Q2 2024 Leggett & Platt Inc Earnings Call

Operator: Greetings and welcome to the Leggett & Platt second quarter 2024 earnings 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. It is now my pleasure to introduce your host. Cassie Branscum, Vice President of Investor Relations. Thank you.

Greetings and welcome to the Leggett <unk> Platt second quarter 2024 earnings 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 it is now my pleasure to introduce your host Casey.

Casey Branscom Vice President of Investor Relations. Thank you. Please go ahead.

Cassie Branscum: Good morning, and welcome to Leggett & Platt's second quarter 2024 earnings call. With me on the call today are Karl Glassman, CEO, Ben Burns, CFO, Tyson Hagel, President of the Bedding Products Segment, Sam Smith, President of the Furniture, Flooring, and Textile Products Segment, and Kalina Talbert, Manager of Investor Relations. The agenda for our call this morning is as follows. Karl will discuss our current priorities and demand trends. Then we'll cover our operating results and additional financial details, including a restructuring update and address our revised outlook for 2024. And the group will answer any questions you have. This conference call is being recorded for Leggett & Platt and is copyrighted material. This call may not be transcribed, recorded, or broadcast without our express permission.

Speaker Change: Good morning, and welcome to Leggett <unk> Platt second quarter 2024 earnings call with me on the call today are Karl Glassman, CEO and Burns CFO Tyson Hegel precedent the bedding products segment, Sam Smith, President of the furniture flooring and textile products segment and cleanup.

Speaker Change: Albert manager of Investor Relations.

The agenda for our call. This morning is as follows Karl will discuss our current priorities and demand trend.

Speaker Change: Dan will cover operating results, an additional financial details, including a restructuring update and address our revised outlook for 2024 and the group will answer any questions you have.

Speaker Change: This conference call is being recorded for Leggett and Platt and is copyrighted material. This call may not be transcribed recorded or broadcast without our expressed permission.

Cassie Branscum: A replay will be available on the Investor Relations section of our website. Yesterday, we posted our press release and a set of slides that contain summary financial information along with segment details and a restructuring update. Those documents supplement the information we discuss on this call, including non-GAAP reconciliation. Remarks today concerning future expectations, events, objectives, strategies, trends, or results constitute forward-looking statements. However, actual results or events may differ materially due to a number of risks and uncertainties.

Speaker Change: Play will be available on the Investor Relations section of our web site, we posted to the IR section of our website Yesterdays press release and a set of slides that contain summary financial information along with segment details and a restructuring update those documents supplement the information we discuss on this call including non-GAAP.

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Speaker Change: Remarks today concerning future expectations events objectives strategies trends our 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 risks.

Cassie Branscum: 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 sections in our most recent 10-K and subsequent 10-Q entitled Risk Factors and Forward-Looking Statements. I'll now turn the call over to Karl. Good morning.

Speaker Change: Factors and additional information please refer to yesterday's press release and the sections in our most recent 10-K and subsequent 10-Q entitled risk factors and forward looking statements I'll now turn the call over to Carl.

Karl Glassman: Good morning, and thank you for joining our call today. Upon returning to the CEO role in late May, I hit the ground running and have spent a significant amount of time with our team focusing on both our near-term initiatives and longer-term outcomes. My priorities are centered around transparent communication with internal and external stakeholders, identifying opportunities for quick wins to drive improved profitability, and empowering our people to tackle those projects, ensuring there are clear timelines and accountability for activities underway, and acting with a sense of urgency across the business.

Carl: Good morning, and thank you for joining our call today.

Upon returning to the CEO role in late May I hit the ground running and have spent a significant amount of time with our team focusing on both our near term initiatives and longer term outlook. My priorities are centered around transparent communication with internal and external stakeholder.

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Carl: Identifying opportunities for quick wins to drive improved profitability and empowering our people to tackle those projects, ensuring there are clear timelines and accountability for activities underway and acting with a sense of urgency across the business.

Karl Glassman: I am also focused on ensuring that we have a strong team to help move the business forward. And on that note, I'm pleased to share that Cassie has decided to stay with the company and will continue to lead our IR function. Furthermore, I would like to welcome Sam Smith, President of the Furniture, Flooring, and Textiles Product Segment, to the call today. Sam is joining us to participate in Q&A and will be a regular participant on these calls going forward. Sam joined Leggett 10 years ago and has held several operational roles of increasing responsibility within our home furniture business.

Speaker Change: I am also focused on ensuring that we have a strong team to help move the business forward and on that note I'm pleased to share that Cassie has decided to stay with the company and we will continue to lead our IR function.

Speaker Change: Furthermore, I would like to welcome Sam Smith, President of the furniture flooring and textile products segment to the call today.

Speaker Change: Sam is joining us to participate in Q&A and will be a regular participant on these calls going forward.

Speaker Change: Sam joined like it 10 years ago and has held several operational roles of increasing responsibility within our home furniture business.

Karl Glassman: He has already spent a tremendous amount of time collaborating with the management teams of each business within the segment, as well as assisting me with operational efficiency improvements in a specialized product segment. I want to emphasize that the strategic priorities discussed on last quarter's earnings call will remain our near to mid-term priorities. As a reminder, those priorities are strengthening our balance sheet and liquidity, improving margins by optimizing operations and our general and administrative cost structure, and positioning the company for profitable growth opportunities. As you know, last quarter, we announced the decision to reduce our dividends. Although it was a difficult decision, management and the board of directors unanimously agreed that it was the right course of action.

Speaker Change: As already spent a tremendous amount of time collaborating with the management teams of each business within the segment as well as assisting me with operational efficiency improvements in our specialized products segment.

Speaker Change: I want to emphasize that the strategic priorities discussed on last quarter's earnings call. We remain our near to midterm priorities as a reminder, those priorities.

Strengthening our balance sheet and liquidity improving margins by optimizing operations, and our general and administrative cost structure and positioning the company for profitable growth opportunities.

As you know last quarter, we announced the decision to reduce our dividend.

Speaker Change: Although it was a difficult decision management and the board of directors unanimously agreed that it was the right course of action, we remain committed to maintaining our long held financial strength and the dividend reduction will help solidify our foundation.

Karl Glassman: We remain committed to maintaining our long-held financial strength, and the dividend reduction will help solidify our foundation. Shareholder returns also remain an important long-term capital allocation priority. While our near-term focus is on paying down debt and continuing to invest in our businesses, in the future, we expect to more frequently utilize share repurchases to return capital to shareholders. We continue to work toward improved profitability through the execution of our restructuring plan and other operational improvement initiatives.

Speaker Change: Shareholder returns also remain an important long term capital allocation priority.

Speaker Change: While our near term focus is on paying down debt and continuing to invest in our businesses in the future. We expect to more frequently utilize share repurchases to return capital to shareholders.

Speaker Change: We continue to work toward improved profitability through execution of our restructuring plan and other operational improvement initiatives. The restructuring plan is on track and some elements of the plan are progressing ahead of schedule and exceeding expectations.

Karl Glassman: The restructuring plan is on track, and some elements of the plan are progressing ahead of schedule and exceeding expectations. In betting products, we expect restructuring activities within US Spring to be complete by year end. Through the first half, we have shifted the majority of our innerspring volume into our four larger remaining spring production facilities. In early the third quarter, we completed the transition of all Interspring production. The team has done a fantastic job working with our customers to ensure that there are no disruptions during this process, and we now anticipate minimal sales attrition within U.S. territories.

Speaker Change: Embedding products, we expect restructuring activities within U S spring to be complete by year end through the first half we have shifted the majority of our innerspring volume into our four larger remaining spring production facilities.

Speaker Change: In early third quarter, we completed the transition of all inner spring production.

Speaker Change: The team has done a fantastic job working with our customers to ensure that there are no disruptions. During this process and we now anticipate minimal sales attrition within the U S spring.

Karl Glassman: We are also seeing improved efficiency flow through our remaining Interspring facilities earlier than expected and anticipate that future improvements in demand will drive incremental efficiency gains. Restructuring activities within Specialty Foam are well underway. We have closed one small operation, and two additional facility consolidations are in process and should be complete by year end. Internationally, we have substantially completed downsizing our Chinese Interspring operation.

Speaker Change: We are also seeing improved efficiency flow through all remaining innerspring facilities earlier than expected and anticipate that future improvements in demand will drive incremental efficiency gains.

Speaker Change: Restructuring activities within specialty foam are well underway, we have closed one small operation and two additional facility consolidations are in process and should be complete by year end.

Speaker Change: Internationally, we have substantially completed downsizing, our Chinese inner spring operation, we still anticipate that all betting restructuring actions will be complete by the end of 2025 in the furniture flooring and textile products segment restructuring initiatives are also on track.

Karl Glassman: We still anticipate that all bedding restructuring actions will be complete by the end of 2025. In the furniture, flooring, and textile products segments, restructuring initiatives are also on track. Our home furniture restructuring activity is essentially complete, and we expect to complete phase one of our flooring products restructuring by the end of the year.

Speaker Change: Our home furniture restructuring activity is essentially complete and we expect to complete phase one of our flooring products restructuring by the end of the year.

Karl Glassman: Our second phase of restructuring activity in flooring products will wrap up in the first half of 2025. As we continue to drive operational improvements across the company, we have identified and initiated a small restructuring opportunity within our specialized product segment. Our Hydraulic Cylinders team is working to increase profitability through manufacturing optimization and operating efficiency improvement. We previously shared that we are initiating a review of our general and administrative cost structure, and we remain optimistic about the potential returns from this activity. In the second quarter, we completed a thorough analysis of the GNA structure across our business units and corporate shared services.

Speaker Change: Our second phase of restructuring activity and flooring products will ramp up in the first half of 2025.

Speaker Change: As we continue to drive operational improvements across the company, we have identified and initiated a small restructuring opportunity within our specialized products segment. Our hydraulic cylinders team is working to increase profitability through manufacturing optimization and operating efficiency.

Speaker Change: Movements. We've previously shared that we are initiating a review of our general and administrative cost structure and we remain optimistic about the potential returns from this activity in the second quarter, we completed a thorough analysis of the G&A structure across our business units and corporate.

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Karl Glassman: Now, our teams are working to identify the greatest opportunities for improvement, design necessary organizational changes, and organize projects to further streamline processes and resources. Looking ahead, we remain committed to long-term investment in our key businesses, including betting, automotive, and geocomponents. We are confident that our refocused bedding strategy, which leverages our innerspring and specialty foam innovation to target growth in higher-valued semi-finished and finished products, is the right path forward. Our automotive business remains healthy and has further growth potential in both comfort and convenience products, such as motors and actuators.

Speaker Change: Now our teams are working to identify the greatest opportunities for improvement design necessary organizational changes and organized projects to further streamline processes and resources.

Looking ahead, we remain committed to a long term investment in our key businesses, including bedding automotive NGL components, we are confident that our refocused betting strategy, which leverages, our inner spring and specialty foam innovation to target growth in higher value semi finished.

Speaker Change: And finished products is the right path forward, our automotive business remains healthy and has further growth potential in both comfort and convenience products, such as motors and actuators and we expect to capture additional growth opportunities in our Geo components business as we expand our product.

Karl Glassman: And we expect to capture additional growth opportunities in our geocomponents business as we expand our product lines and geographic footprint. Additionally, we are currently conducting a strategic review of our diverse portfolio, asking ourselves if we are the rightful owner of each business and how each one fits into our long-term vision.

Speaker Change: Lives and geographic footprint.

Speaker Change: Additionally, we are currently conducting a strategic review of our diverse portfolio asking ourselves. If we are the rightful owner of each business and how each one fits into our long term vision.

Karl Glassman: As we work through our restructuring plan and operational improvement initiatives, including our G&A analysis, and we make progress in our portfolio review, a sharper view of our future is emerging. We will continue gaining visibility in the coming quarters and will share additional details as work continues. We also anticipate sharing an updated and comprehensive long-term vision, including financial targets, mid-next year. We fully expect that the future of Leggett & Platt will be more focused and more profitable. To our employees, thank you for your hard work and perseverance.

Speaker Change: As we work through our restructuring plan and operational improvement initiatives, including our G&A analysis, and we make progress in our portfolio review a sharper view of our future is emerging we will continue gaining visibility in the coming quarters and will share additional details as work.

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Speaker Change: We also anticipate sharing an updated and comprehensive long term vision, including financial targets mid next year, we fully expect that the future Leggett and Platt will be more focused and more profitable.

Speaker Change: To our employees.

Thank you for your hard work and perseverance. Your efforts are positioning our company for long term success.

Karl Glassman: Your efforts are positioning our company for long-term success. Now turning to demand trends in our key market, our second quarter 2024 sales and adjusted earnings were lower than anticipated at the beginning of the quarter. However, excluding increased inventory write-downs and reserves and higher bad debt expense, we would have outperformed our adjusted earnings expectation.

Speaker Change: Now turning to demand trends in our key markets.

Speaker Change: Our second quarter 2020 for sales and adjusted earnings were lower than anticipated at the beginning of the quarter, excluding increased inventory write downs and reserves and higher bad debt expense, we would have outperformed our adjusted earnings expectations. We now expect two.

Karl Glassman: We now expect 2024 full-year sales to be lower than originally estimated due to softer industry demand in multiple end markets and continued raw material deflation. Demand in our residential and commercial markets remains weak as consumers continue to delay big ticket discretionary purchases. Additionally, many bedding and furniture industry participants are financially stressed amid a third year of low demand. Against a backdrop of diminished consumer demand, mattresses imported from 12 countries and dumped into the U.S. market by foreign producers have further harmed domestic manufacturers.

Speaker Change: 24 full year sales to be lower than originally estimated due to softer industry demand in multiple end markets and continued raw material deflation.

Speaker Change: Demand in our residential end markets remains weak as consumers continue to delay big ticket discretionary purchases.

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Speaker Change: Many bedding and furniture industry participants are financially stressed amid a third year of low demand.

Speaker Change: Against a backdrop of diminished consumer demand mattresses imported from 12 countries and dumped into the U S market by foreign producers have further harm domestic manufacturers, we believe the domestic industry deserves a level playing field and we are pleased with the detour.

Karl Glassman: We believe the domestic industry deserves a level playing field, and we are pleased with the determinations that both the United States Department of Commerce and the United States International Trade Commission have recently made regarding the current mattress anti-dumping case. Since May, the DOC has published final dumping rates for all 12 countries, ranging from 4.6% to triple digits. The ITC has finalized orders for eight countries, and final orders for the remaining four countries are expected in early September.

Speaker Change: Terminations that both the United States Department of Commerce in the United States International Trade Commission have recently made regarding the current mattress anti dumping case.

Speaker Change: Since may the DLC has published final dumping rates for all 12 countries ranging from 4.6% to triple digits. The ITC has finalized orders for eight countries and final orders for the remaining four countries are expected in early September we.

Karl Glassman: We estimate U.S. mattress market consumption was down mid single digits versus 2023 in both the second quarter and first half of this year. However, while landed mattress import volumes have fallen year-to-date, inventory build-up from late last year is still likely being worked through. In the second half, we expect industry units to remain below 2023 levels, resulting in full-year consumption down mid-single digits. We still expect our 2024 betting product segments volume to be down high single digits due to company-specific factors, including the loss of a customer and specialty foam and restructuring-related sales attrition.

Speaker Change: We estimate U S mattress market consumption was down mid single digits versus 2023, and both the second quarter and first half of this year.

While landed mattress import volumes have fallen year to date inventory buildup from late last year is still likely being worked through in the second half. We expect industry units will remain below 2023 levels, resulting in full year consumption down mid single.

Speaker Change: We still expect our 'twenty 'twenty four bedding products segments volume to be down high single digits due to company specific factors, including the loss of a customer and specialty foam and restructuring and related sales attrition.

Karl Glassman: Higher than expected trade rod sales for non-betting applications are expected to partially offset the impact of planned sales attrition. Excluding steel rod, betting product sales directly related to the mattress industry are expected to be down low double digits.

Speaker Change: Higher than expected trade rod sales for non bedding applications are expected to partially offset the impact of planned sales attrition.

Speaker Change: Excluding steel rod bedding product sales directly related to the mattress industry are expected to be down low double digits.

Karl Glassman: The global automotive market is experiencing volatility driven by several factors. While our products are utilized in both internal combustion engine and electric vehicles, geographic differences in the global shift to EVs have resulted in internal combustion engine programs running for longer than planned, leading to delayed program launches and time. In Asia, the transition to electric vehicles has surged forward, while Europe is grappling with cost and affordability challenges. Meanwhile, North America remains indecisive.

Speaker Change: The global automotive market is experiencing volatility driven by several factors.

Speaker Change: While our products are utilized in both internal combustion engine and electric vehicles geographic differences in the global shift to E. Vs has resulted in internal combustion engine programs running for longer than planned leading to delayed program launches and timelines.

Speaker Change: In Asia, the transition to electric vehicles has surged forward, while Europe is grappling with cost and affordability challenges.

Speaker Change: Meanwhile, North America remains indecisive. Additionally.

Karl Glassman: Additionally, the growth of new Chinese market entrants and increases in Chinese exports, particularly to Europe, are driving further market disruption. Europe has responded by introducing new tariffs, but it is yet to be seen if this will slow the pace of Chinese imports. Light vehicle production in major markets is expected to be down low single digits versus 2023. We expect our automotive business to be in line with global production versus our previous assumption of outperformance.

Speaker Change: Additionally, the growth of new Chinese market entrance and increases in Chinese exports, particularly to Europe is driving further market disruption.

Speaker Change: Europe has responded by introducing new tariffs, but is yet to be seen if this will slow the pace of Chinese imports.

Speaker Change: Light vehicle production in major markets is expected to be down low single digits versus 2023, we expect our automotive business will be in line with global production versus our previous assumption of outperformance.

Karl Glassman: This change is largely driven by an unfavorable product mix related to the growth of Chinese electric vehicles. Finally, our geocomponents business has experienced sluggish project releases in the civil construction market, and retail sales have recently been weaker than originally anticipated. We now expect both civil construction and retail full-year sales volume to be down low single digits. While low volumes continue to be the most significant headwind to earnings, our initiatives to improve operating efficiency and maintain pricing discipline will drive margin recovery in the near term.

Speaker Change: This change is largely driven by unfavorable product mix related to the growth of the Chinese electric vehicles.

Speaker Change: Finally, our Geo components business has experienced sluggish project releases in the civil construction market and retail sales have recently been weaker than originally anticipated. We now expect both civil construction and retail full year sales volume to be down.

Speaker Change: Low single digits.

While low volumes continue to be the most significant headwind to earnings our initiatives to improve operating efficiency and maintained pricing discipline will drive margin recovery in the near term.

Karl Glassman: With this foundation, we will be well positioned to capture profitable growth opportunities as demand recovers. I'll now turn the call over to Ben to review second quarter financial details, a restructuring update, and our revised outlook for the year.

Speaker Change: With this foundation, we will be well positioned to capture profitable growth opportunities as demand recovers.

Speaker Change: I'll now turn the call over to Ben to review second quarter financial details, a restructuring update and our revised outlook for the year.

Benjamin Burns: Thank you, Karl, and good morning, everyone. Second quarter sales were $1.1 billion, down 8% versus the second quarter of 2023 due to volume declines primarily in residential end markets and raw material-related selling price declines. Compared to second quarter 2023, sales in our betting product segment decreased 13%. The loss of a customer within Specialty Foam, which we expected to impact the back half of 2024, actually began in the second quarter. Excluding this change, segment sales would have declined by high single digits. Second quarter sales in specialized products were flat year over year, and sales in furniture, flooring, and textile products were down 6%.

Ben: Thank you Carl and good morning, everyone second quarter sales were $1 $1 billion down 8% versus the second quarter of 2023 from volume declines primarily in our residential end markets and raw material related selling price decreases compared to second quarter 2023 sales and are betting products segment decreased.

Ben: 13% the loss of a customer within specialty film, which we expect it to impact the back half of 'twenty 'twenty four actually began in the second quarter. Excluding this change segment sales would've declined high single digits second quarter sales in specialized products were flat year over year and sales in furniture flooring and textile products.

Ben: We're down 6%.

Benjamin Burns: Second quarter EBIT was a loss of $614 million, primarily from a $675 million non-cash goodwill impairment charge. In connection with the preparation of the second quarter 2024 financial statements, we performed an impairment analysis which included that an impairment existed as a result of the significant decline in stock price and current market condition. Excluding the goodwill impairment charge and other items outlined in yesterday's press release, adjusted EBIT was $71 million, down $21 million versus second quarter 2023, primarily due to increased inventory write-downs and reserves, lower volume, raw material-related pricing adjustments, and higher bad debt reserves, partially offset by lower amortization expense, operational efficiency improvements, and restructuring benefits. Second quarter earnings per share were a loss of $4.39.

Ben: Second quarter EBIT was a loss of $614 million, primarily from a $675 million noncash goodwill impairment charge.

Ben: In connection with the preparation of the second quarter 2024 financial statements. We performed an impairment analysis included that in the impairment existed as a result of the significant decline in stock price and current market conditions.

Ben: Excluding the goodwill impairment charge and other items outlined in Yesterdays press release, adjusted EBIT was $71 million down $21 million versus second quarter 2023, primarily due to increased inventory write downs and reserves lower volume raw material related pricing adjustments and higher bad debt reserves.

Ben: Partially offset by lower amortization expense operational efficiency improvements and restructuring method.

Ben: Second quarter earnings per share were a loss of $4 39 on an adjusted basis second quarter EPS was <unk> 29 cents.

Benjamin Burns: On an adjusted basis, second quarter EPS was $0.29, a 24% decrease from second quarter 2023 adjusted EPS of $0.38. As always, we are focused on cash generation. In the near term, we are prioritizing debt reduction while continuing to fund organic growth. Our long-term priorities for the use of cash are funding organic growth, funding strategic acquisitions, and returning cash to shareholders through dividends and share repurchase. In the second quarter, operating cash flow was $94 million, a decrease of $17 million versus the second quarter of 2020. This decrease was primarily driven by lower earnings, partially offset by working capital improvements.

Ben: 24% decrease from second quarter of 2023, adjusted EPS of <unk> 38 cents.

Ben: As always we are focused on cash generation in the near term we are prioritizing debt reduction while continuing to fund organic growth. Our long term priorities for use of cash are funding organic growth funding strategic acquisitions, and returning cash to shareholders through dividends and share repurchases.

Ben: In the second quarter operating cash flow was $94 million, a decrease of $17 million versus the second quarter of 2023.

Ben: This decrease was primarily driven by lower earnings partially offset by working capital improvement.

Benjamin Burns: We ended the quarter with adjusted working capital as a percentage of annualized sales of 14.9% and an improvement of 30 basis points versus second quarter 2020. Cash from operations is still expected to be $300 to $350 million in 2021. We ended the second quarter with total debt of $2 billion, including $208 million of commercial paper outstanding. Net debt to trailing 12-month adjusted EBITDA was 3.83 times at quarter end, in line with our expectation of hitting peak leverage in the second quarter.

Ben: We ended the quarter with adjusted working capital as a percentage of annualized sales, a 14, 9% and an improvement of 30 basis points versus second quarter of 2023.

Ben: Cash from operations is still expected to be $300 million to $350 million in 2024.

Ben: We ended the second quarter with total debt of $2 billion, including $208 million of commercial paper outstanding net debt to trailing 12 month. Adjusted EBITDA was 383 times at quarter end in line with our expectation of hitting peak leverage in the second quarter.

Benjamin Burns: As a reminder, our Covenant calculation is more favorable than our publicly reported leverage ratio, and we remain comfortably below the 4 times Covenant leverage ratio. In the third quarter, we expect to begin progressing toward our long-term target of two times, as we use cash previously allocated for the dividend, along with 2024 total anticipated proceeds of $35 to $45 million from EIDL and restructuring-related real estate sales to accelerate debt reduction.

Ben: As a reminder, our covenant calculation is more favorable than our publicly reported leverage ratio and we remained comfortably below the four times covenant leverage ratio.

Ben: In the third quarter, we expect to begin progressing toward our long term target of two times as we use cash previously allocated for the dividend along with 2024 total anticipated proceeds of $35 million to $45 million from idle and restructuring related real estate sales to accelerate debt reduction.

Benjamin Burns: We still expect to predominantly use our commercial paper program to repay $300 million of 3.8% 10-year notes maturing in November. Total liquidity was $705 million at June 30, comprised of $307 million of cash on hand and $398 million in capacity remaining under our revolving credit facility.

Ben: Still expect to predominantly use our commercial paper program to repay $300 million of three 8% 10 year notes maturing in November.

Ben: Total liquidity was $705 million at June 30 comprised of $307 million of cash on hand, and 398 million in capacity remaining under our revolving credit facility.

Benjamin Burns: As Karl mentioned earlier, our team is doing an excellent job executing the restructuring. With six months of activity now complete, we are providing an update on some of the financial metrics related to the restructuring. We originally estimated that these initiatives would reduce sales by approximately $100 million on an annualized run rate basis once fully implemented in late 2025. We now expect less impact and estimate that sales attrition will be approximately $80 million on an annualized run rate basis after all initiatives are completed. For 2024, we are revising our sales attrition estimate from $40 million to $25 million, with $3 million of sales attrition realized in the second quarter. Real estate sales associated with the restructuring plan are also going well.

Speaker Change: As Carl mentioned earlier, our team is doing an excellent job executing our restructuring plan with six months of activity now complete we are providing an update on some of the financial metrics related to the plan.

Carl: We originally estimated that these initiatives were reduced sales by approximately $100 million on an annualized run rate basis once fully implemented in late 2025.

Speaker Change: We now expect less impact and estimate the sales attrition will be approximately $80 million on an annualized run rate basis. After all initiatives are complete for 2024, we are revising our sales attrition estimate from $40 million to $25 million with $3 million of sales attrition realized in the second quarter.

Speaker Change: Real estate sales associated with the restructuring plan are also going well previously we assumed that we would generate up to $10 million in cash from restructuring related real estate sales in 2024, with an additional $50 million to $80 million generated in 2025.

Benjamin Burns: Previously, we assumed that we would generate up to $10 million in cash from restructuring-related real estate sales in 2024, with an additional $50 million to $80 million generated in 2022. We still expect total proceeds of $60 to $80 million, but now believe properties will sell sooner than originally anticipated and expect proceeds of $15 to $25 million in 2024 and the balance in 2025. Restructuring costs during the quarter were $11 million, comprised of $9 million in cash costs and $2 million in non-cash costs.

Speaker Change: We still expect total proceeds of $60 million to $80 million, but now believe properties will sell sooner than originally anticipated and expect proceeds of $15 million to $25 million in 2024 and the balance in 2025.

Speaker Change: Restructuring costs during the quarter were an $11 million comprised of $9 million in cash cost and $2 million and noncash costs. The plan remains on track from a cost perspective, and there are no changes to our total estimate or timing of costs and.

Benjamin Burns: The plan remains on track from a cost perspective, and there are no changes to our total estimate or timing of costs. In the second quarter, we realized $3 million of EBIT benefit related to the restructuring plan and now expect approximately $10-15 million of EBIT benefit to be realized in 2024 versus our initial estimate of $5-10 million as benefits are flowing through earlier than expected. We still believe a total annualized EBIT benefit of $40 to $50 million will be realized once initiatives are fully implemented in late 2020.

Speaker Change: In the second quarter, we realized $3 million of EBIT benefit related to the restructuring plan and now expect approximately $10 million to $15 million of EBIT benefit to be realized in 2024 versus our initial estimate of $5 million to $10 million as benefits are flowing through earlier than expected we.

Speaker Change: We still believe total annualized EBIT benefit of $40 million to $50 million will be realized once initiatives are fully implemented in late 2025.

Benjamin Burns: We are lowering our 2024 sales guidance and narrowing our adjusted EPS guidance range, resulting in a slightly lower mid-terms. This change reflects the impacts of lower volume, increased inventory write-downs and reserves, and higher bad debt reserves partially offset by continued strong execution of the restructuring plan, operational efficiency improvements, and pricing decisions. 2024 sales are now expected to be $4.3 to $4.5 billion, or down 5% to 9% versus 2023, compared to our prior guidance of $4.35 billion to $4.65 billion.

Speaker Change: We are lowering our 2024 sales guidance and narrowing our adjusted EPS guidance range, resulting in a slightly lower midpoint. This change.

Speaker Change: <unk> reflects the impacts of lower volume increased inventory write downs and reserves and higher bad debt reserves, partially offset by continued strong execution of the restructuring plan operational efficiency improvements and pricing discipline.

Speaker Change: 2024 sales are now expected to be $4, three to $4 5 billion or down 5% to 9% versus 2023 compared to our prior guidance of 4.35 billion to $4 $65 billion.

Benjamin Burns: The decrease versus our prior guidance reflects lower expected volumes across our segments and deflationary pressure. Volume is expected to be down low to mid single digits, with volume at the midpoint, down high single digits in bedding products, flat in specialized products, and down low single digits in furniture, flooring, and textile products.

Speaker Change: The decrease versus our prior guidance reflects lower expected volumes across our segments and deflationary pressure.

Speaker Change: Volume is expected to be down low to mid single digits with volume at the midpoint down high single digits, and bedding products flat and specialized products and down low single digits and furniture flooring and textile products.

Benjamin Burns: Deflation and currency combined are expected to reduce sales. Low single-digit 2024 earnings per share are expected to be a loss of $3.43 to a loss of $3.58, versus our prior guidance of $0.95 to $1.25, including the impact of the non-cash goodwill impairment charge, restructuring charges, real estate gains, and certain other costs outlined in yesterday's press release. Full-year adjusted earnings per share are expected to be $1.10 to $1.25 versus our prior guidance of $1.05 to $1.35.

Speaker Change: Deflation and currency combined are expected to reduce sales low single digits.

Speaker Change: 2024 earnings per share are expected to be a loss of $3.43 to a loss of $3.58 versus our prior guidance of 95 to $1 25, including the impact of the noncash goodwill impairment charge restructuring charges real estate gains and certain other costs outlining yesterday.

Speaker Change: Press release full.

Speaker Change: Full year adjusted earnings per share are expected to be $1.10 to $1 25 versus our prior guidance of $1 five to $1 35 as a result, our 2020 for full year adjusted EBIT margin range is expected to be six 5% to six 9% versus our prior guidance of six 4% to seven 2%.

Benjamin Burns: As a result, our 2024 full-year adjusted EBIT margin range is expected to be 6.5% to 6.9% versus our prior guidance of 6.4% to 7.9%. Our teams are diligently working each day to improve profitability through our strategic initiatives and effective cost management, and we are beginning to see the benefits of these efforts. With those comments, I'll turn the call back over to Cassie.

Speaker Change: Our teams are diligently working each day to improve profitability through our strategic initiatives and effective cost management and we are beginning to see the benefits of these efforts. We look forward to updating you with further progress on this work in the coming quarters.

Speaker Change: With those comments I'll turn the call back over to Kathy. Thank.

Cassie Branscum: Thank you, Ben. Operator, we're ready to begin the Q&A.

Kathy: Thank you Ben operator, we're ready to begin Q&A.

Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today is from Susan Maklari of Goldman Sachs. Please go ahead.

Speaker Change: Thank you the floor is now open for questions. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May Press Star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.

Kathy: Keith.

Speaker Change: Our first question today is coming from Susan Mcclary of Goldman Sachs. Please go ahead.

Susan Maklari: Thank you. Good morning, everyone.

Susan Mcclary: Thank you good morning, everyone.

Good morning, Susan.

Karl Glassman: Good morning, Susan. Good morning.

Karl Glassman: Good morning. Welcome back, Karl.

Susan Mcclary: Good morning, welcome back Carl.

Karl Glassman: I think it's good to be back, but it's good to speak to you anyway.

Carl: Thank you.

Carl: It's good to be back, but it's good to speak to you anyway.

Karl Glassman: It's good to be back. It's good to have you back. We're happy to hear you on these calls again. You did a really good job, I think, of talking us through a lot of the focus areas and the things that are happening at Leggett. As you've stepped back into this role, can you talk about what your clear priorities are at this point? You know, how you think about the positioning of the business and the things that you're especially focused on as you think about the next several quarters?

Susan Mcclary: It gives me back its good to have you back we're happy to have you on these calls again.

Speaker Change: You did a really good job I think of I'm talking us through a lot of you know you do.

Speaker Change: The focus areas.

Speaker Change: The things that are happening like it as you stepped back into this role can you talk about what your clear priorities are at this point.

Speaker Change: You know how youre thinking about the positioning of the business and the things that you're especially focused on as you think about the next.

Speaker Change: Her quarters.

Karl Glassman: Yeah, it's really to be incredibly transparent with you, the investment community, and with our employees that we're in a tough environment, and transparency is always important, but probably never more important than it is now. It's also to have kind of quick wins, to continue to do the blocking and tackling that's required to improve our profitability, and at the same time, just empower our people to make decisions, to know that they're supported, and that we're all in this together.

Speaker Change: Yeah, it's really too.

Speaker Change: Be incredibly transparent with you the investment community and with our employees that were in a in a tough environment and transparency as it is always important but probably never more important than it is now. It's also to have just kind of quick wins to continue to do the blocking and tackling.

Speaker Change: Tackling that's required to improve our profitability and at the same time, just empowering our people to make decisions to to to know that they're supported and you know that.

Speaker Change: We're all in this together.

Karl Glassman: At the same time, we're establishing a sense of accountability and urgency that maybe was lacking that's really important. We're also, you know, I can't be more pleased with where the restructuring plan is. Staying focused on the restructuring plan is really important. Tyson and his team have done a terrific job with what really is a heavy lift.

Speaker Change: At the same time, we're establishing really a sense of accountability and urgency that maybe was lacking that's really important. We're also you know I I can't be more pleased with where the restructuring plan is staying focused on our restructuring plan is really important.

Tyson and his team have done a terrific job with with what really is a heavy lift to get through the first phase of that in U S. Spring as quickly as they have is is truly remarkable when you think about the size and scope of those activities sustain and involved in that.

Karl Glassman: To get through the first phase of that in U.S. Spring as quickly as they have is truly remarkable when you think about the size and scope of those activities. Being involved in that analysis and kind of talking through phase two, at the same time, always, always prioritizing customer relationships and product innovation. The stickiness of our relationship with our customers is really important to us, and the responsibility that they kind of share with us for innovation going forward, so we spent a lot of time on that.

Speaker Change: That analysis and.

Speaker Change: Kind of talking through phase two at the same time always always prioritizing customer relationships and product innovation. The stickiness of our relationship with our customers is really important to us and the responsibility that they they kind of share with us for.

Speaker Change: Innovation going forward. So we spent a lot of time on that we're also spending a lot of time kind of.

Karl Glassman: Dealing with what does Leggett look like five years from now? What's our position? It's really a portfolio management review in terms of what businesses we should be in and, at the same time, trying to accelerate profitable growth in the businesses that we remain in and balancing that. So there's more to come. There's been a lot of work, really good work, done there. But I couldn't be more pleased with how the team is interacting and kind of rising to the occasion. It's typical Leggett style.

Speaker Change: Dealing with what is like it looked like five years from now what's our positioning what.

Speaker Change: It's really a portfolio management review in terms of what businesses should we be in and then at the same time trying to accelerate profitable growth in the businesses that we remain in and.

Speaker Change: Balancing that so there there's more to come there has been a lot of work really good work done there, but I couldn't be more pleased with how the team is interacting and kind of rising to the occasion. Its typical leggett style, but thanks for the question Susan I'm, sorry, it's a long winded, but theres a lot going on.

Karl Glassman: No, that was a good answer. And it's great to hear how things are coming together. You know, you mentioned that there were some moving parts in there. Of course, there was a loss of a customer in the specialized foam piece. Maybe can you talk a bit about the new products and some of the other efforts that it's going through to help revitalize and regain share with some of your existing customers?

Susan Mcclary: No that was a good answer and it's great to hear how things are coming together very encouraging.

Speaker Change: For the color.

Speaker Change: And maybe shifting for battle more specifically you mentioned that there's been some moving parts in there of course, there was a loss of the customer and the in the specialized phone Pete maybe can you talk a bit about the new products and some of the other Africa like its going through to help revitalize.

Speaker Change: We gained share with some of your existing customers what that means so those betting volumes and maybe especially but they're not specialize some piece of it.

Karl Glassman: What does that mean for those bedding volumes and maybe especially within that specialized foam piece? And how should we think about the mix shift overall and how that's perhaps going to come together over time as some of these things gain momentum?

Speaker Change: When you think about the mix shift overall and how that perhaps when it come together over time and some of these things don't momentum.

Karl Glassman: Well, you are a master at asking complex questions. So, therefore, I'm a master at handing them off. So, ask Tyson to answer that question.

Speaker Change: Or you are a master that asking about a complex question.

Speaker Change: And has it so therefore I'm a master at handing it off so [laughter] asked Tyson to answer that question, but.

Tyson Hagel: But Susan, before I do, you know, and many listeners know that I've been around the bidding industry literally all my life, and the changes that the industry is going through right now are remarkable. They're unprecedented. I will tell you, in retrospect, 2008 through 2010 was easy to manage through compared to what the team's managing through right now in terms of the rate of change. So with all of that said, Tyson, please try to unravel that giant ball.

Susan Mcclary: Susan before I do.

Tyson: You know when many of the listeners know that I've been around the bidding industry literally all my life and the changes that the industry is going through right now are remarkable they are unprecedented.

Speaker Change: I will tell you in retrospect 2008 through 2010 was easy to manage through compared to what the team's managing through right now in terms of the rate of change so with all of that said Tyson. Please try to unravel that giant ball.

Tyson: Sure. Thank you.

Tyson Hagel: Sure. Thank you, Karl. Good morning, Susan.

Tyson Hagel: I appreciate the question. Let me go through a few things with you. I'll start by saying our development teams are extremely busy right now working with several of our critical customers on innovation projects. And that's really true across the segment, but really most specifically with our spring group. And a high percentage of our resources are spending time working on projects that are committed to launch, and they're high volume and long-term opportunities, so they're really critical for both us and our partners. And really, like Karl said, this is a really critical service and function and how we work together with our customers. We all depend on one another.

Tyson: Good morning, Susan I appreciate the question.

Tyson Hagel: And so this is a really encouraging thing, you know, despite the current challenges like Karl just outlined, this is a really encouraging sign for us, and getting through these projects is really critical. And it is a really tough market. The second thing would be that it's always competitive. Right now, it's extremely competitive.

Tyson: Let me let me go through a few things with you I'll start by saying our development teams are extremely busy right now working with several of our critical customers on innovation projects and it's really true across the segment.

Tyson: Really most specifically with our spring group and at the high percentage of our resources.

Our spending time working on projects that are committed to launch and their high volume and long term opportunities. So there are really critical for both us and our partners.

Tyson: And really this is like Carl said this is a really critical service in function and how we work together with our customers we depend on one another and so this is a really encouraging thing is despite the current challenges like Karl just outlined.

Karl: This is a really encouraging sign for us and getting through these projects is really critical.

Karl: And it is a really tough market and the <unk>.

Speaker Change: Second thing would be its always competitive right now it's extremely competitive and we're not ignoring any opportunities that we have even in the short term to.

Tyson Hagel: And we're not ignoring any opportunities that we have, even in the short term, to work with customers on opportunities that make sense for us and for them. And we've talked a little bit in some of the past calls about some of our innovation that helps us in this category, our EcoBase and automated foam-encased comfort core unit production. And these are both really labor- and manufacturing-efficient projects.

Speaker Change: To work with customers on opportunities to make sense for us and for them and we've talked a little bit in some of the past calls about some of our innovation that helps us in this category.

Speaker Change: Our eco base and automated phone me case comfort core unit kind of production and these are both really labor and manufacturing efficiency projects.

Speaker Change: Projects and so these are some tools that we have that we can work with our customers even in a really tough environment to help them and gives us a chance to regain some market share. So those are really really important things for us in the short term as well.

Tyson Hagel: And so these are some tools that we have that we can work with our customers, even in a really tough environment, to help them and give us a chance to regain some market share. So those are really, really important things for us in the short term as well. Then I'll say DCS. You mentioned that, and you can see in the second quarter, we did have an earlier than expected loss of a customer. But without that, we did have some volume improvement year over year. And we've seen this for the last several quarters.

Tyson Hagel: And it's the result of a lot of hard work from our commercial teams at DCS and diversifying the customer base, selling accessories, components, and finished mattress projects, specifically with some private label customers. So we have been seeing the benefits of a lot of that effort. And we'll see some more of that in the back half of the year; we have some more things in the pipeline. With that said, we have a lot of work to do there, and there will be some ups and downs when we're in the middle of restructuring that also impacts specialty foam.

Speaker Change: I mean, I'll say D. C. S. You mentioned that and you can see in the second quarter. We did have an earlier than expected loss of a customer but without that we did have some volume improvement year over year and we've seen this for the last several quarters and it's the result of a lot of hard work from our commercial teams the D. C S.

Speaker Change: And diversifying the customer base I felt like accessories components and finished mattress projects, specifically with some private label customers. So we have been seeing the benefits grow through throw out of that effort and we will see some more of that in the back half of the year, we have some more things in the pipeline.

Speaker Change: But that said we have a lot of work to do there and there'll be some ups and downs, but we're in the middle of a restructuring that also impacts specialty film so there'll be some some things that come and go but we're working hard on it and feel good about the progress, we're making them and I'd also add is part of specialty film our Peterson chemical team has been really really busy with some delay.

Tyson Hagel: So there'll be some things that come and go, but we're working hard on it and feel good about the progress we're making. And I'd also add, as part of specialty foam, our Peterson chemical team has been really, really busy with some development projects as well, and they have a couple of products that they've been sharing at some of the recent trade shows that they're excited about, and our customers are excited about, so that's some good progress as well.

All the projects as well and they have a couple of products that they've been sharing with some of the recent trade shows that they're excited about our customers are excited about it.

Speaker Change: So that's some good progress as well so I guess to tie all of that together I know that's a long answer.

Tyson Hagel: So I guess to tie all of that together. I know that's a long answer. Not all of this will benefit us overnight, but I think it's really exciting and encouraging that, even in a challenging market, our customers are working with us on some new developments and things that will pay some long-term dividends for us in that.

Speaker Change: Not all of this will benefit us overnight.

Speaker Change: But I think it's really exciting and encouraging that even in a challenging market that our customers are working with us on on some new development in and things that will pay some long term dividends for us and them.

Tyson Hagel: Okay, that's a great color. Thank you, Tyson. And then I just want to get one more in because I think this is a bright spot in the quarter and I want to make sure we touch on it. And it's FF&T.

Speaker Change: Okay. That's great color. Thank you and then I just want to get one more in because I think this is a bright spot in the quarter and I want to make sure we touch on it and it's S. S T.

Susan Maklari: They had a very nice margin. They came in about 80 basis points ahead of where we were. The margin was up year over year. And that was even with those volumes down a bit in there. Can you just talk about the success that they're seeing and the ability to continue to execute at that level even with this tough demand environment?

Speaker Change: Very nice margin. They came in about 80 basis points ahead of where we where the margin was up year over year and that was even with those volumes down a bit in there can you just talk about the success that they're still in their ability to continue to execute at that level, even with a tough demand environment.

Karl Glassman: Yeah, Sam, why don't you appreciate the really accolades? Sam and his team are doing a great job. Those businesses are really well managed.

Yeah, Sam why don't you appreciate the really the accolades our Sam and his team are doing a great job those businesses are really well managed but Sam if you would why don't you respond.

Karl Glassman: But Sam, if you would, why don't you respond?

Sam Smith: Sure, Karl. Thanks for the question, Susan. I really appreciate it.

Sam: Sure Carl Thanks for the question Susan really appreciate it.

Sam: First off let me just say that we've got some great teams and some great leaders across these businesses.

Sam Smith: So first off, let me just say that we've got some great teams and some great leaders across these businesses. They've always been good, but over the last four years, with, you know, the wild spikes and the drops that we've seen in volume. Commodity costs, freight rates, manufacturing costs, all these things have taught us really to be even better leaders. You know, for example, we've learned how to very quickly analyze where we are from a cost of margin perspective.

Sam: I'm always been good but over the last four years with the.

Sam: The wild spikes in the drops that we've seen in volume.

Sam: Commodity costs freight rates manufacturing costs. All these things that taught us really to be even better leaders.

Sam: For example, we've learned how to quickly analyze where we are from a cost or margin perspective.

Sam Smith: We've learned how to really anticipate where we believe volumes are going to go and where costs are going to go in the near term. We've learned how to make some really hard decisions to mitigate some of the cost increases, like the restructuring efforts that we're working through right now in flooring and that we essentially finished in home furnishings. We've learned how to have some really difficult conversations with ourselves, with our customers, and with our vendors.

Sam: We alert to.

Sam: Really anticipate where we believe volumes are going to go and where our costs are going to go in the near term we've learned how to make.

Sam: Makes it a really our decision to mitigate some of the cost increases like the restructuring efforts that we're working through right now in Florida that we essentially finished in home furniture.

Sam: Yes, we've learned a lot.

Sam: It has been really difficult conversations with ourselves with our customers and with our vendors and as we done all these things.

Sam Smith: And as we've done all these hard things, I think our teams really gained a lot of confidence in themselves and in their abilities to kind of control what they could control and to really deliver on what they need to deliver on. So I think these abilities and our growing confidence are really what's allowed us to deliver on this great pricing discipline that you see in a really tough environment. So, bottom line, I think we're becoming more agile, more focused, and really better overall business leaders.

Sam: Our teams really gained a lot of confidence in themselves and their abilities to kind of control with it.

Sam: Control and to really deliver on what they need to deliver them. So.

Sam: I think these abilities and our growing confidence it really what's allowed us to deliver on this break great pricing discipline that you see in a really tough environment, but bottom line I think we're becoming more agile.

Sam: More focus and really better overall business leaders. So when volumes do start getting better I think we're going to be able to use these skills and our confidence that we've learned positively grow on the upside.

Sam Smith: When volumes do start getting better, I think we're going to be able to use these skills and our confidence that we've learned to positively grow on the upside. I think it's too early to really speculate what that looks like from a magnitude perspective, but we're in a lot better position to handle the upside appropriately because handling the downside made us a lot better.

It's too early to really speculate what that looks like a magnitude perspective, but we're in a lot better position to handle the up your upside appropriately book close handle on the downside made us a lot better.

Susan Maklari: Good. All right. Well, that's great to hear. I'll ask another question, but I'll let you guys go for now. Thank you all for that color. It was great.

Speaker Change: Alright, well, that's great to hear I'll re queue with some other questions well, let you guys go for now thank you all for that color it was great.

Susan Mcclary: Thanks, Susan.

Operator: Thank you. The next question is coming from Bobby Griffin of Raymond James.

Speaker Change: Thank you. The next question is coming from Bobby Griffin of Raymond James. Please go ahead.

Robert Griffin: Good morning everybody, thanks for taking my questions. I'm Karl. Good to talk to you again. Yeah, same, goes both ways.

Bobby Griffin: Good morning bodies, Thanks for taking my questions and Karl good to talk to you again.

Karl: Yeah. So it goes both ways. Thanks Bobby.

Robert Griffin: Thanks, Bobby. And Cassie, thank you for all the details in the slides that you and I, our team on the restructuring initiative, it's very helpful to kind of see that laid out visually. So I appreciate it.

Susan Mcclary: Kathy Thank you for all the details in the slides that you and the IR team on the restructuring initiatives very helpful to kind of see that laid out visually so I appreciate it.

Kathy: Youre welcome.

Robert Griffin: I guess, I guess first up for me, Karl, I was going to start maybe with the auto business. Actually, a lot of different shifts kind of going on there between the adoption of EVs, maybe slower in some areas faster than others, you know, the Chinese entrance into Europe. And I guess maybe there still is a debate on where inventory levels go in the US from, you know, obviously, the COVID impact. Can you just maybe unpack kind of those dynamics and how Leggett is positioned for them, and where there are opportunities or where investments need to be?

Speaker Change: I guess I guess first off for me Carl is going to start maybe with the auto business is actually a lot of different shifts kind of going on there between the adoption of evs, maybe slower in some areas faster and others you know the Chinese entrance into Europe, and I guess, maybe there still is a debate on where inventory levels go in the U S. From you know obviously the COVID-19 impact.

Speaker Change: Can you just maybe unpack kind of those dynamics and how late it is position for those and where's the opportunities of where my investments need to be.

Karl Glassman: Yeah, Bobby, thanks for the question. Like many of our markets, Global Automotive is a bit of a challenge, as you said, EV adoption is very different depending on what region we operate in. And, as you know, that's a very global business. Overall, it probably is good for us, but not so good from a total industry demand perspective, in that the current IHS forecast shows global build in the major markets down 2%. We think that it will probably be shifted down as a release again. There's probably more of a hockey stick in 4Q than is appropriate.

Carl: Yeah, Bobby Thanks for the question it like many of our our markets.

Carl: Global automotive is a bit of a challenge as you said.

Speaker Change: The EV adoption is very different depending on what region, we operate in and as you know that's a very global business.

Carl:

Speaker Change: Overall, it probably is good for us, but not so good from a total industry demand perspective and that the current IHS forecast shows global build in the major markets down 2%.

Speaker Change: We think that it will probably be shifted down as they release again.

Speaker Change: There's probably more of a hockey stick in for Q than is appropriate we've.

Karl Glassman: We've readjusted our thinking, and that's embedded in our current guidance. Our teams are dealing with elongated programs on ICE vehicles in certain markets and acceleration of EV adoption in others, and I do want to make it clear that we do have content for the Chinese BYDs, the biggest, but there's a number of them, that we certainly have content there. When we take our sales forecast down, it's because the dollars of sales per each unit are less than originally anticipated in an EV model, but we take profitability down at a lesser rate because our profit margins on those legacy models, which are very heavy weighted to mechanical lumbars, where we have a very, very strong market position. So lower selling price, higher profitability, really in absolute dollars in many of those programs. So it's complicated. As regards inventories in the US, inventories are starting to grow. What's normal?

Speaker Change: We adjusted our thinking and that's embedded in our current guidance.

Speaker Change: Our teams are dealing with elongated programs on ice.

Speaker Change: Vehicles.

Speaker Change: In certain markets and acceleration.

Speaker Change: Of EV adoption, and others and I do want to make it clear that we do have content on the Chinese.

Speaker Change: Byd's biggest but theres a number of them that we certainly have content there.

Speaker Change: When we take our sales forecasts down it's because the dollars of sales per each unit are less than originally anticipated in an EV model, but we take profitability down at a lesser rate because our profit margins on those legacy.

Speaker Change: He models, which are very heavy weighted to mechanical lumbar's, where we.

Speaker Change: Have a very very strong market position, so lessor selling price.

Speaker Change: Your profitability really in absolute dollars.

Speaker Change: And many of those programs. So it's complicated as regards inventories in the U S.

Speaker Change: Inventories are starting to grow what's normal I don't think post COVID-19 anyone really knows that.

Karl Glassman: I don't think post-COVID anyone really knows. The consumer has been trained to wait even longer for a vehicle. But at the same time, cars are, I think the average auto life in North America is 12.6 years. So that's at a historic high. At the end of the day, there's an affordability problem; buying a new vehicle is hellaciously expensive. That's what's happening in Europe with the trade down to electrification, but some of the Chinese upstarts are probably too strong, but it's really an affordability issue. I think that plays into our hands as well, as I said earlier, we'll see how the whole thing unravels.

Karl Glassman: Very good. I appreciate that. And then maybe one that kind of dovetails into the betting segment.

Speaker Change: The consumer has has been trained to wait even longer for a vehicle, but at the same time autos are I think the average auto life in North America is 12 six years. So that's at a historic high.

Speaker Change: How that all sorts out you know really.

Speaker Change: At the end of the day, there's an affordability problem.

Speaker Change: Buying a new vehicle is whole Asia sleep expensive, that's what's happening in Europe with the trade down.

Speaker Change: To electrification, but with some of the Chinese ups.

Speaker Change: Upstarts is probably too strong, but it's really an affordability issue I think that plays into our hands as well as I said earlier, but we'll see how the whole thing unravels.

Speaker Change: Very good I appreciate that and then maybe one that kind of dovetails into the bedding segment, but it's all again, there's some metal margin compression and just curious kind of the dynamics there.

Robert Griffin: But Saul, again, there's some metal margin compression and just curious kind of the dynamics there. Is this just, in your view, a normalization, you know, we had some really high spreads, and we're just coming back to kind of what maybe is closer to normal? Or has there been some changes, some changes in either tariff protections or some of the dynamics that have caused some imports to come in more than they typically would? Anything there for us to think about?

Speaker Change: In your view a normalization you know we had some really high spreads they were just coming back to kind of what maybe its closer to normal or has there been some.

Speaker Change: Some changes in either like the tariff protections or some of the dynamics that caused some imports to come in more than they typically would anything there for us to think about.

Karl Glassman: Yeah, Tyson can clean me up. I think it's just a normalization. There's no change in import protection at all. It's just the shrinking of that spread is probably more driven by demand or lack of demand domestically across all markets, obviously not just bedding and furniture. But it's just a normalization.

Speaker Change: Yeah, Tyson and clean me up I think it is just a normalization are there's no change in import protection at all it's just a the shrinking of that spread is probably more driven by demand or lack of demand domestically across all markets.

Bobby Griffin: Obviously, not just bedding and furniture, but it's just a normalization yeah I totally agree called normalization and Bobby you, probably remember we talked about it there was.

Tyson Hagel: Yeah, I totally agree, Karl. Normalization, and Bobby, you probably remember, we talked about it; there was, at least compared to history, an excessive difference between the US steel market and Europe. And we saw some of that and adjusted prices accordingly in our businesses late last year. So we had already started seeing a lot of price normalization kind of downstream through our businesses. But yeah, totally agree with Karl, just the normalization of kind of coming off COVID and the pandemic impact.

Bobby Griffin: At least compared to history and access a difference between the U S steel market in Europe, and we saw some of that and adjusted prices Accordingly in our business as late last year. So it already starting to single out of the price normalization kind of downstream through our businesses, but yeah I totally agree with Carl just normalization of kind of coming out of Covid and the pandemic impacts.

Robert Griffin: Appreciate that. And then maybe, Karl, one more, just on your prepared remarks about portfolio optimization, I just kind of wanted to ask in context of, you know, the hurdle rates or the hurdles to kind of get over the line on doing that, given where the macro is and where some of these end markets are. What are the patient levels? Like, how do you guys go about debating that?

Speaker Change: I appreciate that and then maybe one more just on the you talked a little bit on your prepared remarks that portfolio optimization I just kind of wanted to ask in context of you know the hurdle rates are the hurdles to kind of get over the line on doing that given where the macro is and where some of these end markets are just kind of what's the patient level like how do you guys go about debating that.

Speaker Change: Because I do remember back you know I guess this would have been in probably 13 or 14, maybe than you were a president there was some good portfolio optimization to raise margins in and had a nice impact on the P&L.

Robert Griffin: Because I do remember back, you know, I guess this would have been in 13 or 14, maybe, and you were president. There was some good portfolio optimization that raised margins and had a nice impact on the P&L.

Karl Glassman: Yeah, Bobby, good question. We can remember how to do it. There was Ryan Kleibacher, who runs strategy, was certainly involved in at that timeframe and helped through all of that. So what we're trying to do is forecast these businesses. You know, we look at them today but try to forecast them five years out. And from a profitability perspective, from a growth potential, and from a fit to Leggett perspective, there is a lot of good work done.

Speaker Change: Yeah, Bob Good question.

Speaker Change: Remember how to do it there.

Speaker Change: And there was Brian <unk>, who runs strategy was we're certainly involved in at that time frame.

Speaker Change: And helping them through all of that so we're what we're trying to do is forecast. These businesses. Yeah. We look at them today, but trying to forecast them five years out and from a profitability perspective from a growth potential and from a fit to leg it perspective.

Karl Glassman: I think that you should expect a smaller, more focused company in the future. By our history, we don't divulge any potential divestitures until we're under an LOI, so there's more to come, but there's a lot of activity.

Bobby Griffin: A lot of good work done I think that you should expect a smaller more focused company in the future.

Bobby Griffin: By our history, we don't divulge any potential divestitures until were under an LOI. So theres more to come but there's a lot of activity.

Robert Griffin: Thank you. I appreciate it. Best of luck here during the process and the rest of the year.

Speaker Change: Thank you I appreciate it best of luck here during the process.

Bobby Griffin: Rest of the year.

Bobby Griffin: Thank you Bobby.

Operator: Thank you. The next question is coming from Keith Hughes of Truist Securities. Please go ahead.

Speaker Change: Thank you. The next question is coming from Keith Hughes of <unk> Securities. Please go ahead.

Keith Hughes: Thank you. Building on that last answer, Karl, on any portfolio moves, is that probably more likely to be seen next year, or do you think we could see something in the second half?

Keith Hughes: Thank you building on that last answer Karl on some portfolio moves is that probably more likely to be seen and the next year or do you think we could see something in the second half of this year.

Karl Glassman: This is Dr.

Karl: Uh huh.

Karl Glassman: I would think probably early next year. It just takes a long time to get through some of these processes. Some of our businesses are very complex geographically and multi-product, so yeah, I would say first half of next year.

Karl: I would I would think probably early next year its too. It just takes a long time to get through some of these processes. Some of our businesses are very complex geographically.

Speaker Change: All type product.

Speaker Change: So yeah, I would say first half of next year.

Keith Hughes: And, you know, very much like the one you went through in 2007, I assume everything is on the table at this point.

Speaker Change: And you know very much like the one you went through in 2007 I assume everything's on the table at this point.

Karl Glassman: Everything's being evaluated. In the prepared comments, you know, we continue to tell you the businesses that we're going to lean into. Betting, automotive, GEO, and I would say all textiles. There are some alternative markets and some of our other textile businesses that have shown significant growth. Those businesses are well managed. There are some other businesses that are core to the company that are really well managed, that are good performers, and are great cash generators. We need those businesses to be healthy going forward, so there's a balance between all of that. Really, the screen is fit for purpose, growth potential and our ability to execute in whatever those markets are.

Speaker Change: Everything is being evaluated in the prepared comments.

Speaker Change: We continue to tell you the businesses that we're going to lean into that in automotive.

Speaker Change: And I would say all textiles, there's some alternative markets and some of our other textiles businesses that have significant growth those those businesses are well managed.

Speaker Change: There are some other businesses that are core to the company that are really well managed that are good performers great cash generators.

Speaker Change: We need those businesses to be healthy going forward. So there's a balance of all of that really the the screen is fit.

Speaker Change: Growth potential and our ability to execute and whatever those markets are.

Keith Hughes: Okay, and on the quarter. Susan asked earlier, the volume was down a little bit, not that much in furniture, flooring, and textiles, particularly furniture and flooring, but the price was down a good bit. If you could talk about, is that just market pressure and pricing, or is there some kind of portfolio change that's impacting prices? Just what's the dynamic?

Speaker Change: Okay and on the quarter.

Speaker Change: So there's a question earlier the volume it was down a little bit not that much in furniture flooring, and textiles, particularly furniture and flooring, but the price was down to good but if you could talk about is that just market pressure on pricing or is there some kind of portfolio change that's impacting price just what's the dynamics there.

Karl Glassman: It's an interesting question, Keith, because pricing is all over the board. Generally, what's happening is prices are falling with commodity cost reductions, a general comment across most of the portfolio. But I do need to call out a couple businesses.

Speaker Change: Well, it's an interesting question Keith because pricing is all over the board that.

Speaker Change: Generally what's happening is prices are falling with commodity cost reductions general comment across most of the portfolio, but I do need to call out a couple of businesses.

Karl Glassman: Aerospace & Automotive: They had a hard time passing through cost inflation, post-pandemic, and trying to deliver to the customer. So it's difficult in that time frame when they were having a hard time kind of meeting demand for them to pass through materials. Now that both of those businesses have done a better job of being able to keep up with customer demand, they've gone back kind of retrospectively and increased some prices. So we've enhanced margins in both of those two businesses. But across the company, it's generally highly correlated to commodities.

Speaker Change: Aerospace and automotive.

Speaker Change: They had a hard time passing through cost inflation.

Speaker Change: Post pandemic and trying to deliver to customers. So it's difficult in that timeframe. When they were having a hard time kind of meeting demand for them to pass through materials now that they have both of those businesses have done a better job of being able to keep up with customer demand and they've gone back.

Speaker Change: Kind of retrospectively and increased some prices. So we've enhanced margins in both of those two businesses, but across the company is generally highly correlated to commodities being softer.

Karl Glassman: I assume that would be the phone and home furniture. Is that what you're referring to?

Speaker Change: Okay.

Speaker Change: So that would be the phone at home furniture that whatsoever.

Karl Glassman: Yeah, it's a little bit of betting year on year. A little bit of textiles were seen.

Speaker Change: Yeah, so a little bit of betting year on year.

Speaker Change: Okay a.

Speaker Change: A little bit of texture.

Keith Hughes: Thank you very much.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you very much.

Operator: Once again, that's star number one. If you'd like to register a question at this time, the next question is coming from Peter Keith of Piper Sandler. Please go ahead.

Speaker Change: Once again Thats star one if you'd like to register a question at this time. The next question is coming from Peter Keith of Piper Sandler. Please go ahead.

Peter Keith: Hey, good morning, everyone. And Karl, again, for me, it's nice to hear your voice. So I think in some ways you already answered this question to Susan's question around your areas of focus, but I wanted to look at it from the other angle. As you've come in, what do you think have been the biggest challenges and issues against Leggett & Platt in recent years when you've been away from the company?

Peter Keith: Hey, good morning, everyone and.

Peter Keith: Karl is good for me and nice to hear your voice.

Speaker Change: So I think in some ways you already answered this question to Susan <unk>.

Peter Keith: Question around your areas of focus, but I wanted to look at it from the other angle as you've come in and what do you think have been the biggest challenges and issues.

Peter Keith: <unk>.

Speaker Change: Against Leggett and Platt and in recent years.

Speaker Change: When you've been away from the company.

Karl Glassman: Yeah, that's an interesting question because I haven't really been away. You know, staying involved, certainly with relationships, but Yeah, I think it, continuing to be transparent and having a sense of urgency and an ability to make decisions. I think those are kind of the key areas of focus. And it's a tough environment, you know, not laying blame on anybody. I mean, it's a tough, tough environment that our teams are operating in. Sometimes it's tough to be able to kind of stand back and, you know, see the forest through the trees.

Speaker Change: Yeah, that's an interesting question because I've I haven't really been away.

Speaker Change: Staying involved certainly with relationships but.

Speaker Change: Yeah, I think it's.

Speaker Change: Continuing to be transparent.

Speaker Change: And having a sense of urgency and an ability to make decisions I think those are kind of the key areas of focus.

Speaker Change: And it's a tough environment, you know not laying blame on anybody I mean, it's a tough tough environment that our teams are operating in.

Speaker Change: Sometimes it's tough to be able to.

Speaker Change: Kind of stand back and.

Speaker Change: See the the forest from the trees in it so I think that's it is as much as anything Peter.

Karl Glassman: And so I think that's it as much as anything. Peter, our people have been working in a tough, tough environment. There's no question in my mind that the betting industry is probably no longer in recession but is in depression. That's unprecedented. The last three years have been a challenge with the whipsaw effect of post-pandemic demand and then the fall off right after that. So, you know, I think it's just dealing with the issues at hand and then trying to guide them from a future perspective.

Speaker Change: Our people have been working in a tough tough environment that there's no question in my mind that the bedding industry as is probably no longer in recession, but as in depression. That's been unprecedented the last three years have been a challenge with the whipsaw effect of post pandemic demand and then the falloff right after that so the <unk>.

Speaker Change: So effect has been tough so you know I think it's just dealing with the issues at hand, and then trying to guide from a future perspective.

Speaker Change: Okay.

Peter Keith: And then I know people always respect your opinion on betting and I guess What are you seeing? I think you talked about, I think it was mid-single-digit unit declines. Has there been, you know, I guess throughout Q2, things, do you think they got better? Did they get worse? And anything you're seeing with the industry so far in Q3?

Speaker Change: And then.

Speaker Change: People always respect your opinion on that.

Speaker Change: Getting in I guess.

Speaker Change: What are you seeing I think you've talked about.

Speaker Change: I think it was mid single digit unit declines.

Speaker Change: Ben.

Ben: Throughout Q2.

Speaker Change: Do you think he got better did it get worse than anything youre seeing with the industry. So far in Q3.

Karl Glassman: You know, I think sequentially, first quarter, second quarter was kind of more the same. What's changed from our last call is we would have had a probably a more aggressive, positive tone on units in the back half of this year. I think the industry's come to the realization that it's tough, and it's going to continue to be tough. So, you know, nothing's really changed. We tease each other about this phrase that the industry uses about bouncing along the bottom.

Ben: No I think sequentially first quarter second quarter was kind of more of the same what's changed from our last call is we would've had a probably a more aggressive a positive tone on units in the back half of this year I think the industry has come to the realization that there it's tough.

Speaker Change: It's going to continue to be tough. So you know not nothing's really changed we tease each other about this phrase that the industry uses about bouncing along the bottom and it it kind of feels that way.

Karl Glassman: And it kind of feels that way. You know, based on history, election years are not very favorable to the betting industry. Advertising, the cost of advertising, and the availability of advertising is really difficult, trying to get, and keep the consumer's attention at a time when there are some affordability issues. So yeah, that's why we've kind of changed our update to the back half to say that we expect full year to be soft down mid single digits, acknowledging that the comps get a little bit easier in the back.

Speaker Change: You know based on history election years are not very favorable to the bedding industry.

Speaker Change: Advertising the cost of advertising or availability of advertising is really difficult and trying to get keep the consumer's attention at a time when.

Speaker Change: There are some affordability issues so yeah.

Speaker Change: Yeah. That's that's why we've kind of changed our update to the back half to say that we expect full year to be soft.

Speaker Change: The down mid single digits, acknowledging that the comps get a little bit easier in the back half.

Speaker Change: Okay.

Peter Keith: And also, I want to ask a follow-up question on metal margin. So it sounds like that's seeing a little more pressure now than you thought a couple months ago. Is there any way to quantify the metal margin impact on guidance? And then where is your metal margin today versus 2019?

Speaker Change: And.

Speaker Change: Also I want to ask a follow up on the metal margin.

Speaker Change: It sounds like that's seeing a little more pressure now than what you thought a couple of months ago.

Speaker Change: Is there any way to quantify that the amount of margin impact.

Speaker Change: On to the guidance and then where is your metal margin today versus 2019.

Karl Glassman: I would say it's higher than 2019. And as regards metal margin compression imputed in the guidance, it's not that significant, but no, we don't decompartmentalize to that degree.

Speaker Change: Compared to 2019.

Speaker Change: Certainly yeah, I would say, it's higher than 2019.

Speaker Change: And as regards metal margin compression imputed into guidance.

Speaker Change: It's not that significant but no we don't decompartmentalize to that degree.

Peter Keith: Lastly, on the automotive front, so calling out some of the headwinds around the disruption from Chinese entrants and, I guess, various demand dynamics on EVs. As you think about those, they do seem maybe a little bit more structural and not transitory. Do you think about those as being more challenges to sales or, or margins for the specialized segment or perhaps both?

Speaker Change: Okay Fair enough lastly on the on the automotive.

Speaker Change: So calling out some of the headwinds around.

Speaker Change: The disruption from China, and then yeah, I guess various demand dynamics on that E D.

Speaker Change: If you think about those they do seem.

Speaker Change: Maybe a little bit more structural.

Speaker Change: In terms of not not transitory.

Speaker Change: Do you think about those as being more challenges to sales or.

Speaker Change: Or margins for the specialty segment or perhaps both.

Karl Glassman: I agree that they're probably not transitory. And it really does go back to car affordability and auto affordability issues. It's interesting.

Speaker Change: I agree that they're probably not transitory.

Speaker Change: And it really does go back to car affordability auto affordability issues. It's interesting. This is a north American statistic and remember that our automotive business is very much a global business, but small car.

Karl Glassman: This is a North American statistic. And remember that our automotive business is very much a global business. But small cars sold at a faster rate so far this year than any time in recent history. And I think that's not a consumer preference change; that's purely an affordability or lack of affordability issue.

Speaker Change: Sold at a faster rate so far this year than any time in recent history.

Speaker Change: And I think thats not a consumer preference preference change that's purely an affordability or lack of affordability issue. So it.

Karl Glassman: So it is more of a pressure on the top line than the bottom line, for sure. But our automotive teams continue to do a terrific job of executing. And as I said earlier, we're really well placed on some of those. But, we're well placed across the whole value chain, but because of the maturity of the, the, the smaller vehicles, then the kind of lack of, I guess the top line is, I said it more fluently the first time I said it, the top line is going to be less, but the bottom line is, on a percentage basis, absolutely, in an absolute dollar basis Just because of the maturity of those programs and our competitive market position with them.

Speaker Change: It is more of a pressure on topline and bottom line for sure.

Peter Keith: Okay, sounds good. Thank you very much.

Speaker Change: Our automotive teams continue to do a terrific job of executing and as I said earlier, we're really well placed on some of those.

Operator: Thank you. The next question is a follow-up from Susan Maklari of Goldman Sachs.

Speaker Change: We're well placed across the whole value chain, but because of the maturity of the.

Speaker Change: The smaller vehicles.

Speaker Change: The kind of lack of of <unk>.

Speaker Change: The top line is.

Speaker Change: You said it more fluently. The first time I saw it but the top line is going to be less but the bottom line is is on a percentage basis, absolutely in an absolute dollar basis, probably better Jeff.

Speaker Change: Because of the maturity of those programs and our competitive market position with those programs.

Speaker Change: Okay sounds good thank you very much.

Speaker Change:

Speaker Change: Thank you. The next question is a follow up coming from Susan Mcclary of Goldman Sachs. Please go ahead.

Susan Maklari: Thank you. I just have two more for you, Karl.

Susan Mcclary: Thank you.

Speaker Change: Two more for you Carl.

Speaker Change: What I'm trying to get better in this conversation.

Karl Glassman: I'm trying to get Ben into this conversation. We'll ask Ben one too.

Speaker Change: Well that's been one we'll get good good thing he said yes.

Karl Glassman: Good, good. Thank you. He's anxious.

Susan Maklari: Okay, okay. Well, we'll definitely do that. There's plenty. There's plenty we can do... But first, one of the things I want to follow up on is you mentioned the impact of the election, being an electioneer, on demand for betting. How do you think the health of the consumer today, broadly speaking, and the impact that this macro uncertainty and perhaps the increased political uncertainty, too, in the last couple of weeks is adding to their willingness or their ability to go out and make these bigger ticket purchases?

Speaker Change: Okay, well, we'll definitely be I mean, there's plenty plenty we can ask.

Speaker Change: Hmm.

Speaker Change: What do they want to follow up on you mentioned the impact of the election being an election year on demand for battle.

Speaker Change: About the health of the consumer today.

Speaker Change: Broadly speaking.

Speaker Change: That's just macro uncertainty and perhaps that won't take political uncertainty too in the last couple of weeks and adding to their willingness or their ability to go out and make these bigger ticket purchases.

Karl Glassman: It's a concern. You know, the news of

Speaker Change: It's a concern.

Karl Glassman: The news of yesterday on job formations isn't positive. Some of the, you know, I'm certainly not an economist, but some believe that we're heading into recession. The health of the consumer's weak, as you know, certainly on the premium side of betting, a lot of those purchases are financed. You know, we economists speak of the K-shaped recovery, and the top leg of the K seems to be softening. The ultra premium seems to, for the first time post-pandemic, feel a little bit of softness that we can see as a read-through through some of our customers.

Speaker Change: The news of yesterday on job formations isn't positive.

Speaker Change: Some of the.

Speaker Change: Certainly not an economist, but some believing that we're heading into recession.

Speaker Change: The health of the consumers week as you know certainly on the premium side of betting a lot of those purchases are financed.

Speaker Change: We economists speak of the case shape recovery and the top leg of the case seems to be softening the ultra premium seems too.

Speaker Change: For the first time post pandemic, feeling a little bit of softness that we can see as a read through through some of our customers. So said differently until the fed makes a rate adjustment.

Karl Glassman: So said differently, until the Fed makes a rate adjustment, I don't think that anything really changes. You know what drives betting, and that's household formation, household changes, and consumer confidence, and none of that happens until the Fed moves.

Speaker Change: I don't think that anything really.

Speaker Change: Really changes that are.

Speaker Change: You know what drives bedding and that's household formation household changes in consumer confidence and none of that happens until the fed moves.

Karl Glassman: Okay, okay. And then maybe, you know, following up on that too.

Speaker Change: Okay. Okay.

Speaker Change: Following up on that too.

Susan Maklari: You've been working through this restructuring plan with a lot of macro headwinds coming at you. If the Fed does start to move in the back half of this year, how do you think about what having macro tailwinds could mean for the business? And how do you think about, we talk a lot about that in relation to the consumer, but could it also help some of those industrial businesses as well?

Speaker Change: We're working through this restructuring plan with a lot of macro how to ring carnival.

Speaker Change: That does start to move in the back half of this year.

Speaker Change: Think about what having macro tailwind could mean for the business.

Speaker Change: Just think about when we talk a lot about that in relation to the consumer but could it also help some of those industrial businesses as well.

Karl Glassman: Absolutely. Volume is always a good thing. You know, that's really what's happening now. And to Sam's very appropriate comments a little bit ago, that you put some volume through these assets now, you know, what Tyson and the team have done in betting. I tell you what, we all know what volume does through these spring plants. It gets really good, really, really quick. And many of our businesses have the same characteristics. So volume would be welcomed and is needed.

Speaker Change: Absolutely volume is always a good thing.

Sam: You know that's really what what's happening now and to Sam's very appropriate comments, a little bit ago that you put some volume through these assets now you know what what Tyson and the team has done embedding.

Sam: I'd tell you what we all know what volume does through the spring plants.

Speaker Change: It gets really good really really quick.

Speaker Change: Many of our businesses have the same characteristics. So.

Speaker Change: Volume would be welcomed and is needed at this point.

Karl Glassman: Yeah, okay. All right. Now we'll ask Ben a question. All right, I appreciate it. Okay, here we go. Ben, you actually saw a nice improvement in working capital despite everything that's going on this quarter. Can you just talk a little bit about the sources of that and how you think about continuing to be able to get some benefits out of it, even if things stay tough?

Speaker Change: Yeah, Okay, all right now.

Speaker Change: Now I will ask that question [laughter] Alright, I appreciate it.

Speaker Change: Okay.

Speaker Change: You actually saw a nice improvement in the working capital. Despite everything that's going on this quarter can you just talk a little bit about the sources of that and how you think about continuing to be able to to get some benefits in there even if things stay tough.

Benjamin Burns: Yeah, sure, Susan. I think most of the benefit really comes from bringing our inventories down. We've been doing that nicely for a while now. Our teams are really focused on that and doing a good job, and it has provided some improvement. I think as we go through the back half of the year, we don't expect a whole lot more.

Speaker Change: Yeah sure Susan I think most of the benefit really comes from bringing our inventories down and we've been doing that nicely for a while now our teams are really focused on that and doing a good job and it has provided some improvement.

Benjamin Burns: We've done a good job, but I would think working capital benefits are slightly lower. Our earnings will drive the majority of the cash flow. And we really, as we've talked about, we'll use that to help start reducing debt. One thing I'd also point out that we did reduce debt by $73 million in the second quarter, which was nice. And we haven't seen the free up of cash yet from the debt. I'm sorry, but the dividend reduction really will start to make an impact in the third quarter. Even though we declared the dividend lower in the second quarter, we paid the first quarter dividend in the second quarter. So from a cash perspective, that was still a little bit higher burden, obviously.

Speaker Change: I think as we go through the back half of the year, we don't expect a whole lot more we've done a good job.

Speaker Change: But would think working capital benefits as slightly our earnings will drive the majority of the cash flow.

Speaker Change: And we really as we've talked about we'll use that to help start reducing debt.

Speaker Change: One thing I'd also I'd point out that we did reduce debt $73 million in the second quarter, which was nice and we haven't seen.

Speaker Change: The free up of the cash yet from.

Speaker Change: The debt I'm, sorry, the dividend reduction that that really will start to make.

Speaker Change: Make an impact in the third quarter, even though we declared the dividend lower in the second quarter, we paid the first quarter dividend in second quarter. So from a cash perspective that was still a little bit higher burden, obviously and then the last thing I'd mention is our teams have done a really great job of monetizing some of these real.

Benjamin Burns: And then the last thing I'd mention is our teams have done a really great job of monetizing some of these real estate properties. So in the first half of the year, we generated $18 million of proceeds from real estate that was not related to the real estate or, I'm sorry, the restructuring project. But in the back half of the year, we're seeing where we can accelerate some of the restructuring-related real estate properties and generate 15 to 25 million in proceeds there. So we feel good about our cash generation and these real estate sales as we start to make progress now in the back half on that debt reduction.

Speaker Change: State properties. So in the first half of the year, we generated $18 million of.

Speaker Change: Proceeds from <unk>.

Speaker Change: Real estate properties that were not related to the real estate or I'm, sorry, the <unk>.

Speaker Change: The restructuring project, but in the back half of the year, we're seeing where we can accelerate some of the restructuring and related real estate properties and generate 15% to $25 million.

Speaker Change: And proceeds there so we feel good about our cash generation in these real estate sales as we start to make progress now in the back half on that debt reduction.

Benjamin Burns: Yeah, okay. And following up on that, you actually maintain the operating cash flow guide at $300 to $315 million, even with taking the guide down incrementally, talking about volumes being weak, all these headwinds that you're facing. Can you talk about the ability to maintain that and what's going into that?

Speaker Change: Yeah, Okay. That's all.

Speaker Change: Hang up on that.

Speaker Change: The operating cash flow guide at 300 to 350 million, even with taking the guy down incrementally talking about volumes being weak all all these.

Speaker Change: All of these headwinds that you're facing.

Speaker Change: Can you talk about the ability of the main poorer and what's going into that.

Benjamin Burns: Yeah, I think there are a couple of things there, and we talked about them just here recently. The ability for our businesses to really start seeing the benefit of the restructuring, you know, being able to efficiently move volume through the business, I think, will be a big thing. And then we have a really big focus on working capital. Like I said, we've had a good focus on that, but we'll continue to do that, and we'll continue to challenge ourselves to utilize that to drive cash as well. Yeah, okay.

Speaker Change: Yeah, I think there's a couple of things there and we talked about them here.

Speaker Change: Here recently.

Speaker Change: The ability for our businesses to really start seeing the benefit of the restructuring.

Speaker Change: Being able to efficiently move volume through the business I think will be will be a big thing and then we have a really big focus on working capital like I said I believe we've had a good focus on that but.

Speaker Change: We will continue to do that and we will continue to.

Speaker Change: Challenge ourselves to utilize that to drive cash as well.

Susan Maklari: Okay, all right, well, I will end it there. Thank you everyone for all the color today, and good luck guys.

Speaker Change: Okay, Alright, well I will end it there. Thank you everyone for all the color of the Dol Good luck guys.

Speaker Change: Thank you.

Cassie Branscum: Thank you. At this time, I'd like to turn the floor back over to Ms. Branscum for closing comments.

Speaker Change: Thank you at this time I'd like to turn the floor back over to MS brands come for closing comments.

Cassie Branscum: Thank you for joining us today and for your interest in Leggett & Platt. We'll talk to you next quarter. Have a great weekend.

Speaker Change: Great. Thank you for joining us today and your interest in like an implant and we'll talk to you next quarter have a great weekend.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines to lock off the webcast at this time and enjoy the rest of your day.

Speaker Change: Okay.

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Speaker Change: Thanks.

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Speaker Change: Okay.