reflects mid single digit volume growth raw material related price increases currency benefit and approximately 1% growth from acquisitions net of divestitures.
The change versus prior guidance of $4 nine to $5 1 billion, primarily reflect higher raw material related price increases and lower expected volume in automotive, resulting from semiconductor shortages impacting industry production.
2021 earnings per share are now expected to be in the range of $2 86 to $2 96.
Including <unk> 16 per share from the real estate gain recognized in the second quarter.
Full year adjusted earnings per share is now expected to be $2 70 to $2 80.
With the change versus prior guidance of $2 70 to $2 19, primarily.
Primarily due to lower automotive volume.
This guidance also assumes fixed cost savings as a result of actions taken in 2020 to now be approximately $75 million.
Based upon this guidance framework, our 2021 full year adjusted EBIT margin range should be 11, 1% to 11, 2%.
Earnings per share guidance assumes a full year effective tax rate of 23% depreciation and amortization to approximate $190 million.
Net interest expense of approximately $75 million and fully diluted shares of $137 million.
In closing, we remain focused on cash generation, while reducing debt and deploying capital in a balanced and disciplined manner that positions us to capture near and long term growth opportunities, both organically and through strategic acquisitions with those comments I'll now turn the call back over to Susan.
Thank you that concludes our prepared remarks, we thank you for your attention and we'll be glad to answer your questions. Karl will direct our Q&A session ethnic group answers questions Daryl are ready to begin.
Thank you we will now be conducting a question and answer session.
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Please while we poll for your questions.
Our first question is coming from the line of Susan Mcclary with Goldman Sachs. Please proceed with your questions.
Thank you good morning, everyone.
Good morning, Susan is around.
Maybe can we get some more color on what youre hearing from some of your customers in terms of auto production you know understanding that the chip headwinds are obviously pretty tough out there, but just any kind of incremental commentary around.
Some of the Oems are telling you in any regional differences as you think about the different parts of the world that youre seeing in terms of production levels and availability.
Good morning, Susan.
Mitch will answer the question and we will kind of marry that with some IHS data, which helps us from a directional perspective, but Mitch why don't you hadn't started if you don't mind, yes, sure. Thanks, Carl and good morning, Susan.
Yes, let me take take a shot at that.
It's kind of mixed signals still from the Oems as right as they are challenged with understanding what their production schedules are going to be as the chips situation remains very dynamic, but if we step back to the July IHS production forecast for the major markets. So that would be North America.
Europe and developed Asia countries, which is most impactful to us as we know that July forecast showed year over year production being up just under 8% and so then it has declined it had been declining sort of month to month in small increments and then all of a sudden in September.
Look our big dropdown, which I think became sort of more realistic to what's actually happening out there in the with the chip availability and then took another step down in October. So now we've gone from being up 8% year over year for 2020 to down over 2%.
Is that is a forecast that and I think there is still risk there, but I think again this is chip production.
OEM production trails back to us from our standpoint, we do use of chips, but theyre pretty generic and we so far have been able to navigate the availability. There. So this is the industry impact on us.
As we look into the third quarter here, we would see.
Production for the major markets was down almost 23% year over year and the outlook for Q4 is down about 20%. So I think it continues to be challenging through the remainder of the year and then as for the forecast looking out into 2020.
Rick you see year over year, maybe down a bit in the first quarter and maybe a little bit of improvement in the second quarter and then a more optimistic look for the back half of 2022.
I think that we'll have to continue to watch that I think the chip situation continues to be very dynamic, but hopefully we'll start seeing some improvement in the back half of 'twenty to 'twenty two and the current forecast shows would it be back at 2019 production levels by the end of 2023.
You ask a second part to that question around regional differences, which I think is really good question.
It feels like that the.
North American Oems were impacted most quickly as they ramped up production most quickly and feel like that feels like that is maybe getting a little bit better I don't see any massive surge, but I think maybe is sort of starting to level out and recover slightly and now we're starting to.
<unk> more impact spread to Europe, and a little bit of Asia. So I think it is a little bit dynamic regionally.
But I think we're probably.
<unk> seen that.
<unk> continued to see.
The.
Hopefully sort of the worst impact in Q3, but we've said that before but I think we don't see the kind of very optimistic surge coming in the next quarter or two that the industry was forecasting previous to that.
Let me pause there and see if that's helpful to you no. That's very helpful. Thank you for all that color that was that was great niche.
And my follow up question is you've obviously proven the ability to get price.
This quarter across bedding, and furniture and flooring, I mean, youre seeing that kind of mid high teens pricing.
Are you just kind of across the business as you think about price cost and how should we be thinking about that as we look to 2022 are you positive are you fairly caught up is there more to come just any color there.
Yes sure yes.
Yes, I think we're in a really good spot I mean, I think that we have been.
<unk> made some changes some of the restructuring we did in home furniture to walk away from certain lower margin business commodity business.
It has allowed us to be more impactful in passing along inflation I think inflation levels are high enough that that we're having to pass it along our customers are having to pass that along and it's just a different dynamic than.
And historically, so I feel like we're pretty well caught up.
Sometimes we have a bit of a lag.
But say for example, there is a chemical increase that came through sort of the.
<unk> of the third quarter it took us.
A little bit longer than it had to pass that through but now now that through as well so I don't see that dynamic changing.
I think where it where its most challenging of course is in the automotive side, where we have long term contracts, but we don't have the same kind of inflationary impacts that we have say across steel and chemicals and nonwovens. So we're able to.
To offset those either through discussions with our suppliers or through.
Delaying or eliminating the sort of annual.
Price downs that.
Our traditional in that industry or through other <unk> activity. So I feel like the teams have done an incredibly good job of passing through to the inflation that we've seen so far and I think we're well positioned to do that should it continue.
And a follow on to that Susan that.
I think we're fully caught up now with the foam increase that went into place early October.
Issue that's out there is it looks like there'll be some steel inflation.
Scrap forecaster up in.
In November one scrap settles here next week.
So I think that we'll probably see some continued inflation in the steel market.
We will recover as we always do.
With the historic lag, but we're not done from industry perspective, as it relates to steel. So some people have asked about metal margin.
I expect that the metal margin is sustainable for the Forecastable future and may even expand because of really strong demand signals augmented by commodity inflation and basic scrap.
Okay. That's very helpful. I'm, just going to squeeze one more in which is.
Continuing on this conversation of price versus volume when we look at the update to the margin guidance that you gave and that incremental move down my assumption is thats really reflecting all the pricing that's coming through while the volumes have come off as we think about next year, if we assume that that volume recovery.
To come back in and production levels rise kind of across betting autos. All of these segments is it fair to assume that you should see incremental margin expansion along with that.
Yes.
Thank your suspicion is correct its volume dependent Susan.
We need productive activity and we need some supply chain stability. So we get past the manufacturing inefficiency that's caused by the supply chain disruption so units and predictable supply chain would go a long way and adding the incremental margin.
Yes, Okay, alright, Thank you I will pass it along.
Thanks, Susan.
Yeah.
Thank you our next questions come from the line of Bobby Griffin with Raymond James. Please proceed with your questions.
Good morning. Thank you for taking my question hope everybody's doing well.
Good morning, Bobby I.
I guess first I want to call since we brought up and Susan's questions just touchback on steel real quick.
Then over the last couple of days some talk about changes in the EU U S. A.
Aluminum steel tariffs.
I don't quite know exactly whats changing or if it's been settled completely yet, but do you see any impact of legacy.
From from those changes and anything there that could change the dynamics happening right now with the steel and rod spread.
Bobby It's a really good question and we we actually don't know what those negotiations are at this point.
We do not believe that they will have an impact from the standpoint that the steel business is truly local.
And the U S Rod and wire producers have been.
Assisted by anti dumping actions that are in place we will continue to be in place that are separate.
And apart from any tariffs. So we do not think that it will be disruptive.
Anyway.
It's somewhat dependent on our strong EU economy, and the steel market in the EU itself is pretty tight too so.
While its early we don't expect any really impact at this point.
Okay. That's helpful and then I guess.
Maybe also touch on automotive.
Clearly a very dynamic supply chain environment and I was just curious from your perspective is there things you guys can do where you are prepared when the chip availability at least comes back and maybe talk a little bit about the ability of the automotive segment to ramp up quickly in production because I'm a feeling once chips open back up there's going to be a flood.
Orders from the OEM to try to get these cars back on the lots and stuff.
Yes, Great question, Yes, sure. Thanks, Charles that's a great question Bobby.
I think one I think I think that there had been this optimism of hey, These are going to this is going to get resolved one day and it's going to come pouring back and I don't think that that's what it looks like as we talked about I think we see.
Some modest improvement through the first half of next year.
But I do think I mean, a really important point to this is that the consumer demand for vehicles is very very strong and inventories are very very low and so at some point you are right. When this constraint resolves itself, that's going to be a very strong tailwind for us.
And for the industry in general, but not only to get vehicles on the lots of service demand, but then to build back up inventory levels.
Okay.
Fortunately for us this a lot.
Lot of the automotive production is more automated than some of our other production and so I think that there is not.
I think it's that.
That balance of <unk>.
Sure that we're maintaining appropriate levels of labor as I mentioned like investing in our labor force in these times are difficult to bring people on.
And as we see things start to improve we will make sure that I think that we will have visibility and time to continue to ramp up but I don't think its equipment adds or things like that.
Okay. That's helpful. And then last one for me and I'll turn it over just coincide the bedding segment clearly hard to kind of see what the industry does on a quarter by quarter basis, but maybe can we unpack.
The U S spring volumes in the foam volumes versus what your expectations or what you've kind of heard.
The industry in the U S industry performed in <unk> and is there any way to me.
Parse out what some of the labor and availability challenges costs from a volume standpoint.
Well that is a complex question Bobby and were.
I'm going to actually take it back mentioned I have been talking about this a lot. So he's going to answer it but we're going to kind of take you back in history, a little bit to give you.
Kind of a status update of where we think the industry, where it's come from so Mitch if you don't mind, we unravel all that yes, let me take a shot at it Karl So Bobby let's focus on the U S spring side here for strength, so on the component cycle here.
And we've been in a little bit of a different cycle dynamic than the industry. So if we step back and we think about.
Q2 of last year, when the pandemic hit everything slowed down we had the surge in need for medical products.
And so on.
All of a sudden at the end of the second quarter demand started to creep back up we all thought that was a great thing and then really became very strong in the third quarter of last year.
And for US we had nonwoven shortages, we had labor shortages. So we were sort of the first negatively impacted by all of the supply chain constraints that are so common in our dialogue today and so in the third quarter of last year, we were just literally depleting, our inventory and making all we could.
We couldn't keep up and you probably remember those challenging times for us, but so so from our covered call perspective for example that was.
Q3 of last year was even higher than 2019, so it was a bit of a peak for us.
And again, just depleting our inventory and then as we went into Q4.
Volume has dropped significantly not because there wasn't demand, but because we just couldnt get the labor in the nonwovens material that we needed to keep up we also at that time walked away from a decent volume of low margin open coil business. So so that has been a bit of a drag but from a sales standpoint, but not really from a profit.
Ability standpoint.
Since that time in Q call. It Q4 of last year, we've been sequentially, improving our production and our sales and so.
I guess as we went through that time, where we were unable to fully support our customers. They not surprisingly some of then turn to some imported product, which finally started to come towards the end of last year more of it sort of hit at the beginning of this year just as the Oems then started facing their phone shortages and then.
Later, and some of their labor constraint. So there is a bit of <unk>.
Excess inventory that's been worked through now we have the data with hindsight that shows like those imports of component inner springs are coming down and our values are sequentially improving in half.
Every quarter since the fourth quarter of last year. So we're just on a little bit of a different dynamic cycle and so as we said we're here with strong inventory position keeping labor in place.
<unk> be able to support our customers as their production.
Production improves as they work through their backlogs broke through the phone shortages in their labor constraints and move into next year, Let me pause there does that help.
Yes, that's helpful. Mitch I appreciate the detail sorry to end on a complex one but I do appreciate you taking the time to walk through it.
Okay, Alright, great and then I think if we say from a from a phone standpoint for us.
Q3 was also very strong from an ECS standpoint, just because of the business. We were winning and then more in line with the overall industry we hit.
The chemical constraints that have been continued to impact us better hopefully getting a little bit better in Q4.
Okay helpful. Best of luck here in <unk>, and then heading into 2022.
Thank you Bob.
Thank you. Our next question is coming from the line of Peter Keith with Piper Sandler. Please proceed with your questions.
Hi, Thanks, Good morning, everyone. Thanks for taking the questions.
Maybe I'll just follow up on that last comment from Mitch just around the film business and feeling pretty good about it I'm, having a hard time reconciling the negative a negative 17% drop in volume year on year.
I know there is the chemical constraints, but we thought at this point you'd be having some benefit from anti dumping and it does seem like the demand backdrop through Q3 has been pretty good. So can you just help me understand what's going on with that drop in volume.
Sure sure Peter I'll take a shot at it I think maybe you misunderstood my comment so what I was saying was that our volume was really strong in the third quarter of last year at ECS as we were winning new business and then our impact has been more like the overall OEM.
Industry impact as we've continued to face supply chain constraints due to chemical shortages throughout the throughout the year.
Including during the third quarter.
The outlook for us for chemicals in the fourth quarter is improving some to some degree hopefully would allow us to be more.
In line to service the demand that we have but that is really the constraint for us is the chemical availability and it remains a very challenging and dynamic.
Situations, but I think it's improving.
Okay, Alright, that's helpful.
Maybe this is related to it but yes.
If we're just looking at the sales guidance for the fourth quarter. It looks like Youre, calling for again high single digit year on year growth, but it's against a tougher comparison in Q3. So the the two year growth needs to accelerate quite a bit could you just help us get comfortable with.
What part of the business should be accelerating on a two year basis.
Okay.
Peter This is Susan and.
A big part of that increase that you are looking at will be on a two year basis will actually will be will.
It will be inflation I think volume.
Right.
And to your Hawkins.
Down.
Okay. So it's more price increases coming through on the phone.
Yeah, and if you remember well.
I may have missed that myself. So you may not remember, but we were in a deflationary setting in the back half of 2019 thinking that the two year and actually last year. We were we just had just begun to employ our selling prices.
In the fourth quarter. So we were flat in the third quarter deflationary first half flat.
Third quarter, and finally had a little bit.
And of course, we've had with all the inflation we brought in this year most of that year over year change no matter, which which quarter you are looking at versus which prior one year or two year look back.
A big part of all of that is Oh is pricing.
Okay very helpful. And then I had one last question just on labor availability.
You've mentioned this now for the both mattresses and flooring I believe so what actions are you taking to address the labor availability and it seems to be prevalent everywhere. So it doesn't seem like an issue that's going to be going away.
Yes, I think there's two different issues Peter when we spoke to labor availability on the bedding side. It was primarily a customer issue.
So what our customers are telling us is as volume is becoming more available to them that they're having a more difficult time ramping their productive capacity because of the availability of <unk> ability to retain labor. So that is more of an external issue.
We have had pockets of labor availability issues from time to time, it's very very local.
In our comment on the flooring side is in the third quarter, we had some lack of available labor in two geographies that has been partially mitigated.
Augmented by the challenges that we face from a trucking and transportation labor that our flooring business is all delivered.
Two stores, primarily retail outlets.
And that availability of trucking and delivery labor has been a challenge so it's not a comp issue at all.
As a matter of just wide bodies willing to work and come to work on a repetitive basis.
Okay.
Thanks for clearing that up for me I appreciate it and good luck.
Okay.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line of Judy Merrick with Truest. Please proceed with your questions.
Hi, Thanks. This is Judy on for Keith Hughes.
Clarify one.
Yeah on your answer Karl on the industry for bedding for Bobby's question.
See you.
Spring is inventories in good shape, even though this time was not unexpected to resolve into 2022, but where your inventory is now on the springs.
Yes inventories in really good shape, the foam situation is improving slowly but is incredibly volatile.
And we don't think that there will be full availability of chemicals into 'twenty two into 2022, So Judy you have it right.
Okay, great. Thank you.
Youre welcome.
Thank you there are no further questions at this time I would like to turn the floor back over to Susan Mccoy for any closing comments.
Thanks.
All I have to say, yes, Josh. Thank you for joining us today, and we look forward to talking to you again next quarter. Thank you.
Yes.
Thank you that does conclude today's teleconference. You may disconnect your lines at this time.
You for your participation and have a great day.