Susan McCoy - Vice President of Investor Relations Karl Glassman - President and Chief Executive Officer Matt Flanigan - Executive Vice President and Chief Financial Officer Perry Davis - Executive Vice President, President of Residential and Industrial Segment Mitch Dolloff - Executive Vice President, President of Furniture and Specialized Segments Dave DeSonier - Senior Vice President, Strategy and Investor Relations Wendy Watson - Director of Investor Relations.

Susan Maklari - Credit Suisse Budd Bugatch - Raymond James Keith Hughes - SunTrust Robinson Humphrey Daniel Moore - CJS Securities Peter Keith - Piper Jaffray Spencer Joyce - Hilliard Lyons John Baugh - Stifel Herb Hardt - Monness Crespi Hardt Justin Bergner - Gabelli & Company.

Greetings, and welcome to the Leggett & Platt Incorporated First Quarter 2018 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 [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Susan McCoy, Vice President of Investor Relations. Thank you, Ms. McCoy, you may begin..

Good morning. And thank you for taking part in Leggett & Platt's first quarter conference call.

With me today are Karl Glassman, President and CEO; Matt Flanigan, Executive Vice President and CFO; Perry Davis, who is EVP and President of both the Residential and Industrial Segments; Mitch Dolloff, EVP and President of the Furniture Products and Specialized Products Segment; Dave DeSonier, Senior Vice President of Strategy and Investor Relations; and Wendy Watson, our Director of Investor Relations.

The agenda for our call this morning is as follows. Karl Glassman will start with a summary of the major statements we made in yesterday’s press release. Matt Flanigan, will then discuss financial details and our outlook for 2018; and finally, the Group will answer any questions that 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 expressed permission. A replay is available from the IR portion of Leggett’s website.

We posted to the Investor Relations portion of the website yesterday’s press release and a set of PowerPoint slides that contain summary financial information along with segment details. Those documents supplement the information we discussed on this call, including non-GAAP reconciliations.

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 sections in our 10-K and 10-Qs entitled forward-looking statements and risk factors. I’ll turn the call over to Karl Glassman..

Good morning. And thank you for participating in our first quarter call. Before I begin my prepared remarks, I want to thank Dave DeSonier for his years of service to Leggett and our investors. This is Dave’s last conference call. As he winds down through his year-end retirement, Dave will be focusing almost exclusively on strategic planning.

Dave joined Leggett in early 2000. He organized our first investor call and has done an outstanding job of facilitating our investor relations communication and transparency. Thank you, Dave. We are very pleased with our start to 2018. As we reported yesterday, first quarter sales increased 7% to $1.029 billion.

Organic sales grew 6% primarily through raw material related price increases and positive currency impact. Volume grew 1% with strength in Automotive and Adjustable Bed largely offset by soft demand in several other businesses. Acquisitions also added 2% to sales growth, partially offset by prior year divestitures.

First quarter earnings per share were $0.57, down 8% from $0.62 in the first quarter last year primarily from higher raw material costs. EBIT and EBIT margin declined due to the pricing lag we experienced with passing along commodity inflation.

To reflect this continued steel inflation we are raising our 2018 sales guidance to $4.3 billion to $4.4 billion and lowering our full-year EPS guidance to $2.60 to $2.80. Matt will discuss guidance in more detail later in the call.

We are encouraged about the remainder of 2018 as Automotive and Adjustable Bed continue to strongly outperform their markets. Work Furniture is making impressive gains in collaborative soft seating and several factors should contribute to growth in our Bedding business.

In the US, we are benefiting from market share gains with both traditional and direct to consumer mattress producers, and increased content in more of the mattresses our customers produce.

Comfort Core units continued to growth as a percentage of total innerspring units and more customers are adding Quantum Edge perimeter springs to their innersprings. In the first quarter of 2018 over 35% of our Comfort Core units included Quantum Edge.

We expect this growth to continue as mattresses with Comfort Core and Quantum Edge are preferred by consumers, articulate better in adjustable beds and streamline production for our customers. As expected, margins declined in the first quarter from continuing steel inflation.

Steel costs increased in late 2017 have further accelerated here to date and are expected to go up again in May. We are able to pass these increases onto our customers after an approximate 90-day lag in the majority of our businesses. However, since inflation has continued we now expect margin compression into the second quarter.

Assuming costs stabilize margins should improve in the second half of the year. On the subject of steel, we are frequently asked how the recently announced Section 232 steel tariffs and other duties on steel rod are affecting our operations. Depending on the type of steel input, we are seeing varying degrees of inflation in the US.

Long product, the steel industry term for rod and wire, which are the steel products we produce at our rod and wire mills is up 20% since the end of 2017. Flat product, cold rolled sheet steel, which we purchase for use in several of our businesses but most heavily in Home Furniture is up 20% to 30% since the end of 2017.

The majority of our steel costs are in our long product and flow through our industrial products segment and into our other businesses, where we internally consume about two-thirds of the wire we produce. As I mentioned, we are able to pass along these steel cost increases to our customers subject to the pricing lag.

However, we have less ability to fully pass through steel inflation in our home furniture business, especially as our competitors produce their products in China, where steel costs are lower.

Given the recent increases in flat steel cost in the US we are responding by reducing our cost structure and moving additional production to our Chinese operations to take advantage of the lower input cost.

As a reminder, from last quarter's conference call I am no longer giving segment narrative since those results are detailed in yesterday's press release and the slide deck we post on the investor relations website. We will be happy to discuss any questions you have relating to the segments during the Q&A at the end of the call.

I will now turn the call over to Matt..

Thanks Karl, and good morning everyone. Cash from operations was $44 million in the first quarter, which is in-line with our normal seasonality and reflects increased working capital investment supporting higher sales and inflation. We ended the quarter with adjusted working capital as a percentage of annualized sales at 12%.

We now expect our full-year operating cash to approximate $450 million. Capital expenditures should approximate $160 million and dividends should require about $195 million of cash for the year. Our top priorities for use of cash remain organic growth, dividends, and strategic acquisitions.

After funding these priorities, if there is cash still available we generally intend to repurchase stock. Our financial base remains very strong.

We entered the quarter with net debt to net capital of 37.8% within our long-standing targeted range of 30% to 40% reflecting working capital investment, first quarter stock repurchases and increased acquisition activity. We also monitor debt-to-EBITDA and entered the quarter with debt at 2.4 times our trailing 12 months adjusted EBITDA.

As Karl mentioned we are raising our full-year sales guidance to $4.3 billion to $4.4 billion, up 9% to 12% versus 2017. We expect mid single-digit volume growth from strength in Automotive, Bedding, Adjustable Bed, Work Furniture, Aerospace and Geo Components.

Raw material related price increases in increases and currency impact should also add to sales growth. The PHC acquisition completed in January in our new hydraulic cylinders business unit is expected to add 2% to sales growth.

However, we are lowering our full-year earnings per share guidance a nickel to a range of $2.60 to $2.80 per share, largely due to the impact of ongoing steel cost inflation. Based upon this guidance range, we anticipate our 2018 full year EBIT margin to be between 11.5% to 12%. This guidance also assumes an approximate 22% full year tax rate.

Lastly, on January 1 of this year we adopted the new revenue recognition accounting standard ASC 606, using the modified retrospective method. This new standard did not materially impact our first quarter results and we do not expect it to have any ongoing material impact on our sales, net earnings, balance sheet or cash flows.

With those comments, I will turn the call back over to Susan..

That concludes our prepared remarks. We thank you for your attention and we will be glad to answer your questions. In order to allow everyone an opportunity to participate, we request that you ask only one question and then yield to the next participant.

If you have additional questions you are welcome to reenter the queue and we will answer those questions as well. Michelle, we are ready to begin Q&A..

[Operator Instructions] Our first question comes from the line of Susan Maklari with Credit Suisse. Please proceed with your question..

Thank you. Good morning, everyone. .

Hi, Susan..

Hi, Susan..

My first question is around the pricing, and sort of I know that you started to put some of this through in the third quarter of last year just given the inflation that we started to see, but can you give us some sense of where you are in terms of the price increases, maybe across the different businesses, and just some idea of how we should expect that to flow through as we think about that upcoming quarters?.

Hi, Susan. I will take a swing. This is Karl. I will take a swing at it at the high-level and ask Perry and Mitch to weigh in on specific product categories. But basically what happened is first off, you are correct that we saw steel related inflation in 3Q of last year, passed through in 4Q.

Steel was relatively flat in October and November and then we saw a significant spike in December. That is why on our last call in February we guided folks to understand that we were going to have some margin weakness in 1Q of this year. Some of the analysts heeded to that advice; some of them didn't.

But anyway, we have since passed through the inflation that we experienced in 4Q successfully in virtually every business. Mitch will talk about Home Furniture in some detail, but the timing is that has recovered.

What we didn't anticipate when we gave full-year guidance was the significant run of steel inflation that we have experienced in February and March on into April, scrap-based and ultimately into product. We are in the process of passing through that inflation. It will be in place by July 15 as at its latest.

That is assuming that we don't have another round of inflation. Right now we expect some steel stability that we expect scrap to trade about sideways in May. We have seen the flat and long selling prices stabilize. We are seeing some continued increase in rod, but the amount of increases are slowing.

So our current guidance is based on a forecast that we are seeing some stability in steel, which would be a very good thing for us to finally catch up in July. That is really why we are showing that strong forecast in the back half. Now there is some probability we will see another round. If in fact we do, it will increase our LIFO forecast.

We will have significant FIFO gains. Our steel mill does extremely well in this type of environment. And I'm going to compliment our employees that are listening to this call. Passing through inflation is difficult. Our people are really, really good at it. And anybody that doubts that has been proven wrong historically.

So we just need some stability in our cost structure.

But either Perry or Mitch, either one of you had anything to add?.

Okay. Maybe I should comment a little bit around Home Furniture. I think it is a slightly different dynamic than we have on the Bedding side, where we really don't have a contractual basis to pass the price increases along.

So, we did experience the inflation at the end of last year but didn't have a whole lot of luck passing that through due to the situation with falling steel prices in Asia. This year, we have made some progress in pushing through price increases, but we have not fully recovered.

We will continue to aggressively pursue those price increases both in the US and in China, where necessary and in the long term we will not maintain unprofitable business.

That being said there are some things that we can do to help ourselves, we can effectively - as you probably all know we have manufacturing assets both in China and in the US and we are working hard to manage our global footprint to optimize the steel, labor and transportation costs over the long run.

So, we expect that overtime will be flexing our production capacity in the US and China as circumstances vary. But right now, these factors shift towards us producing more products in China. Beyond that, we’re also aggressively looking at our structure and approach to reduce overhead and operating costs.

We are making good progress there when we think that will have some more or so. That also puts us in a position if things grant us as we think that the back of the half of the year for home furniture will be stronger from the profitability standpoint that we’ll experience in the first half..

Susan, I’ll just echo, this is Perry. I’ll just echo Karl’s comment with regards to rod and wire increases; we do anticipate further increase in May. But as Karl said the rate is slowing, it appears that we may be nearing the inflection point there.

If that is the case, both of those programmatic formulae increases and for the industry in general, we expect to have our pricing caught up with that inflation by early July..

Okay, that’s very helpful. Thank you. And, then I just wanted to get a little bit more color on the bedding side. It sounds like overall maybe units are a little soft, but you’re definitely continuing to gain some share with the Comfort Core product and the Quantum Edge.

So, can you just give us a sense of what’s going on in the end markets there, I know that there has been a lot of moment and then maybe just some sense of what means for you?.

Yes, definitely. And, you’re right, the first part of the year January started off extremely slow and now there are a lot of factors and it’s changing out the product lines, we had some terrible weather conditions in certain areas that probably hampered shopping and those kind of continued on through February.

But we’ve seen a pickup in the latter part of the quarter. And, then if you - Karl and I did some checking yesterday as to April, we have three complete weeks to look at and the US business through the first three weeks, we are up about 4%.

So, if that trends holds and we don’t see any reason why it wouldn’t and April is traditionally not a strong month in the US bedding market. But there seems to be some lengths to this now. I don’t think I have ever seen a time after a January market where our customers had been able to floor their products any quicker.

So, a lot of the floors already set, there’s still some work to do on others. But it’s important that they have all those components in place by Memorial Day, a traditional selling season. And, they looked to be kind of well ahead in the curve compared to in past years. We are pleased with Comfort Core and with Quantum Edge.

Those gains I suspect will continue to increase as Karl said in the opening remarks, we are about 35% penetrated in the Comfort Core category with Quantum Edge. I suspect that as we run along through the course of this year, we will go past 40% with those content gains.

And, then one other area, in looking at the innersprings that we produced for upholstery layers, let’s call it generically our nano products. We are seeing great penetration there and year-on-year those products are up about 60%.

So, we are seeing increased interest in using coils in place of other kind of exotic filling components whether that would be latex or types of visco elastic or other products that are used in the comfort layer of mattresses. So, we are excited about that too.

That product category, while still relatively small, will begin to become meaningful for us and the rate of growth is outstanding..

To follow on just a little bit there that when Perry gave you the April statistics, those were same day, so we had an extra shipping day in April. So, he’s neutralized that out, so that same day unit growth based on the delta that we saw in the first quarter.

So, we had three down in units if we look at just innerspring dollars, we were up 7% in innerspring dollars a tribute to the content gains and to inflation. So, roughly that 7% growth in units will probably with continued inflation look like something 12%, 13%, maybe even 14% in dollars, so it’s significant..

Okay.

And, then can one of you just remind us of the comps that you’re going to come up against in the bedding space as we go through second and third quarter just given some of the sort of changes that happened this time last year?.

Yes, I’ve got it right here Perry. Innerspring units in 2Q of last year were down 8%. That was the time of most significant market disruption over the whole Mattress Firm [temper issue], 3Q down 3%, 4Q down 2%. So, the comps admittedly in the second quarter relatively easy. I’m absolutely convinced you will see positive units from us this year..

Okay. And, then one last question and then I’ll give someone else the chance.

As you sort of look across Leggett and you think about all the different end markets that you touch and that you’re in, what are you seeing broadly in terms of maybe more of the consumer products relative to some of your industrial products, can you just give us some high level sense of sort of your touch on things?.

Yes, Susan, thanks for that question. And, I apologize, this answer is going to take a few seconds - minutes actually. But when we look back at the first quarter, I know that the analysts have all written that we missed the first quarter, I beg to differ, I think we exceeded the first quarter.

As a matter of fact, our internal forecast was $0.57 of EPS. We reported $0.57 had $0.03 of LIFO, we didn’t expect plus admittedly we had $0.02 of tax benefit that we didn’t expect, so neutralized on the $0.58. That’s somewhat remarkable in an environment where we only have 1% unit growth.

And, I think that’s the route of your question that it’s a testimony to our pricing power first off, but if you aggregate 3Q and 4Q last year, we had about 4.5% volume growth.

Some of Perry’s commentary on 1Q, I believe weather was a significant issue and our construction related businesses, foreign products, which is carpet cushion and Geo Components, we saw really softness in January that’s atypical.

And, then in the residential related businesses, Perry said, we saw softness in bedding, certainly saw some related softness in our fabric business that sells into bedding and home furniture, home furniture demand was soft, consumer products were soft.

Adjustable bed growth was significant at 22%, probably would have been better than that in a different weather environment. So, the fed released the retail sale statistics and they were admittedly softened in the first quarter. So, we think that 1% were really comfortable that we’re through the worst of it.

I believe our guidance is all around mid single digit unit growth, we are comfortable with that prediction based on what we saw on the back half of last year and what we have seen in April, business is much, much better. So, as we kind of go around all those product categories, their strength in every one of them from a unit perspective.

The only bit of weakness would be in home furniture and it goes to this transition that Mitch spoke to and frankly our lack of doing business where we can’t make an acceptable return. We’re appropriately optimistic is that very short answer, shorter with what I said with that final comment and I’m sorry for all of that.

But I had to take the opening Susan..

No, no, that’s incredibly helpful and that’s exactly what I was going to. So, thank you very much for the color. And, good luck..

Yes. Thank you..

Thank you. Our next question comes from Budd Bugatch with Raymond James. Please proceed with your question..

Good morning, it is Budd for Bobby on this call..

Hey Budd before we go any further everybody in the room wants to wish you a Happy Birthday. So, Happy Birthday, Budd..

Thank you very, very much. I can’t remember how many there are or have been..

It’s a big number. It’s been significantly larger than our first quarter EPS but go ahead..

I appreciate that. Karl, I want to go to the second part of the sentence in the first paragraph of the release regarding bedding where you - you expect the market improvement as 2008 progresses.

And, I want to drill down to a couple of barriers about, how are you defining the market and I know you gave us some read on April, but why would the market improve overall and as I said how are you defining the “market”?.

The market in that sense is meant to be the domestic market, which most of the investors are most sensitive to. We expect continued robust strength globally.

But so it is the domestic bedding market and it’s really what we are seeing in April and what we are hearing from our customers both at the OEM manufacturing and at retail, it’s the lack of disruption that will have from Mattress Firm temper issue. So, the answer to Susan’s question, the comps are relatively easy.

So, the placement Perry made reference to this, it’s a placement of new products and the enthusiasm around those product launches, we expect that there will be much more robust advertising spend, it’s what we are hearing from both the manufacturers and the retailers.

So, we are generally feeling just better about things, but Perry do you…?.

Yes, I mean, the other part of the market, but you may have in mind too is the box bed category. We’re really optimistic there for a variety of reasons.

But we got, in some instances, relatively large players in that market that are making switches over to Comfort Core innersprings, we have other players who are maintaining their current product categories in the marketplace, but they are looking strongly and adding additional lines and we are having conversations with lot of those folks with regards to hybrid offerings that they want to build their lines with.

So, that’s an area where although that still doesn’t represent a huge portion of the market, it is growing obviously and it’s an important part as a market for us. The first folks to play there were primarily the foam people.

And, now we are seeing that market more closely mirror or begin to look like the market in general where there is a preference for innerspring. So, we think overtime that will change significantly and we obviously want to be a big player in that market.

Quantum Edge and those edge enhanced type products where they come out of the packaging and the edge is something that is demonstrable to the consumer. It’s a true feature benefit for the consumer, and it’s custom-made for that type of product, so we are excited about that..

I did have in mind the domestic market, but I was trying to see whether the market you are referring to as the market as maybe the defined by Espoo or something different and looking at that overall domestic markets and how do you look - how you’re looking at that?.

It’s total market Budd..

So, that would be 28 million units, is that the way we think about the market?.

Yes, I think that’s a good number, 28, 29. It’s difficult to define the total market at this point. No real good data on domestic bed in the box, better data on imported mattresses. The imported mattresses continuing to gain share probably now greater than 20% of units, so aggregate everything together and we’re in that 28 million, 29 million units..

Okay. And, last from me just you talked about adjustable beds and also automotive has been still continued strong.

Are we always worry that when you have some areas that are performing as consistently and strong as they have that there may be some a down trend coming, how do we get comfort that’s not the case?.

Hi Budd, this is Mitch. To comment on automotive first. So, we were up 7% in the first quarter year-over-year which we feel very good about when we look at the overall market, while our goal of 1,000 basis points above the market is sort of our long term goal and don’t really want to comment on quarter-to-quarter.

I think if you look at the first quarter for the overall market, you see production actually down a bit for the major markets and the market has a whole maybe 1% or 2%. So, we feel like 7% is very strong and also you’ll know that we recall that we have really good visibility about our sales in the out years based on our programs.

So, we won over $300 million in new programs last year, continue to be very strong there. So, our outlook both for this year and for the coming years tells us that we can continue to make our 1,000 basis points above the market target. So, that’s on automotive, we feel still strong there. Adjustable bed has just been going great.

Really strong Q3, Q4 last year, continued in the Q1. Our business with our major customer continues to be strong in the first quarter and we are ramping up capacity to help us serve them for the remainder of the year. So, we don’t see negative headwinds there either. So, we feel really good about both of those businesses going forward..

Okay, thank you very much..

Thank you. Our next question comes from Keith Hughes with SunTrust Robinson Humphrey. Please proceed with your question..

Thank you.

A couple of questions on organic growth, your guidance assumes mid single digits, does that include volume from PHC acquisition?.

No, keep that separate..

That’s organic. So, you did 1% first.

So, this is a pretty big ramp, I know you’re bullish auto and adjustables, other businesses are going to have to pickup to get to this estimate, what if you can kind of rank order, what do you think will start to accelerate in order of magnitude?.

Certainly domestic bedding continued growth in international spring had a little bit of soft first quarter after a really, really strong last couple of years. We expect resurgence of growth there most of that little bit of softness was in Latin America had since reversed. We certainly expect that we are not going to have weather events.

Yes, I mean, GEO components was really soft in the first quarter, that business has been growing at significantly greater than single digits. Carpet cushion is regrowing.

Though it’s just more robustness in those markets, we don’t see anything fundamentally different in 2018 than we saw from a unit perspective in 2017, and we had 4% unit growth in 2017 even with the disruption that we experienced in the bedding industry..

Okay. And then just switching back to steel real quick, looks like scrap, I think you mentioned, looks like scrap has kind of going down little flat down maybe it’s the better word in the last sort of month or so.

How are the spreads been running in the last month and the next couple of months, are they at normal, are they widening, how is that winding out?.

Keith, this is Perry. They’re widening, there is a lot of factors that play right now in the marketplace with regards to some of the tariffs that were put on latter part of last year and early part of this year have constrained the importation of long products.

And, so that has enabled some of the domestic producers to pick up the slack there, increase their productive capacity and its put some constraints, there has been a good demand environment for those products.

So, the pricing power in a marketplace for rod right now is relatively strong and we’ve seen some pretty hefty increase as Karl said since the first half of the year, all products up around 20%.

Keith I would add just going back briefly on Geo Components which is a growing business for us obviously, it’s a business that is seasonal, its weather dependent. We really had a rough go with January and February due to weather there.

We sustained through all that good backlogs, we kind of have some vision into as those programs - not programs, but projects rollout.

And, we saw the volume there with improvement, the weather situation in March really picked up tremendously and that’s holding now so much so our guys that are running that business unit are resolute in their conviction that the business volumes that we plan for and our strategic plans throughout the year they’re going to be attained.

And, so we believe that backlog is just delayed and that demand is in fact truly pent-up demand that will shift as we go forward, so that has improved our - obviously our dollar volume, but the number of products that we are able to get out of the door..

And, so if you look at margins in the second quarter of company-wide and you say there is going to be compression.

Do you think there will be less standard and less compression in the second versus the first?.

Similar about, Keith. And, to get back to the full year that would indicate meaningful implements in both the third and fourth quarter..

So, there’s rolling so much pricing, I’m little surprised at the margin compression, I understand why, but it wouldn’t last of somewhat going into the second, is there any things going on in the second that is kind of urgent?.

No, that similar comment and you can apply a range to that too and maybe there’s a little bit of an improvement, no, no is the answer..

Okay, all right. Thank you..

Thank you. Our next question comes from Daniel Moore with CJS Securities. Please proceed with your question..

Thank you and good morning.

I wanted to maybe just touch a little bit on the PHC acquisition, talk a little bit about what you’re seeing since the close and what your outlook is for organic growth and the revenue or cost synergies expected?.

Daniel, this is Mitch. So, PHC has performed really well in the couple of months that we’ve had them. Their sales are up year-over-year. And, we see really strong demand both in Northern American and in Europe in the current coming period. So, we feel very good about that.

We see opportunities - for continued organic growth in the primary market material handling, particularly looking to perhaps get reductive capacity in place in China where lots of our large customers also produce product, so that’s an opportunity that we think we can help them with.

And, then we’re also very active in looking in add on acquisitions that would help out our footprint and our capabilities.

As I mentioned, the PCH is strongly focused on the material handling side, we think there’s opportunities in the adjacent markets around construction application, so we will participate in PCH today that where we could get a stronger - stronger our position. So, a couple of months in we feel very good about that acquisition..

That’s helpful.

And, switching gears the Quantum Edge, the 35% today of Comfort Core units going to 40% potentially, where do you see that going longer term?.

Yes, Daniel, this is a good question. I at one time didn’t think we would ever see 40%. So, you’re probably asking the wrong guy. But I believe that within the next year we could see mid 40s somewhere in that range, that maybe a little optimistic, I’m not totally sure.

Longer term it just makes so much sense from a lot of different perspectives for our customers, it’s a simplified product to build, it requires them to keep fewer SKUs and less working capital in their plans when they have to deal with all of the firm, for firm encasement. So, the economic from a holistically standpoint are good for our customers.

So, I think we’ll continue to see that build right on through this year. And, from there I don’t know if it will ever get in the upper 40s or not, probably he has opinion of his own there, but I think mid 40s is attainable..

Got it, that’s helpful. Last one for me.

Capital allocation obviously remained committed to being very balanced, in terms of your TSR given the longer term track record of outperforming the S&P, it seemed to be based on where the stock is as good as an investment a stronger return, would be maybe being a little bit more aggressive and pulling that lever on share repurchases, any thoughts there? Thanks..

Yes Daniel, this is Matt. As you know we won a million too in the first quarter and we mentioned in the release yesterday that we expect by between 2 and 3 during the rest of this year, certainly the protocol to talk about the M&A pipeline is looking like as you know that’s part of our priorities for cash.

Mitch just represented with PHC related opportunities that might appear or not too distant future, we don’t quite know. And, we are certainly mindful of where the equities trading and we don’t live in a vacuum.

But right now what we put in the press release is certainly our expectation that during the year will buy between 2 million and 3 million shares and do it prudently..

Okay..

Thank you. Our next question comes from the line of Peter Keith with Piper Jaffray. Please proceed with your question..

Hey, thanks. Good morning, everyone. Just another question for Matt, the cash flow is taken down by about 10%. And, I noticed some puts and takes on margin in sales.

Could you give us little more detail on what cause that overall reduction?.

Yes, Peter, good question. Really it’s largely working capital investment story, we had a bit more working capital invested in the first quarter tied to the sales growth has certainly kind of inflation relationship to that as well. And, really that is the most difficult part of our cash flow profile predict as you know.

So, we just thought it made sense as we have this inflation phenomenon roll into the second quarter that we might anticipate the normal working capital cycle investment for us to reflect a better estimate for full year operating cash at $450 million versus $500 million.

But I will tell you that at the end of the year, we were trading at about 11% working capital investment, all things considered all pieces of the puzzle. In the first quarter that moved up to 12% and certainly we’re all dedicated to bringing that back in the 11% neighborhood and so we will do better than $450 million.

But as a working assumption that was the better estimate at this point in time for the full year..

Okay. Thank you. That is helpful. My second question would just be on the topic of Mattress Firm, so just from of our industry conversations. There are other suppliers not just firm that seemed increasingly nervous about their cash situation.

And, I was wondering if you could provide an update on the status of that relationship if you’ve been having the tight terms or do you have credit insurance in place on that receivable, any update on Mattress Firm right now would be helpful?.

Pete, this is Matt again.

Certainly, the customer we’ve enjoyed for a long, long time very aware of their situation, we don’t comment specifically as you would imagine relative to whether we had credit insurance related to that account or other consideration, but I would just tell you very supportive of what they are trying to make happen as they compete in the spaces that they are in and we’re also well aware of their credit profile and have had excellent conversations and interaction with them and monitor our payment trends, their payment practices and we feel we’re certainly that - we’re well positioned where we should be all things considered with that relationship..

And, Peter the only thing that I would add is, obvious we had a lot of conversation with their other suppliers, we know of Mattress Firm being nothing but current with every one of their vendors.

So, current today doesn’t mean that your current tomorrow, but they have absolutely paid every one of their invoices on time and taken every available discount. And, we believe that is not a Leggett only phenomenon..

Okay, very good guys. Thanks so much and good luck with the rest of the year..

Thank you..

Thank you..

Thank you. Our next question comes from the line of Spencer Joyce with Hilliard Lyons. Please proceed with your question..

Hey, good morning. Thanks for taking the call..

Hi Spencer..

Many of my things have been addressed. So, I’ll try to be fairly pointed here. Ford announced just this week they are discontinuing some of their sedans.

And, I was wondering if there was any potential direct impact for Euros contract and maybe it’s too small to matter, but do you sell through to them or perhaps is there a benefit from some of the companies that you do work with if your components aren’t in those Ford cars, but any clarity there would be nice?.

Okay. Hi Spencer, this is Mitch. Yes, I think that’s a great question. I think that announcement just sort of echoes what’s been happening in the industry anyway not only in North America, but around the world as we see everything smaller car production declining especially in North America, but crossovers and SUVs and trucks accelerating.

So, we would be well represented in all of those product categories across all major OEMs.

So, we might lose a little bit on the car side, but we are going to gain as much or more on the shift to truck and SUV production where those larger vehicles just have more content, so that’s been a positive influence for us in recent history and they’ll continue to be one going forward.

For sure, we won’t have that interruption or disruption as some of those vehicles changed. But I’m not sure at this point how that will take place. I think that is maybe many current programs run out and then whether they’re doing significant investment and refreshing those platforms. So, I don’t think we see a sudden stop of production there.

But either way we’ll benefit, we believe more from that shift to larger platform..

And, Spencer, to follow on a little bit that you probably would have also seen that GM announced earlier this week that they’re going to add a third shift in their facility in Spring Hill, Tennessee that produces SUVs both Cadillac and the GM nameplate.

So, it’s just augment to what Mitch is saying that vehicles are getting bigger, more content good for us..

That’s helpful. Perhaps one for Matt here, previous call we talked about working capital a little bit, but specifically account receivable were higher than, I expected kind of exiting the first quarter. And I think perhaps above what might have been implied historically.

Can you discuss maybe one or two specific drivers of account receivables this quarter?.

Yes, Spencer good question. There really isn’t a call out phenomenon on either are receivables DSL particularly and if you slide above DIO, our days of inventory are even our payables activity, now the three key pieces are working capital. They all three were a bit up compared to what we had seen at the end of the year.

And, again there is an inflation element to that, I don’t know three of the pieces.

But at the end of the day, we really don’t believe there is any payment trend or activities that are flashy red signals right now relative to that, but certainly at 12% investment and working capital, 1% higher than at 11%, you see more cash being used to facilitate them.

But I really do believe as all of us around the table believe, there should be kind of natural unwinding of that as we get more to a stable price environment as we go through the rest of the year, the ongoing heavy focused on DSL and collection efforts and inventory management and certainly making sure we’re optimizing our payable activity as well.

So, I don’t really have a very specific two or three things to point to than you should try the model or anticipate just know that you should hold us accountable to working capital investment that’s closer to 11% it is 12% as we entered the first quarter..

That’s helpful.

And, final one from me here, should we expect any special charges for some of the shifts, China that you all referenced a couple of times on the call or would that perhaps be a CapEx line versus an operating line or even if it’s operating, is there something we should think about looking for or would those be [indiscernible]?.

This is Mitch again. I don’t think that it’s anything material at this point, we are looking at everything, we are looking at personal, we are looking at facilities, so we may have some capital investment, we may have some consolidation, but I don’t know what those are and probably be smaller facilities if we did anything.

So, I don’t think from a whole company perspective we see anything that would be material.

Again don’t have specific plan at this point, still doing the analysis, but a good part of that shift because we already have capacity in place in China, we can make that happen with maybe little bit of tooling and maybe a little bit of inventory investment, but not significant capital..

Okay, that’s helpful. And, I actually bought a couch this quarter. So, my [peer is] out there..

We appreciate your support..

All right, I thought it was a good quarter. And, thanks for the questions..

Thank you..

Thank you. [Operator Instructions] Our next question comes from the line of John Baugh with Stifel. Please proceed with your question..

Thank you, good morning. And, congrats Dave DeSonier, on your instrumental role in establishing Leggett as one the best IR team that I know of Corporate America, congratulations..

It’s pretty easy. All I had to do was hire Susan..

Most of my questions have been asked. But I did want to touch on two things just to make sure, international bedding was little soft. You called that out. You’re bullish on the year.

Have you seen anything in your Steinhoff business around the globe, is it weakening, Karl or no, that’s all pretty much on track?.

No, we really haven’t in either. We have exposure to them in bedding and furniture. From an operating perspective I think that they continue to just kind of progress, their issues are more back office corporate banking from a future basis, this one we haven’t seen..

Primarily in the UK and Europe very little, there are no disruption basically, same thing run kind of business as usual there. They do have some holdings in Australia obviously and some retail assets in Australia, not sure what their future plans with that. But we haven’t seen any disruption..

Okay, great. And, then not to beat the dead horse on auto, so I don’t cover auto. So, and obviously quarters can be lumpy, I think the last three quarters were in the 7% to 8% year-over-year and I know the Q1 last year was a really tough compare.

But I guess the question Mitch is, when you look at forecast ‘18, ‘19, ‘20 in auto build, I don’t even know what that is, so maybe you could share that view. And, then you comment on a 1,000 basis points where you commented on $300 million program wins. I have no sense of what’s rolling off.

I guess without getting the quarters projections, maybe give some color around how we get comfort that we are going to still see that roughly 1,000 basis points for in the future? Thank you..

Okay, great John. So, for sure if you look at ‘18 versus ‘17 or what happened in ‘17 started off the first half of the year really strong and then started to slide a little bit in the second quarter and then significantly in the third and fourth quarter particularly in North America.

So, that does as you mentioned creates pretty tough comps for us in Q1 and Q2, we think that gets better in Q3 and Q4. If you look at the long term forecast, so call it at ’17 to ‘20, ‘21 kind of outlook, we would see for the major markets, CAGR of a little over 1%, call it 1.4%, 1.5%.

And, for the globe, global market a little bit stronger maybe around 2%. The distinction for me the major markets North America, Europe, China, Japan, South Korea, much larger volume, much higher content, you have faster growth in the developing markets on a lower unit volume based and also lower content.

So, eventually benefit from that growth in the developing markets, but for sure the major markets have a bigger impact for us.

And, what really bothers was significant disruption in North America last year, we look at the major markets, unit volumes was up around 1%, we see it for ‘18 forecast, we look at IHS production forecast is up a little bit from 1.2% to 1.4% and that’s kind of the trend going forward.

So, we talk about a 1,000 basis points about the market, we are looking at something like 11% to 12% on average over the long term.

So, you’re right to mention that, we look at our program, but at the same time we have programs falling off, our rate of wins significantly exceeds the rate of programs falling off and that’s what drives our confident to make this kind of prediction.

I remember that we have good long term visibility, so when we’re winning award production generally starts about two years after the win or survives in other programs and then the program technically last around six years.

So, we think about it as the series of curves that sort of build that we have good visibility, what’s coming off those occasionally surprises and what’s coming on and that’s been - how we run the business for the last several years. And, I think our track record shows that we’ve been able to deliver this..

And, then thanks for all that color. My last question about getting of specifics margin levels, I’m just interested in whether there is any delta going forward in both the automotive and aerospace margin profile.

I know in aerospace you had a little bit softness there at 1 point, what is the margin profile in both of those segments going forward status quo? A - Mitch Dolloff I would say pretty close to status quo, we may have ups or downs, quarter-to-quarter depending upon program mix.

But at this point I think the margin, I’m thinking about automotive right now and pretty similar across the major product categories, there are some though that are going to pick up steam where we’re doing sort of more complex assemblies, I’m thinking about Ford [indiscernible] that we mentioned before where there is more cash through content, so that would have a little bit of margin.

But overall that had a significant impact on our business. So, I think we’re pretty comfortable that will say close to where we are.

In aerospace, we have seen some margin declined in the last couple of years, really coming up of our straight to business where they were really sort of out of the market high and we’ve been moving to capture more volume and get those pricing more reasonable in some cases.

But we think that most of that has happened and we continue to grow the fabrication side of that business. So, all in all I think that our margin profile there looks pretty steady as well. And, if I look at our outlook for the rest of the year, that’s what I see there as well..

And, Mitch just to be clear, I think there was a reference in your slide deck to growth impacting auto margin, is that - was that what you were referring to with the complexity you have in other words I guess the question is simply as you look at the products you’re winning in the margin profile, it looks similar, but there are maybe some tooling up in CapEx that you happened to do because volumes there overtime has been so good, is that the right way to think about it?.

Yes, and that’s exactly right John. When I entered the first part, I was thinking about sort of long term budget on this product. But there is sometimes some sort of lumpy investments in both capital and overhead that’s required to support this.

Again, we win the program, we have this time before it ramps up, but we are making those investments both in the productive capacity, but also sometimes overhead to manage those programs. So, we get occasionally when we have significantly new technologies or new programs starting up where we get a little bit of lumpiness in that profitability.

And, that’s exactly what we are talking about there..

Thank you and good luck..

Thanks John..

Thank you. Our next question comes from Herb Hardt with Monness Crespi Hardt. Please proceed with your question..

Good morning..

Good morning, Herb..

Wishing you all well, my question is always two.

One is given the strength in housing, would you expect home furniture, other parts of residential to pick up a bit later in the year into next year? And, can you give some more detail on aerospace, we’ve been pretty successful making acquisition, it’s kind of become a footnote in the last one or two quarters?.

Yes, I’ll take the first and dump the last on Mitch, that’s the easy one. Yes, the housing, the strength in housing usually has a bit of a lag. So, historically and it moves through the homes. So, when housing picks up, we generally see it Geo, carpet or flooring products earliest and then it moves through the house generally from front to back.

So, you will see some strength in home furniture, in front room and then you will see bedding strength as well. Housing, housing moves housing household formations are generally very good for our business, but it is not instantaneous..

Herb, this is Mitch. On Aerospace, not a footnote to us, we are very actively engaged there. And, it’s still not that big part of our business at $140 million, $150 million sales, which is why I think you don’t hear more about it all these calls. But we spend a lot of time working on it, and we still are committed to it as a growth platform.

We see good things happening both from an organic standpoint where we are winning programs on some of the new aircraft and engines that are coming up, so we feel positive about that.

We are also very active in add on acquisition, we haven’t been able to bring one to finalization, but we’ve been really active in looking that opportunities and continue to do so. So, we’ll get one to bring home, hopefully, in the not-too-distant future. We keep swinging the back..

At Apollo, we are really comfortable with the quality of our management team there, they have capacity to do more and manage more; it’s a complex business. So, to Mitch’s point, we just need to make the business more substantive..

Okay. Well, thank you very much and good luck..

Thanks Herb..

Thank you. Our final question comes from Justin Bergner with Gabelli & Company. Please proceed with your question..

Thanks for putting me in guys, good morning.

My first question in regards to your range, I mean, EPS range is pretty wide still and I’m trying to figure out, is that range mainly because of the raw material pass through or is that more because of the volume and if the latter maybe could you frame sort of what volume correspond to the low end of the range and what volume correspond to the high end of the range?.

Justin I think it’s a little bit about, we’ll routinely have - still a pretty wide range coming out of the first quarter just because steel years yet to unfold and we want to try to create opportunities as best as we can see them for cover on the upside downside usually and it is this time predominantly volume related, but we recognized some extra towards volatility around commodity cost and what those are doing.

As I think of that $0.20 range, high end or low end it is more a factor of the volume side, we say mid single digit, you might think of that as 4% to 5% growth, terrifically good would be 6%.

We’ll see how the year comes together and then the earnings leverage attributable with the flow through value or benefit incremental volume to our EBIT and then ultimately our EPS is the bulk of that the width of the range is explained accordingly..

Okay.

So, with 6% volume corresponded at high end of the range or above high end of the range?.

No, I would say something in the 5% to 6% range..

Okay..

We say mid single digit, but you can interpret that as using 4%, 5%, 6%, something in that I would think 5% and change maybe a little bit over 5% would be a reasonable price to think about, the higher end and maybe in the 4% ballpark the lower end..

Okay, that’s really helpful.

And, then just very quickly on Comfort Core, the stats you were giving about 7% growth, was that specific to April month to date?.

It’s a good question. We came out with a sheet this year at January with basically no growth, it’s pretty depressed environment overall. So, when you think of Comfort Core being up 8% year-on-year that tells you the accelerated pace we saw in February and March.

So, running well above a percent, so to end the quarter at 8% given the start we had is strong..

Okay, great. I think my numbers were little bit disjoint there.

And, then is Comfort Core then above 40% of your unit shipments now, I think that was what you said in the last quarter?.

From a pieces perspective it’s about 35. -- Obviously they represent - of total US pieces Comfort Core is right at 40% in terms of Quantum Edge with Comfort Core, Quantum Edge 35% of Comfort Core and that represents obviously a higher revenue or dollar volume because those are value add products for us..

Okay. Thank you. I’ll wrap it up here. I appreciate the questions..

Thank you. There are no further questions at this time. I would like to turn the floor back to over Ms. McCoy for any closing remarks..

Okay. Well, thanks for joining us today. And we’ll talk to you next quarter..

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for participation and have a wonderful day..