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Leggett & Platt Inc. (LEG)

Q4 2007 Earnings Call

January 25, 20089:00 am

Executives

David M. DeSonier – VP of Strategy and Investor Relations

Felix  Wright – Chairman and Consultant

David Haffner – CEO and President

Matthew Flanigan – Chief Financial Officer, Sr. VP

Karl Glassman – Exec. VP

Susan McCoy – Dir. of Investor relations

Analysts

David Macgregor – Longbow Research

Budd Bugatch – Raymond James

Laura Champine – Morgan, Keegan & Company, Inc.

Joel Harvard – Hilliard Lyons

Keith Hughes – Suntrust Robinson Humphrey

John Baugh – Stifel Nicolaus & Company, Inc

Cory Arman – Sprice  Volker

Marc Heilweil – Spectrum Advisory Services

Fred Spiece – Spiece Dorson-Thorton Capital Growth

Operator

Welcome to the Leggett & Platt Fourth Quarter Earnings Call.

(Operator Instructions)

I know now like to turn the conference over to our host, David DeSonier.

David DeSonier

Good morning and thank you for taking part in Leggett & Platt Fourth Quarter Conference call. I am David DeSonier the Vice President of Strategy and Investor Relations and with me this morning are the following.  David Haffner our CEO and President, Karl Glassman our Chief Operating Officer, Felix  Wright who is Leggett’s Chairman of the board, Matt Flanigan our CFO, and Susan McCoy our Director of Investor relations.

The agenda for today’s call is as follows, Dave Haffner will start with the summary of the major statements we made in yesterday’s press release.  Karl Glassman will discuss trends in our various markets.  Dave will then address our outlook for 2008 and finally the group will answer any questions you have.

This conference is being recorded for Leggett & Platt and it is copyrighted material.  This call may not be transcribed, recorded or broadcasted without our expressed permission.  A replay is available from the IR portion of Leggett’s Website.

In addition, I need to remind you that remarks today concerning future expectations, events, objectives, strategies, trends, or results constitute forward-looking statements.  Actual results and events may differ materially due to a number of risks and uncertainties and the company undertakes no obligation to update or revise these statements.

For a summary of these risk factors and additional information please refer to yesterday’s press release in the section in our 10-K entitled forward-looking statements.  I will now turn the call over to Dave Haffner.

David Haffner

As anticipated yesterday, we reported a net loss for the fourth quarter as a result of implementing our strategic plan.  In our November and December Press release, as we told investors that we would incur a significant non-cash charges.  Consistent with our forecast during the quarter we recorded $143 million of goodwill impairment in our fixture and display operations and $132 million of asset impairment associated with businesses we intend to divest.

As a result we have now incurred virtually all of the one-time cost associated with our strategic plan.  Operationally for the quarter are ongoing businesses performed in line with the guidance we issued in December versus Fourth Quarter 2006, earnings from the ongoing operations declined primarily due to lower sales in our domestic residential related businesses, increased medical and energy cost and currency impacts.

For the full year 2007, we reported a net loss of $0.6 per share, reflecting the large non-cash impairment charges previously mentioned.  Operationally, earnings decreased versus the prior year, primarily from lower organic sales.  We experienced soft demand throughout 2007 in our US home related and retail markets but these declines were partially offset by strength in international markets and the non-dealer portion of the domestic commercial vehicle products business.

Despite lower earnings in 2007, our financial profile remains very strong.  We generated record annual cash from operations during the year of $614 million.  A 28% increase over 2006.  In a large part due to our on going emphasis on working capital management.  We continued to have an excellent balance sheet in the end of the year with Net of VAT at 28% of net capital below our long-term target level of 30% to 40%.

In November, we increased our annual dividend by 39% to $1.00 per share, which equates to a current yield of 5.5%.  This year 2008, marks the 37th consectutive annual dividend increase for Leggett and an average compound growth rate of over 14% and we also purchased 11 million shares in 2007 and reduced our outstanding shares by 5%.

Several markets remained soft as we entered 2008, with no visible catalyst to aggressively alter demand in the next few quarters.  We are focused on creating long-term value by implementing in our strategic plan and our efforts should benefit share holders even as the economic and market conditions remain challenging.  As announced in November, we adopted Total Shareholder Return or TSR as our primary as our primary strategic objective and expect to achieve 12% to 15% annual TSR over the long term.

We aim to generate TSR and roughly equal amounts from three different sources.  Earning’s growth, dividend yield and share repurchases.  We expect that more balanced three-prong TSR strategy to generate higher returns at considerably lower risk.  We have adopted role based portfolio management with different roles for each business unit based upon competitive advantages, strategic position and financial health.  We have begun implementing in a much more rigorous strategic planning process in part to continually assess each business unit’s role in the portfolio.

Businesses that remain in the portfolio, need to generate returns in excess of the companies cost of capital.  Though most of our business units are generating adequate returns, each has opportunities to improve.  We are eliminating 1/5 of our portfolio largely through the divestitures, which are proceeding as planned.

Investment bankers are assisting with the sale of the aluminum product segment and three of the other business units.  We have already received expressions of interest from numerous potential buyers.  We continue to believe that the divestitures will occur during 2008 and expect after tax proceeds of approximately $400 million.  Given the market’s interest in small to mid-sized transactions in the tangible assets associated with these operations, we believe our expectations are reasonable.  We expect to generate significantly more cash as a result of these changes and we intend to return much of this cash to shareholders.

For the next few years we will need about $300 million annually to fund collectively capital expenditures and dividends.  That need should readily be met with operating cash flow.  As I mentioned earlier we generated $614 million of operating cash in 2007. We anticipate using much of our excess cash, including divestiture proceeds to repurchase shares, pending board approval for purchase over the current 10 million share authorization.

Given our strong consistent cash flow, even during soft economic cycles, we are confident we can meet these priorities.  And with those comments I will turn the call over to Karl Glassman who will discuss the segments in more detail.

Karl Glassman

In my segment comments this morning, of the addressing results related to our continuing operations, as we mentioned in yesterdays, press release, the businesses we plan to divest in 2008 are now reflected in the financial statements is discontinued operations.  So the results for the quarter and full year are not included in this discussion.

With that said, in the residential furnishing segment organic sales decreased 7% in both the Fourth Quarter and the Full Year primarily due to soft demand in the US residential markets and very strong prior year cons in our carpet underlay business.

International demand for betting and upholstery furniture components remained strong throughout the year.  Fourth Quarter EBIT and EBIT margins decreased versus the prior year reflecting higher impairments and restructuring the related charges.  Lower sales in the carpet underlay and domestic betting businesses and increased medical expense energy cost and legal reserve.  Full year EBIT declines also reflect the higher impairments and restructuring the related charges and lower sales.

In commercial fixturing and components, organic sales declined slightly in the fourth quarter primarily due to lower demand and store fixtures and our decision to walk away from sales with unacceptable margins.  Non cash, goodwill impairment charges of $143 million and other restructuring related cost of $9 million lead to a substantial fourth quarter EBIT loss in the segment.  For the full year, sales decreased 3% primarily due to lower store fixtures volume but also from slightly lower demand for office furniture components.  Declines and full year EBIT primarily reflect the goodwill impairment and restructuring the related charges and lower sales.

Late in 2007 we completed the acquisition of an office furniture component’s business located in China with annual sales of approximately $20 million, this operation gives us an Asian presence for producing and supplying our customers who source a portion of their finished products and components offshore.  In industrial materials, organic sales were down 3% for both the Fourth Quarter and Full Year 2007.

Continued softness in the US residential markets lead to lower unit volume but this decline was partially offset by inflation of the steel prices.  EBIT and EBIT margins in fourth quarter also declined slightly versus fourth quarter 2006.  Lower volume and higher steel scrap cost were the main factors behind the EBIT decline, but we are partially offset by earnings from an acquisition completed early in 2007.  EBIT for the full year was roughly flat as the impact for lower organic sales was offset by earnings from acquired business.  In specialized products, we posted strong organic sales in both the fourth quarter and full year, reflecting worldwide growth in our automotive business and continued strong performance than of the non-dealer portion of commercial vehicle products.  Despite strong sales growth, fourth quarter EBIT decreased versus the prior year reflecting currency impacts, non-recurrence of prior year one-time benefits in higher restructuring related cost.  For the full year 2007, EBIT and EBIT margins improved significantly, reflecting higher organic sales in the segment in earnings from a company acquired early in 2007, which were partially offset by currency barriers.  With those comments, I will turn the call back over to Dave.

David DeSonier

As we announced in yesterday’s press release, we expect Full Year 2008 Earnings from continuing operations to be $0.95 to a $1.30 per share.  This includes $0.05 to $0.10 per share in restructuring related cost, but does not account for potential earnings from discontinued operations nor any possible gains or losses from the divestitures.  We expect to use the entire 10 million share repurchase authorization during 2008 and have reflected the resulting share reduction in our full year guidance.  Sales from continuing operations are expected to be approximately $4.2 billion or about 2% lower than in 2007.  This decrease reflects the planned elimination by the end of 2008 of approximately $100 million of revenue with unacceptable profit margins in our store fixtures business.  It also reflects minimal acquisition revenue in essentially flat sales collectively from operations other than store fixtures.

Despite the fact that 2008 will be a complicated reporting year as the divestitures are completed, we are confident in our execution of this strategic plan.  Shareholder returns have suffered for the past few years, but we believe our actions will re-establish Leggett as a more profitable company, one that generates above average total shareholder return.  With those comments I will now turn the call back over to Dave DeSonier.

David DeSonier

That concludes our prepared remarks, we appreciate your attention and we will be glad to answer your questions.  In order to allow everyone an opportunity to participate, we again request that you ask your single best question and then voluntarily yield to the next participant.  If you have additional questions please re-enter the queue and we will answer all the questions you may have.

Question and Answer Session

Operator

(Operator giving instruction)

Our first question comes from David Macgregor with Longbow Research.

David Macgregor - Longbow Research

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

David DeSonier

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

David Macgregor - Longbow Research

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

David DeSonier

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

David Macgregor - Longbow Research

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

David DeSonier

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

David Macgregor - Longbow Research

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

David Haffner

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

David Macgregor - Longbow Research

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

David Haffner

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

David Macgregor - Longbow Research

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

Operator

Our next question is from Budd Bugatch with Raymond James.  Please go ahead, sir.

Budd Bugatch - Raymond James

Talk a little bit about your guidance in terms of the revenue guidance and how that breaks down by segment, if you would?  You have had obviously, a significant impact with the consumer-related businesses and yet, specialized at a remarkably interesting positive same location growth in the fourth quarter.  How surely do you think about it for the entire year?  I know you are not giving quarterly guidance but talk a bit about what you think the year looks like – its internal growth on those four segments.

David Haffner

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

Karl Glassman

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

Budd Bugatch - Raymond James

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

Karl Glassman

Total gross sales before eliminations?

David Haffner

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

Budd Bugatch - Raymond James

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

David Haffner

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

Karl Glassman

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

Budd Bugatch - Raymond James

Alright, I will get back in queue as well.

Karl Glassman

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

Operator

Our next question is from Laura Champine.  Please go ahead.

Laura Champine – Morgan, Keegan & Company, Inc.

A couple of things that I am wondering if you will provide at some point in 8-K, it is tough for me doing that P&L that gets me to that 23-cent positive number.  The continuing ups from the profit loss that we see as a loss of $0.71.  And it is tough to tell what blind item that charges the impact and also, I am wondering if you will give us a segment breakout for the quarters last year at some point to help us forecast this year on a continuing basis.

David DeSonier

Yes, Laura if you called me or Susan we have got all that data and be glad to share it with you.

Laura Champine – Morgan, Keegan & Company, Inc

Okay, and then this $100 million that is coming out of the commercial base root.  How does that compared to —I thought there was about $300 million in total business that you are walking away from in 2008.

David DeSonier

Laura, it was a split—If in yesterday you will recall there was about a $100 million that came out of F&D, so we are consistent there.  There is another about $200 million that we earmarked as business that we were going to eliminate in what we call the under performing operations.  We are in the process of doing that, some of that top-line was eliminated in the fourth quarter.  The remainder of it to various degrees will be eliminated for small divestitures as 2008 progresses.

Operator

Our next question is from Joel Harvard with Hilliard Lyons.

Joel Harvard – Hilliard Lyons

The pace of acquisitions, it looks like it picked up in Q4.  The China office was interested against two parts to this question.  Were there any other particularly noteworthy individual acquisitions in the bucket for Q4, and more over, is this more indicative of the pace you think the company is getting back to or was this bit of an outlier?

David DeSonier

Big or small, Joel of course, we are pulling back from acquisitions relative to the phase we had in the past.  On the other hand, it is repeating myself, but on the other hand we are very interested in those opportunities that come along-whenever they come along that sits extremely well with these new strategic plans. Although, I know I am talking out of both sides of my mouth…

I hate to say we are going to make any significant acquisitions as you know we have certain things on our radar screen but generally speaking we are backed away from our previous rate of acquisition at least for the time being, and we are being much more critical of the evaluation of those acquisition and the strategic fit of those acquisitions.

Joel Harvard – Hilliard Lyons

If you allow me one little followup on that, I know for a while management had been talking about looking outside of the old core.  Is 2008 not a year to think about then?

David DeSonier

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

Operator

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

Keith Hughes - Suntrust Robinson Humphrey

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

David DeSonier

Yes, let me put some parameters on it, Keith.  US spring was down approximately 9%.  International spring was up about 15%.  Furniture was flattish with international being up 8% to 9% offsetting the domestic weakness.   Consumer products was negative about 4% to 5%.  Carpet cushion was the biggest issue, it was off about 26% interestingly enough, and when I have given you all in terms of revenue.  In units carpet cushion was actually slightly positive in the fourth quarter.

So there has been a significant decrease in averaging that selling price at a rate that actually closely parallels a decrease in the cost of the basic raw material which is bone scrap.

There is movement all over.  Generally what we saw was strength in international and offsetting weakness in the US.

Keith Hughes - Suntrust Robinson Humphrey

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

David DeSonier

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

Keith Hughes - Suntrust Robinson Humphrey

A final question on the furniture, is the international and the domestic –

Are getting relatively close in size or is international still a lot smaller?

David DeSonier

International is still much smaller.

Operator

(Operator instructions)

Our next question comes from David Macgregor- Longbow Research.  Please go ahead, sir.

David Macgregor - Longbow Research

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

Karl Glassman

We share your concern that scrap moves significantly in December and then open in January with the same sort of upward movement that we passed or in the process of passing through some wire price increases.  We announced an industry increase effective early January and now a second increase effective early February.

Scrap has a gone wild.  We expect it to stabilize going forward but actually your visibility probably is better than ours at this point, we are concerned.  We do not see a 2004 like run up, but the early characteristics feel very similar to what we experienced to that point.  We do not think that they will beat us.  The steepness of the slope or the duration of the time but it is a concern at this point.  Our costumers are all unnoticed; their large increases were seeing the same dynamics now in the flat products where with the scrap surcharges that have been imposed on us by the large steel producers both international and domestic.  We are in for Mr. Toad’s Wild Ride again.

David Macgregor - Longbow Research

“Mr. Toads Wild Ride,” Well, if you talk about the price increases you have planed for January and February are you going to cover those higher costs?  Is it going to be an efficient pass through at this point or how much do you think are you going to earn on this?

Karl Glassman

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

David Haffner

I would add, Dave, that the budgets that we put together which are the foundation of this forecast, take that delay into account and based upon our best assumptions on what rod cost are going to do and scrap cost are going to do.  So we have taken a bit of negative variance already into account because of that delay that Karl mentioned.

David Macgregor - Longbow Research

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

David Haffner

You know absent from a raw material perspective, we are seeing a little up take in the petrochemical based cost, but nothing of that magnitude.

Operator

Our next question is from Budd Bugatch with Raymond James.

Budd Bugatch - Raymond James

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

Matthew Flanigan

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

Budd Bugatch - Raymond James

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

Matthew Flanigan

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

Karl Glassman

But for those who are pre-tax asset numbers.

Budd Bugatch - Raymond James

Okay, alright.  So that is helpful.

Karl Glassman

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

David Haffner

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

Budd Bugatch - Raymond James

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

Matthew Flanigan

Good question.  We are really pleased obviously to see that happen in 2007 and just so you have, only you can not see it on the statement here, but you would in the 10-K when it comes out.  But the pieces that really helped the working capital flush of cash in 2007 was about $100 million dollars related to receivables.

Better collections, a bit of the sales drop phenomenon happening there, but largely better collections, $65 million associated with inventory and about $13 million related to payables management.

So as you go to 2008, a good estimate on operating cash flow will be poor working capital changes would be about $400 million dollars.  We certainly would expect to be able to generate some additional working capital cash this coming year.  It would not be anything we do not believe near the magnitude it was in 2007 for a variety of reasons, but it certainly should be paused at maybe zero to $50 million.  We are very dedicated to it obviously.

Operator

Our next question is from John Baugh with Stifel Nicolaus, please go ahead sir.

John Baugh - Stifel Nicolaus & Company, Inc

It sounds like you have lost the adjustable bed business to Temper-Pedic that you are supplying.  If that is true, I am not particularly interested in the dynamics of that specifically, but I am wondering what parameters that speak to in terms with general business if there is something going on in China, in subsidies, on those types of products.  In what kind of competitive positioning does an event like that speak to?

Karl Glassman

First off, you are correct.  We have been notified by that costumer that we have lost that business.  Steel prices in China are inflating, are there subsidies in China we certainly believe that that is the case within our springs or we would not have filed the anti dumping petition.

Do they flow over to their adjustable bed supplier?  Cannot answer, the dynamics in that market, we are fully dedicated to the adjustable bed market.  We see it as significant growth area.  What we have done is, historically, we have distributed that product through an intermediary, which is, probably would not even try to use it again, which has been through the bedding manufacturer, which has been our typical mode to market.  And now, we are switching to a strategy of direct to retail, speaking to retailers, taking that sale is one that is difficult for a bedding manufacturer to handle because of the size and bulk of that product.  We have long have provided the service element of that sale.  So, we will see how Temper does with their change.  There is some risk in conversion with the offshore supplier who does not have warranty and service that is domestic.  We will see how they do, but we are fully dedicated to that business.  We will continue to service it and expect it to grow, going forward.

John Baugh - Stifel Nicolaus & Company, Inc

Do you have not the capability to make that product in China yourselves?  Would you have access to steel per cost over there that are similar to your competitors over there?

Karl Glassman

Yes, actually because we are major producer of steel-form products in China that we understand those deal economics very, very well.  The price of steel from a flat perspective is equivalent in China to the US prices and I know, we do not believe because we own and operate those, our operation in China, we do not believe that there is a competitive advantage to making that product, the steel portion of that product in China.

Our electronics that service that product are sourced international already, so we designed, blend and assembled that product domestically as it is.  We believed we are very efficient to market.

John Baugh - Stifel Nicolaus & Company, Inc

As a follow-up on the worth 9% of US spring decline.  It sounds like it retailed in betting things really tanked in December and continued to be very soft in January.  Did you see that in your order pattern, you mentioned flat, I think it was your comment for residential in 2008.  Curious as to what you seeing and betting and what your assumptions for betting, specifically, are in 2008.

David Haffner

You are correct, business actually November, December were tough and I would say January is at the same level, we have not really seen any further deterioration.  It seems like the larger manufactures continue to perform relatively well in mid-sized and smaller manufactures are getting squeezed a little bit, so that is where that softness is.  Our assumption going forward in units in 2008 is flat, up a couple of piece of percent and we believed that we will regain some market shares through our product development initiatives.  We do not believe that the market will be positive in units, in 2008.  I do not believe it will deteriorate significantly, either.

Operator

Our next question comes from Cory Arman with Sprice Volker please go ahead sir.

Cory Arman – Sprice  Volker

I just had one quick question.  You guys had mentioned a legal reserve in your December press release.  Is that material and how much is it and what is it related to?

David Haffner

It is not material, for a premise, it is sort of $45 million and it has to do with a dispute relative to a purchase and supply agreement and the exclusivity of that.  It is in arbitration, as we speak.

Cory Arman – Sprice  Volker

This is not a question, it is just a comment.  I know you got a question earlier about reconciliation of the core EPS to GAAP EPS, it would be great to have that in print for everybody to see, rather than having that taken offline, that is just a comment.

Operator

Our next question comes from Marc Heilweil with Spectrum Advisory Services.

Marc Heilweil – Spectrum Advisory Services

I wrote the Board Chairman, I think about a year and a half ago or two years ago and I think that just maybe the board needs a little freshening up. They really have not – I do not think that it is still a job that is providing the kind of guidance that the management needs and obviously you are hiring consultants now and investment bankers and alike.  Would you care to comment on giving the long tenure, maybe you need some fresh perspectives on your board?  I know that is a difficult thing for you to comment in public, but I was curious I never did get an answer to that query.

David Haffner

Marc that is a good question.  I apologize if you did not get an answer to the query.  Felix and I are both here and I will start and then, I will ask Felix to give his perception, but I can say from my perspective, the board has been extremely helpful in the recent pat years, as we have addressed the need for these strategic changes.  The board in many ways was arm-and-arm with us and in some ways, in fact, behind us, the operating management goosing us into some of the necessary introspective analysis that we have done.

Marc, the use of that outside consultant was primarily for two reasons, one was speed and the other was for independent thoroughness, so we did not limit our perspective on the analysis, because of any internal biases.  They were very, very helpful, but I will just repeat myself, we have got a range of board members, relative to tenure.  We have got some extra ordinarily good, relatively, new board members that bring marketing, branding and retailing.  So I for one feel very good about the support in your management has got from the board and the push that they put us through, but Felix, you are here; you should give your perspective.

Felix  Wright

Marc, obviously Dave certainly, saying what he feels and et cetera and I think that you have heard it, but the only thing that I would echo, I would hope you and anybody else did not think that there has been board entrenchment or anything there that has kept anything from heading to pure independence on this board.  Dave was saluting to we have eight outside independent directors.  Obviously, we could have nine if you want to classify one of them in that way.  We got eight purely, outside independent directors.

As Dave stated, they bring a number of skill sets to this company that are outstanding, running their own companies, doing their own professional services and et cetera, and I think that as Dave has expressed, they have been hand and gloved with management for quite sometime in bringing to forth the new initiatives that have brought the new strategic initiative going forth to the company and I believe that probably, if you were inside that board, you will try as progressive and a board in trying to help and guide management in their decisions as there probably is, but we appreciate your comment.

Operator

Our next question is from Fred Spiece with Spiece Dorson-Thorton Capital Growth.

Fred Spiece – Spiece Dorson-Thorton Capital Growth

I think your quote operating EBIT margin was about 8.5 this year and in your forecast, going forward to 95 to 130.  Is that operating margin as you define it?  Is it going to go up or down?

David Haffner

Fred, our operating margin or EBIT margin for 2007 on continuing operations is closer to 7.8, about that.  And, looking forward the mid-point of our range roughly anticipates about an 82% or 83% EBIT margin, so we are definitely looking for some improvement year-over-year, in continuing operations.

Fred Spiece – Spiece Dorson-Thorton Capital Growth

And then, one comment, consultants are wonderful to have for a short period of time, but they never go away.  I think it would be terrific if they went away and you went back to running the company without too much help from them.  I think you read the operators who you like and those people - their usefulness is short term.

David Haffner

Yes, Fred you know us very well and you know my background.

Operator

There are no further questions at this time.

David DeSonier

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

Operator

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

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Source: Leggett & Platt Inc. Q4 2007 Earnings Call Transcript
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