Leggett & Platt, Incorporated

Greetings and welcome to the Leggett & Platt Third Quarter 2024 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 Kathy Branskup, Vice President of Investor Relations. Thank you. You may begin.

Good morning and welcome to Leggett and Platt's third quarter 2024 earnings call. With me on the call today are Carl Glassman, CEO, Ben Burns, CFO, Tyson Hagel, president of the bedding product segment, Sam Smith, president of the furniture, flooring, and textile product segment, and Kalina Talbert, manager of investor relations. The agenda for our call this morning is as follows. Carl will discuss current demand trends and provide an update on the restructuring plan and other ongoing initiatives. Ben will cover our operating results and additional financial details and address our revised 2024 outlook, and the group will answer any questions you have. This conference call is being recorded for Likert and 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 and a restructuring update. Those documents supplement the information we discuss on this call, including non-GAAP reconciliations. 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 Carl.

Good morning, and thank you for joining our call today. As we begin, I want to thank our employees for their continued hard work and dedication as we navigate a challenging macro backdrop. Our third quarter sales and earnings were below our expectations, largely due to weaker than anticipated demand in residential end markets and headwinds in automotive, hydraulic cylinders, and geocomponents. Sluggish demand in these businesses is expected to persist through the fourth quarter and is expected to be more impactful than previously anticipated. As a result, we are reducing full-year sales and earnings guidance, which Ben will detail later in the call. Now I'd like to highlight a few of the current demand dynamics in our key end markets. The U.S. betting market continues to experience negative volume comp, Although some improvement in demand has been observed during holiday sales, in between periods have been softer. We estimate that U.S. mattress consumption was approximately flat in the third quarter, but domestic production was likely down high single digits. Given a more challenging macro environment and softening in consumer spending, we expect the domestic market will continue to be pressured in the fourth quarter and expect 2024 domestic units to be down mid-single digits versus last year. While we are encouraged to see the Fed begin a cycle of interest rate cuts, we know a series of cuts is needed to meaningfully impact housing turnover, and there will also be a lag between improvement in housing trends and an improvement in mattress demand. We still anticipate that our 2024 bedding product segment volume will be down high single digits due to company-specific factors. Excluding higher trade rod sales for non-bedding applications, segment volume would be expected to be down low double digits. However, it's important to note that our comfort core and semifinal finished products continue to perform in line with or better than domestic mattress production trends, and we are working closely with our customers on a number of product line refreshes and value engineering opportunities. Turning to automotive, the market remains volatile across geographies. In China, multinational OEM customers are losing share to Chinese EV manufacturers where we are currently less represented, resulting in short-notice production declines. In Europe, economic softness and consumer affordability issues have given Chinese EV manufacturers opportunities to supply lower-cost electric vehicles, leading to production declines, product trade-down, and program launch delays for our customers. In North America, uncertainty around EV transition timelines and consumer affordability issues is resulting in program launch delays and product trade downs. Although our sales are more impacted by these factors than previously expected, our automotive team continues to realize efficiency improvements and closely manage cost, resulting in improved EBIT margins. Finally, Weakness in our geocomponents business continued through the third quarter, impacting both the civil construction market and retail sales. These trends are expected to continue into fourth quarter, in addition to normal seasonal softness. Despite the near-term demand challenges, we remain focused on our initiatives to strengthen our balance sheet, improve operating efficiency and margins, and position ourselves for future profitable growth opportunities. I'm pleased to share that our restructuring plan remains on track, and our teams have done an excellent job executing the plan. We will exit our Mexican Interspring operation by year-end, which will conclude all Interspring-related restructuring activity in the bedding product segment. Within specialty foam, we have closed two operations and expect one more consolidation to be complete by year-end. Early in the fourth quarter, we closed one adjustable bed location and shifted production to a more cost-advantaged facility to reduce excess capacity and improve our cost structure. Restructuring initiatives in the furniture, flooring, and textiles product segment are also on track. We successfully executed the restructuring activity in home furniture, and we expect to complete phase one of our flooring products restructuring by early next year. Within specialized products, our hydraulic cylinders team is actively working through a restructuring project designed to increase profitability through manufacturing optimization and operating efficiency improvements. Last quarter, we shared an in-depth strategic review of our portfolio was underway. We are focused on simplifying our portfolio to businesses that are the right long-term fit for Leggett & Platt. As part of this strategic review, we are currently exploring the potential sale of our aerospace business. We do not intend to comment on or provide updates regarding our strategic evaluation process unless and until we determine that further disclosure is required or otherwise appropriate. We also continue to work through an evaluation of our general and administrative cost structure. Our G&A project team is analyzing and identifying opportunities to drive efficiencies. We have identified approximately $10 million in corporate cost savings, which are expected to be realized in 2025. We continue to analyze and identify potential opportunities within our business unit functions. However, we anticipate potential cost reductions will be smaller than those identified in our corporate functions. We remain confident in our ability to execute the restructuring plan and other operation efficiency improvements and position our company for long-term success. I'll now turn the call over to Ben to review third quarter financial details and our revised outlook for the year.