Leggett & Platt, Incorporated

Greetings. Welcome to Leggett and Platt Third Quarter 2023 Webcast and Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cassie Branscombe, Senior Director of Investor Relations. Thank you, Ms. Branscombe. You may begin.

Good morning, and welcome to Leggett & Platt's third quarter earnings call. With me on the call today are Mitch Dulles, President and CEO, Ben Burns, Executive Vice President and CFO, Steve Henderson, Executive Vice President and President of the Specialized Products and Furniture, Flooring, and Textile Products segments, Tyson Hagel, Executive Vice President and President of the Betting Products Segment, Susan McCoy, Senior Vice President of Investor Relations, and Collina Taubert, Manager of Investor Relations. The agenda for our call this morning is as follows. Mitch will start with a summary of the main points we made in yesterday's press release and discuss operating results and demand trends. Ben will cover financial details and address our outlook for the remainder of 2023 and the group will answer any questions you have. This conference call is being recorded for Likert & Platt and is copyrighted material. This call may not be transcribed, recorded, or broadcast without our express permission. A replay will be available on the Investor Relations section of our website. We posted to the IR section of our website yesterday's press release and a set of slides that contain summary financial information along with segment details. 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. Actual results or events may differ materially due to a number of risks and uncertainties, and the company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the 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 Mitch.

Good morning, and thank you for participating in our third quarter call. I would like to start the call by thanking our employees for their tremendous efforts in what was another challenging quarter. Ongoing weak demand impacted our bedding products and furniture flooring and textile product segments, but it was partially offset by continued demand strength in our specialized product segment. Sales in the quarter were down 9% versus third quarter 2022 from lower volume and raw material related price decreases. Acquisitions added 2% to sales. Third quarter earnings per share were $0.39. This includes $5 million or $0.03 per share of gain from the sale of real estate. Excluding this item, adjusted earnings per share were $0.36. Earnings decreased year over year, primarily from lower metal margin in our steel rod business and lower volume in our residential end markets. These decreases were partially offset by lower incentive compensation and bad debt expense. Cash flow from operations was $144 million, up $78 million versus third quarter of 2022. We are lowering our full-year guidance to reflect continued volatility in the macroeconomic environment, continued low consumer demand in residential end markets, and the modest impact we've experienced so far from the UAW strike on our automotive business. We are focused on anticipating and adapting to market changes, improving operating efficiency, driving strong cash management, and engaging with our customers on new product opportunities. We are evaluating opportunities across our businesses, including further integration of our specialty foam and innerspring operations that are expected to support improved profitability, a strong balance sheet, and continued shareholder returns. Now moving on to segment results and demand trends. Sales in our bedding product segment were down 17% versus third quarter of 2022. Demand in the U.S. bedding market remained soft but relatively stable sequentially. We continue to anticipate full-year mattress consumption to be down high single digits. In the quarter, we saw modest sequential improvement in innerspring and mattress units, but we expected deceleration in units sequentially in the fourth quarter due to normal seasonality. Metal margin expanded to its highest point in mid-2022 and narrowed as expected. We still anticipate metal margin to be down mid-teens versus 2022. While our commercial teams continue to evaluate customer opportunities and commercialize new products, soft demand remains the largest headwind to profits. In the near term, we continue to drive operational efficiencies, especially in our specialty foam business, to help offset soft volume. Additionally, we believe meaningful opportunities to increase profitability exist and are evaluating a number of possibilities, including the further integration of our specialty foam and innerspring operations I mentioned a moment ago, which should drive manufacturing savings and product development gains, optimizing our production and distribution capacity to service our customers effectively and efficiently, and enhancing our value proposition to our customers through expanded product capabilities and growing content at attractive price points. Sales in our specialized product segment increased 10% versus third quarter of 2022, driven by the hydraulic cylinders acquisition completed in August of last year and volume growth in aerospace and automotive. The UAW strike had minimal impact to our automotive business in the third quarter. So far in the fourth quarter, the sales impact has been approximately $5 million. As the strike continues and potentially broadens to additional OEM facilities, the impact to the industry remains uncertain and unpredictable. As the situation evolves, we are maintaining communications with our customers and positioning ourselves to quickly react and support their needs. Sales in our furniture, flooring, and textile product segment were down 11% versus third quarter 2022, driven by soft demand across the segment. Sales in home furniture, fabric converting, and flooring were down year over year, but roughly in line with second quarter levels. Work furniture demand has softened modestly with slower activity in European markets. In geo components, demand continued to soften in home improvement retail and civil construction in markets. We expect demand across the segment to decelerate sequentially in the fourth quarter due to normal seasonality. With that, I'll now turn the call over to Ben.