禮恩派 (LEG) 2007 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Leggett & Platt fourth-quarter earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (OPERATOR INSTRUCTIONS) This conference is being recorded today, January 25, 2008. I would now like to turn the conference over to our host, David DeSonier.

Good morning and thank you for taking part in Leggett & Platt's 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. David Haffner will start with a 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. Finally, the group will answer any questions you have.

This conference is being recorded for Leggett & Platt and is copyrighted material. This call may not be transcribed, recorded or broadcast without our expressed permission. A replay is available from the IR portion of 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 or events may differ materially due to a number of risks and uncertainties and the Company undertakes no obligation to update or revise these statements. For a summary of these risk factors and additional information, please refer to yesterday's press release and the section in our 10-K entitled "Forward-looking Statements."

I will now turn the call over to David Haffner.

Good morning, everyone, and thank you for participating in our call.

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 releases, we told investors that we would incur significant non-cash charges. Consistent with our forecast, during the quarter we reported $143 million of goodwill impairment in our Fixture & Display operations and $132 million of asset impairments associated with businesses we intend to divest. As a result, we have now incurred virtually all the onetime costs associated with our strategic plan.

Operationally for the quarter, our 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 costs, and currency impacts.

For the full year 2007, we reported a net loss of $0.06 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 U.S. 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 large part due to our ongoing emphasis on working capital management. We continued to have an excellent balance sheet and ended the year with net debt 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 consecutive annual dividend increase for Leggett at an average compound growth rate of over 14%. We also purchased 11 million shares in 2007 and reduced our outstanding shares by 5%.

Several markets remain soft as we enter 2008, with no visible catalyst to appreciably alter demand in the next few quarters. We're focused on creating long-term value by implementing our strategic plan and our effort should benefit shareholders even as economic and market conditions remain challenging.

As announced in November, we adopted total shareholder return, or TSR, as our primary strategic objective and expect to achieve 12 to 15% annual TSR over the long-term. We aim to generate TSR in roughly equal amounts from three different sources -- earnings growth, dividend yield and share repurchases. We expect this more-balanced, three-pronged TSR strategy to generate higher returns at considerably low 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 the 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 Company's cost of capital. Though most of the business units are generating adequate returns, each has opportunities to improve.

We are eliminating one-fifth of our portfolio largely through divestitures, which are proceeding as planned. Investment bankers are assisting with the sale of the Aluminum Products 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-size transactions and 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'll turn the call over the Karl Glassman, who will discuss the segments in more detail.

Thank you, Dave. Good morning. In my segment comments this morning, I will be addressing results related to our continuing operations. As we mentioned in yesterday's press release, the businesses we plan to divest in 2008 are now reflected in the financial statements as discontinued operations. So their results for the quarter and full year are not included in this discussion.

With that said, in the Residential Furnishings segment, organic sales decreased 7% in both the fourth quarter and the full year primarily due to soft demand in the U.S. residential markets and very strong prior-year comps in our carpet underlay business. International demand for bedding and upholstered furniture components remained strong throughout the year.

Fourth-quarter EBIT and EBIT margins decreased versus the prior year, reflecting higher impairments and restructuring-related charges, lower sales in the carpet underlay and domestic bedding businesses, and increased medical expense, energy cost and legal reserve. Full-year EBIT declines also reflect the higher impairments and restructuring-related charges and lower sales.

In Commercial Fixturing & Components, organic sales declined slightly in the fourth quarter, primarily due to lower demand in 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 costs of $9 million led 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 in full-year EBIT primarily reflect the goodwill impairment and restructuring-related charges and lower sales.

Late in 2007, we completed the acquisition of an office furniture components 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 U.S. residential markets led to lower unit volume, but this decline was partially offset by inflation in steel prices. EBIT and EBIT margins in the fourth quarter also declined slightly versus fourth quarter 2006. Lower volume and higher steel scrap costs were the main factors behind the EBIT decline, but were partially offset by earnings from an acquisition completed early in 2007. EBIT for the full year was roughly flat as the impact from 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 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 onetime benefits and higher restructuring-related cost. For the full year 2007, EBIT and EBIT margins improved significantly, reflecting higher organic sales in the segment and earnings from a company acquired early in 2007, which were partially offset by currency factors.

With those comments, I'll turn the call back over to Dave.

Thank you, Karl. As we announced in yesterday's press release, we expect full-year 2008 earnings from continuing operations to be $0.95 to $1.30 per share. This includes $0.05 to $0.10 per share in restructuring-related costs, 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 and 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 the 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.

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.

Joel, we are ready to begin the Q&A.

(OPERATOR INSTRUCTIONS) David MacGregor, Longbow Research.

A question and a clarification. Just first of all, the clarification. On the share repurchase authorization, do you begin the year with a fresh 10 million authorization or is there some impact from the fourth quarter?

We had about $1 million of the $10 million share authorization we are acquired in the fourth quarter, David, so we have a run rate now of $9 million for the rest of this year.

For 2008. And then I wasn't clear on the actual end of quarter share count. Was it 175? 175.4 was your average, but at another point in your press release you make reference to 169 million shares. What was the actual end of quarter share count?

End of quarter outstanding shares at end of quarter is 169, but the average diluted for the year was 180. The average basic was 179. The average outstanding was 174, so there's lots of ways to report that.

The actual outstanding at the end of quarter, can you give me that, fully-diluted?

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

Okay, and the question I had really had to do with you make reference in the press release to medical and energy costs. Can you quantify those for us as a percentage of your overall costs just to give us a sense of proportion?

Yes, do you have those handy, Karl? I've got them in this deck somewhere.

I have the amount of inflation, but as a percentage of our total cost?

Hang on, Dave. We're not going to be able to get the percentages very easily, but --

I could take this up with you offline after the call, if you'd like.

We've got the numbers. Okay, for the fourth quarter, our energy costs were up $11.5 million and medical costs were up $6.4 million.

Those are year-over-year comps, right?

Fourth quarter year-over-year, yes.

Okay, great. I'll get back in the queue. Thanks very much.

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, tremendous impact from -- or significant impact with the consumer-related businesses and yet specialized had a remarkably interesting positive same location growth in the fourth quarter. How should we think about it for the entire year? I know you're not giving quarterly guidance, but talk, if you would, a bit about what you think the year looks like as internal growth on those four segments?

Budd, on the Specialized side, let's kind of take some of the praise for the growth of the table there. 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 topline standpoint in Specialized, positively impacted by about one-third of that growth of currency, knowing the international mix of those businesses.

In terms of our budget or our guidance going forward by segment --

-- I'm getting them here. For ongoing operations, Residential should be about 49%. Commercial should be about 16%. Industrial Materials should be about 17%. And the remainder, whatever that would be -- should be about 17%

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

Those are total sales, Bud.

Total gross sales? Before eliminations?

Before eliminations, that's correct. In general, Residential about flat. These are total sales. Residential -- or I'm sorry, Commercial about 100 million less, just as we talked about in the press release. In Industrial Materials, about 30 to 40 million more and in Specialized, about 60 to 70 million more.

Much in the way of acquisition in any of those?

We have full-year impact in both Industrial and Specialized of some approximately April-timeframe acquisitions.

Those are fairly small.

Just some run-off.

And then you get the full-year of that $20 million commercial acquisition.

All right, I'll get back in queue as well.

Altogether, Budd, there's about $40 million in those numbers for acquisitions across the Company.

Laura Champine.

A couple of things that I'm wondering if you will provide at some point in an 8-K. It is tough for me to -- there's not a P&L that gets me to that $0.23 positive number. I mean, the continuing ops on the profit loss that we see is a loss of $0.71. It's tough to tell what line items those charges impact? Also I'm wondering if you'll give us a segment breakout for the quarter's last year at some point to help us forecast this year on a continuing basis?

Laura, if you call me or Susan, we've got all that data and be glad to share it with you.

Okay, then this $100 million that is coming out of the Commercial [victories], how does that compare to -- I thought there was about $300 million in total business that you were walking away from in 2008.

Laura, it was split. At investor day, you'll recall there was about $100 million that came out of F&D, so we are consistent there. There was another about $200 million that we earmarked as business that we were going to eliminate in what we called underperforming operations. We are in the process of doing that. Some of that topline was eliminated in the fourth quarter. The remainder of it, to various degrees, will be eliminated through small divestitures as 2008 progresses.

Okay, thank you.

Joel Havard, Hilliard Lyons.

The pace of acquisitions looked like it picked up in Q4. The China office was interesting. I guess two parts to this question. Were there any other particularly noteworthy individual acquisitions in the bucket for Q4? Moreover, is this more indicative of the pace you think the Company is getting back to or was this a bit of an outlier?

They were small, Joel, of course. We're pulling back from acquisitions relative to the pace we had in the past. On the other hand -- and it's repeating myself, I know, but on the other hand, we are very interested in those opportunities that come along, whenever they come along, that fit extremely well with these new strategic plans. So I know I'm talking out of both sides of my mouth.

It's a little bit contradictory, but appreciate the point.

It is. I would hate to say we're not going to make any significant acquisitions and, 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 acquisitions and the strategic fit of those acquisitions.

If you'll allow me one little follow-up on that, I know for a while management has been talking about looking outside of the old core. Is '08 not the year to think about that, then?

That would be reasonable to think about that in the future, but '08 would not be the year to think about that.

Okay, thanks for the clarification. Good luck, guys.

Keith Hughes, SunTrust.

I had a question on the Residential segment. The same-store sales declines, were there any notable deviations from that, either positive or negative, from the negative 7% you discuss in the press release?

Let me put some parameters on it, Keith. U.S. spring was down approximately 9%. International spring was up about 15. Furniture was flattish, with international being up eight to 9%, offsetting the domestic weakness. Consumer products was negative about four to 5%. Carpet cushion was the biggest issue. It was off about 26%, interestingly enough, and in giving 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 average unit selling price at a rate that actually parallels, closely parallels a decrease in the cost of the basic raw material, which is foam scrap.

There's movement all over. Generally what we saw was strength in international and offsetting weakness in the U.S.

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

Yes, ranking and size?

Size, just rough size.

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

Final question on the furniture. Is the international and the domestic, are they getting relatively close in size or is international still a lot smaller?

International is still much smaller.

Thank you.

(OPERATOR INSTRUCTIONS) David MacGregor, Longbow Research.

Just a follow-up, I'm just concerned a little bit about costs in 2008 and I'm watching the scrap market push up to $400 here, I'm just wondering what influence -- you mentioned in your prepared remarks that scrap costs had been a factor in your EBIT margins for that Industrial Materials segment. I'm wondering as you look to 2008, how this comes into play I guess both in terms of Industrial Materials, but also in your spring business.

Dave, this is Karl. We share your concern. Did scrap move significantly in December and then open January with the same sort of upward movement that we passed or are 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 is 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 don't see a 2004-like run-up, but the early characteristics feel very similar to what we experienced at the point. We don't think that there will be the steepness of the slope or the duration of the time, but it is a concern at this point. Our customers are all on notice. They're large increases. We're seeing the same dynamics now in the flat products, where with the scrap surcharges that been imposed on us by the large steel producers, both international and domestic, so it is -- we are in for Mister Toad's Wild Ride again.

Mister Toad's Wild Ride, well, can you talk about the extent to which the price increases you have planned from January and February are going to cover those higher costs? Is it going to be an efficient pass-through at this point or how much do you think you're going to get hurt on this?

As is usual, there is a bit of a delay. We just can't -- it seems like our suppliers are much quicker and maybe a little more ruthless with us than we tend to be with our customers, 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 and flat products.

With that, 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 costs are going to do and scrap costs are going to do and hot rolled pickle and oil, cold rolled, so we have taken a bit of negative variance already into account because of that delay that Karl mentioned.

Are you seeing similar inflation in any of your other sort of non-metals costs or maybe your non-ferrous costs?

No, absent -- from a raw material perspective, we are seeing a little up-tick in the petrochemical-based costs, but nothing of that magnitude.

Great, thanks very much and good luck.

Budd Bugatch, Raymond James.

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

No, Budd, that's a very good question. The $400 million is a tax-affected cash amount we expect to receive. That is the asset base that is associated with that. We would hope to do better, but certainly from our perspective, the $400 million is the right bar to hold us to. Again, that is a tax-affected number.

But the financial statements have got a 480 number and that is also tax-affected, right, Matt?

That is reflecting all the -- well, it is not anticipated tax affect. Based upon what we sell one of these business units for versus another one, they all have their own tax bases.

So those are pretax asset numbers?

Yes.

Okay, so that's helpful.

And our 400 is an after-tax number is the key.

This is Dave. We feel it is important to be conservative in the forecast of those proceeds.

Okay, and when I look at the cash-flow statement and the $600 million-plus that you generated this year, $180 million of that came from working capital changes.

Three pieces, Bud -- (multiple speakers)

-- and $170 million from net income plus depreciation with I think the balance for the adjustments. How do you think it breaks out for 2008? What should we look at, what should we plan for or think about for working capital changes (multiple speakers) and the other segments of that cash-flow from operations?

Good question. We were real pleased, obviously, to see that happen in 2007. Just so you have them, you can't 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 '07, it was about $100 million 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 before working capital changes would be about $400 million. We certainly would expect to be able to generate some additional working capital cash this coming year. It won't be anything, we don't believe, near the magnitude it was in 2007 for a variety of reasons, but it certainly should be positive, maybe zero to $50 million. And we are very dedicated to it, obviously.

Thanks, Matt. Thanks, guys.

John Baugh, Stifel Nicolaus.

I may be in error here, but it sounds like you lost the adjustable bed business to Tempur-Pedic, who you're supplying. If that's true, I'm not particularly interested in the dynamics of that specifically, but I wonder what parameters that speaks to in terms of your general business. Is there something going on in China, in subsidies on those types of products? What kind of competitive positioning does an event like that speak to?

First off, you were correct. We have been notified by that customer that we have lost that business. Steel prices in China are inflating. Are there subsidies in China? We certainly believe that that's the case in innersprings or we wouldn't have filed the antidumping petition. Do they flow over to their adjustable bed supplier? Can't answer. The dynamics in that market, we are fully dedicated to the adjustable bed market. We see it as a significant growth area. What we have done is historically we have distributed that product through an intermediary -- butchered that word -- which is the -- probably won't even try to use it again -- which has been through the bedding manufacturer, which has been our typical mode to market. And now we're switching to a strategy of direct-to-retail, speaking to retailers, taking that -- that sale is one that is difficult for a bedding manufacturer to handle because of the size and bulk of that product. We long have provided the service element of that sale, so we will see how Tempur does with their change. There's some risk in conversion with an offshore supplier who doesn't have warranty and service that's domestic. We will see how they do, but we're fully dedicated to that business. We will continue to service it and expect to grow it going forward.

Was there -- do you not have the capability to make that product in China yourselves and would you have access to steel costs over there that are similar to your competitors over there?

Yes, actually because we are a major producer of steel-formed products in China, that we understand those steel economics very, very well. The price of steel, from a flat perspective, is equivalent in China to the U.S. prices and, no, we do not believe -- because we own and operate our operations in China, we don't 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 internationally already, so we blend and assemble, design, blend and assemble that product domestically as it is. We believe we are very efficient to market.

Okay, and then as a follow-up on the, what, 9% U.S. spring decline, it sounds like at retail in bedding things really tanked in December and continue to be very soft in January. Did you see that in your order pattern? You mentioned flat, I think, was your comment for Residential in '08. I'm curious as to what you're seeing in bedding and what your assumptions for bedding specifically are in '08.

You are correct. Business -- actually November, December were tough and I would say January is at that same level. We haven't really seen any further deterioration. Seems like the larger manufacturers continued to perform relatively well and the mid-sized and smaller manufacturers are getting squeezed a little bit. So that's where that softness is.

Our assumption going forward in units in '08 is flat to up a couple percent, in that we believe that we will regain some marketshare through our product development initiatives. We do not believe the market will be positive in units in '08, but we don't believe it will deteriorate significantly, either.

Great, thank you very much.

Cory Armand, Rice Voelker.

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?

This is David Haffner. It is not material, far from it. It is circa $4 million or $5 million and it has to do is a dispute relative to a purchase and supply agreement and the exclusivity of that. It is in arbitration as we speak.

Okay, and this isn't a question, it's just comment. I know you got a question earlier about reconciliation of the core EPS to GAAP EPS. It would be great have that in print for everybody to see, rather than having to take that offline. That's just a comment. Thank you very much.

Mark Heilweil, Spectrum Advisory Services.

Dave, I wrote the Board Chairman I think about a year and a half ago, or two years ago and I suggested maybe the Board needs a little freshening up. They really haven't, I don't think, done a stellar job of providing the kind of guidance that the management needs. Obviously you're hiring consultants now and investment bankers and the like. Would you care to comment on, given the long tenure, that 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.

It's a good question. I apologize that you didn't get an answer to the query. I think -- Felix and I are both here and I'll start and then I'll ask Felix to give his perception. But I can say from my perspective the Board has been extremely helpful in the recent past here. As we have addressed the need for these strategic changes, the Board in many ways was arm in 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.

Mark, the use of the outside consultant was primarily to -- for two reasons. One was speed and the other was for independent thoroughness, so that we didn't limit our perspective on the analysis because of any internal biases. So they were very, very helpful.

I will just repeat myself. We have got some -- we've got a range of Board members relative to tenure. We've got some extraordinarily good relatively new board members that bring marketing and branding and retailing and so I, for one, feel very good about the support that senior management has got from the Board and the push that they have put us through.

Felix, you're here. You should give your perspective.

Obviously Dave, you certainly see say what he feels and etc. I think you have heard that, but the only thing that I would echo, I would hope you and anybody else doesn't think that there's been Board entrenchment or anything there that has kept anything from having pure independence on this Board. As Dave was alluding to, we have eight outside independent directors. Obviously we could have 9 if you want classify one of them as that way, but we've 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 etc. And I think that as Dave has expressed, they have been hand-in-glove with management for quite some time, in bringing forth the new initiatives that have brought the new strategic initiatives going forward to the Company and I believe that probably if you were inside that Board, you would find as progressive a Board in trying to help and guide management and their decisions as their probably is. But we appreciate your comments.

Good luck with your new initiatives, and thank you.

Fred Speece, Speece Thorson Capital Growth.

As I -- 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?

Fred, our operating margin, our EBIT margin for 2007 on continuing operations is closer to 7.8, about that. And looking forward, the midpoint of our range roughly anticipates about a 8.2, 8.3% EBIT margin. So we're definitely looking for some improvement year-over-year in continuing operations.

Okay, then one comment. Consultants are wonderful to have for very short periods 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 are either operators or you aren't and those people, their usefulness is short-term.

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

Thank you.

Mr. DeSonier, I'm showing that there are no further questions at this time.

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

I just had one last comment, because I know we will get an opportunity to see a few of you in Las Vegas next week. We're looking forward to that, so everybody travel safely.

Thanks a lot.

Ladies and gentlemen, this concludes the Leggett & Platt fourth quarter earnings conference call. You may now disconnect. Thank you for using ACT Conferencing.