David DeSonier – VP, Strategy and IR Dave Haffner – President and CEO Karl Glassman – EVP and COO Matt Flanigan – CFO Susan McCoy – Director, IR

Budd Bugatch – Raymond James & Associates Keith Hughes – SunTrust Robinson Humphrey John Baugh – Stifel Nicolaus Robert Kelly – Sidoti & Company Joel Havard – Hilliard Lyons

Good morning and thank you for taking part in Leggett & Platt's second quarter conference call. I'm Dave DeSonier, the Vice President of Strategy and Investor Relations.

And with me today are the following; Dave Haffner, our CEO and President; Karl Glassman, the Chief Operating Officer; Matt Flanigan, our CFO; and, Susan McCoy, our Director of Investor Relations. The agenda for the call this morning is as follows; Dave Haffner will start with the summary of the major statements we made in yesterday's press release; Karl Glassman will provide operating highlights; Dave will then address our outlook for the full year; and 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. We posted to the IR portion of the website a set of PowerPoint slides that contains summary financial information.

Those slides supplement the information we discuss 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 section in our 10-K entitled Forward-Looking Statements.

I'll now turn the call over to Dave Haffner.

Good morning, and thank you for participating in our call. We are very pleased with the second quarter results we reported yesterday.

For the quarter, sales from continuing operations increased 15% over the prior year. Unit volumes grew approximately 14% during the quarter, reflecting improved demand and market share gains in certain businesses.

Sales also increased slightly during the quarter as a result of price increases implemented to recover higher steel cost. Second quarter 2010 earnings from continuing operations improved significantly to $0.34 per share.

In the second quarter of 2009, earnings from continuing operations were $0.12 per share and included a $0.04 per share charge related to the write-down of a divestiture note. The year-over-year earnings increased primarily reflects higher sales and the associated improvement in capacity utilization.

We've continued to keep a tight hold on fixed cost as sales have increased. As anticipated, the incremental unit volume we realized in the second quarter generated contribution margins in line with our approximate 30% expectation.

This further reinforces our confidence in the company's earnings potential as markets rebound in the future. The company's primary financial objective is to consistently achieve total shareholder return within the top one third of the S&P 500.

From the first of January of 2008 through the 21st of July, 2010, we posted TSR of 36% which ranks in the top 5% of the S&P 500. We continued to be very comfortable with our strong financial profile.

We ended the quarter with net debt at 27.3% of net capital, which is below our long-term targeted range of 30% to 40%. We currently have approximately $350 million available and nearly two years remaining on our $600 million bank facility.

And we have no significant fixed-term debt maturities until 2013. Our cash balance at the end of the second quarter was $244 million.

We generated $67 million of cash from operations during the quarter. Working capital remains at a favorable 14% of sales and reflects our ongoing focus on optimizing returns.

We purchased approximately 2.3 million shares of our stock during the quarter at an average price of $23.17 per share. We also declared a second quarter dividend of $0.26 per share.

At yesterday's closing price of $21.32, the current dividend yield is 4.9%. The dividend remains a key component in achieving our TSR goal.

As has consistently been the case for many years, we expect operating cash in 2010 to comfortably exceed the amount required to fund dividends and capital expenditures. For the full year, we expect operating cash to exceed $300 million.

Capital expenditures for the year should approximate $75 million and dividends will require about $155 million. With those comments, I'll turn the call over to Karl who will provide some operating highlights.

Karl?

Thank you, Dave. Good morning.

I'd like to quickly discuss a few major topics. You will find segment details in yesterday's press release and in the slide presentation on our website that David DeSonier mentioned earlier.

Second quarter sales increased 9% in our Residential Furnishing segment, reflecting unit volume growth in several key businesses. In our U.S.

Spring business, Innerspring unit volumes increase approximately 5% from the second quarter as a result of improved market demand. Box spring units grew approximately 10% during the quarter reflecting improved demand and market share gains.

Unit volumes in our Furniture Component business increased significantly in the second quarter due to market share gains and ongoing market strength in motion upholstery. As Dave mentioned earlier, we implemented price increases during the quarter to recover higher steel cost.

In the Residential segment, most of these increases were in place by mid-quarter. Demand in the Office Furniture industry stabilized and appears to be showing signs of improvement.

We experienced strong growth during the quarter in our Office Components business. The sale's up 21%, primarily from new programs that have been awarded.

Revenues in our Fixtures and Display business grew 4% during the quarter and continue to reflect solid demand by value-oriented retailers. Second quarter sales in our Industrial Material segment increased 28% from a combination of unit volume growth and steel related price inflation.

As expected, metal margins at our steel rod mill improved sequentially but still below second quarter 2009 levels. The sequential improvement in metal margins reflects increased market prices for steel rod.

Second quarter sales in our Automotive business grew approximately 60% versus an extremely weak second quarter 2009. This improvement reflects strong growth in all of the major global markets we serve, including North America, Europe and Asia.

Industry forecast continue to anticipate production in all of these markets this year. With those comments, I'll turn the call back over to Dave.

Thank you, Karl. In light of continued sales growth, we have raised our full-year guidance.

The new ranges are basically equivalent to the upper half of our prior ranges. Sales for 2010 are now anticipated to be between $3.2 billion and $3.4 billion.

The lower end of this range allows for some risk of market contraction from current demand levels, and the higher end allows for a relatively strong demand environment to continue. Based on these sales range, we expect full-year earnings of between $1.10 and $1.30 per share.

We acknowledge the recent weakness in certain macro-markets, including consumer sentiment, but remained guardedly optimistic about market recovery. We're extremely pleased with the progress we've shown to date, and remained confident that we are on track to delivering on our long-term strategic roles.

With those comments, I'll now turn the call back over to David DeSonier.

That concludes our prepared remarks. We appreciate your attention, and we will be glad to try to answer your questions.

In order to allow everyone an opportunity to participate, we 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'll answer all the questions you have.

(Diego), we're ready to begin the Q&A.

Good morning, David. Good morning, Matt.

Good morning, Karl.

Good morning, Budd.

Good morning, Budd.

Good morning, Budd.

Congratulations on the quarter. One of the nicest quarters I've seen out of Leggett in a long, long time.

Can you talk the – I know you've given us the overall large factors for the year, in terms of earnings per share and overall sales. Could you perhaps drill down a bit now and talk a little bit by segment, by the four segments, maybe what your outlook is for revenues, revenue growth and margins in each of the segments.

I know that's one question, David, but one big question.

Karl, do you want to try to answer that one big question?

Good morning, Budd. It's a little bit of a challenge to forecast.

Our guidance, as Dave said, anticipates a continuation of this recovery and we expected when we give our initial full-year guidance back in January that the recovery would be choppy, and we expect that going forward. Obviously, the comps get a little bit difficult as we get deeper into the year.

But as I break it down by segments, as you know better than probably anybody on the call, the bedding industry has somewhat of some seasonality to it where the season starts to pick up mid-May in anticipation of Memorial Day runs basically through mid-September, after Labor Day. We're seeing that seasonal pick up.

The Fourth of July was reasonably strong. What we're not seeing is significant follow-through post-advertising related to those major holidays, whereas, units through the year were up 5% through the end of the second quarter.

That comp might get a little bit tougher. Business has been a little softer the last couple of weeks.

Furniture continues to be strong. We're blessed there and that we've had some market share gains that are somewhat significant as manufacturers and retailers start to reward us for the quality of our products.

And also, as Dave mentioned that we're starting to see some real strength in the motion upholstery segment. So that business is good, continues to be good.

Carpet underlay in Residential is probably the biggest area of concern. That business continues to be soft.

The demand in residential softer – hospitality related demands softer than residential. And we don't really expect any real recovery there.

Hospitality probably won't recover until sometime mid to late next year. So that business is a challenge.

We're starting to experience some raw material cost inflation. They've announced and implemented two price increases now so we expect better performance out of that business in the back half than we experienced in the second quarter.

But it's a challenge. As we move over to the commercial side, you heard the comments on the Office business.

We couldn't be more pleased with that business. It's a tough, tough environment but the manufacturers are open to new designs.

The consumer seems to appreciate those new designs. We certainly have market share gains there.

We're optimistic that the market will grow through the remainder of this year. And certainly you know the (different) forecast (shell growth), forecasted growth in 2011.

Store Fixtures is – certainly we expect continued growth there, been an odd year for Store Fixtures. As you remember, we had an abnormally strong first quarter, second quarter was a little softer than first.

We expect third quarter to – from a demand perspective, to parallel second. Though, it looks like our first quarter maybe the strongest quarter.

That has changed in the demand cycle of Store Fixtures as it becomes more of a replacement product than correlated to new production. That business is good.

My comment as it relates second to the third to second and then second to first was a demand comment. But from a profitability standpoint, we expect continued improvement as the cost savings take hold so as we move the industrial, the demand side of it is highly correlated to residential.

The metal margin that exists at Sterling is back to where it should be so it is better going forward than it was a year ago's third and fourth quarter. Automotive is the stellar performer, and Specialized, certainly strong worldwide demand.

We don't expect any softening, the comps' going to be a little bit more difficult. As you remember, we were up 80% our first quarter, 60% second quarter.

So don't expect that kind of growth going forward. But Automotive demand is strong.

Our Automotive folks did a wonderful job of reducing their cost structure. So that business is performing very well.

Machinery was a good solid second quarter. We expect that demand to continue.

Commercial Vehicle Products, we spoke of in the past. We started to see some strengthening in the second quarter and are pretty optimistic about a solid back half in CVP.

So roll that all together and we feel pretty darn good. What we don't know is what demand will look like going forward, but as Dave said, our cost structures in place.

So give us an order and we feel pretty darn good about it. And that answer was much longer than your question.

Thank you very much.

Thank you. Just following up on the last discussion.

(Lease) at springs were up 5% a little softer in July. Were they down year-over-year in July?

Just up last – any kind of color to be helpful?

Flat.

Flat?

Flat. Yes.

Okay. And is that seasonal factor says save that or do you think demand's just little weaker?

If they certainly sequentially were stronger because of the seasonality that's inherent in the U.S. Spring business, I just think the consumer's probably a little buffy.

Okay. And then the strength in upholstered furniture, take the motion furniture, do you think that's share gain or you think that's the industry.

Both.

Both. Okay.

And I guess final question on – if we look longer term when we get into a more certain demand environment. Moving up the debt level to the targets you talk about in every press release.

Is that going to come primarily through share repurchase or would some M&A activity play a bigger role as it's been in the past.

Keith, this is Dave. If we move in to that range, it very well could be correlated to some acquisition activities, certainly not uncomfortable moving into the lower end of that range to repurchase shares, especially at what appeared to be compelling prices.

But more than likely, we'll utilize our – the generation of our operating cash and tap into that debt for acquisitions, or hopefully some increased productive capability for generic businesses. But acquisitions would be first in line before we would do that to share repurchase.

All right. Thank you.

Good morning. Congratulations.

A question on the contributions margin. You're famous for wide ranges and you got a pretty good one in there.

Still about the range of contribution margin, I think it's been around 30% year-to-date. Correct me if I'm wrong on that.

And I'm just curious what did cause you to be at the higher end and lower end of 25% to 35% range on contribution margin.

Yes, it depends on the mix of businesses. There's a greater or less contribution margin in each one of the businesses, and that's why we give ourselves the latitude of the wide range.

We hope we're going to be for accuracy at some points so that that wide range helps it sometimes. But the other thing is remember that we are now dealing with some inflation and don't expect a contribution of 30% on the pass-through with steel inflation.

Okay.

John, this is Matt here. Earlier question, it has been 30% approximately up to this point this year.

And with the mix of business, is that influential? I mean, your Residential's been very strong in the first half and you're at 30.

So I mean, as you look at your mix of business in answering that question, so if the second half which has some visibility towards not a lot, would that mix stay similar or strengthen or be weaker than the first half, if you had to guess?

We don't expect the contribution to be less than the back half than it was in the first half.

And just as an example, John. If Office furnishings were to ascend, the way we are feeling it going, going up, so where we feel it's going.

That would help that average margin. That's just one example where there's significant differences between those incremental contribution margins.

And then just as a follow-up on steel. You've raised it.

Could you refresh us again on the magnitude and then comment on the rough impact on second half sales across the company and any other margin comment as it relates to what you got versus what you've incurred.

From sequentially – from second quarter to – from first quarter to second quarter there was about $20 million of steel inflation. With that, we get margin recovery but as I said earlier, we don't get an incremental margin on any of that.

We where about 50% – we were fully recovered at the end of the quarter – about halfway through the quarter we were recovered. So that should give you some ability to develop a forecast.

Thank you.

You're welcome. Thanks, John.

Good morning, everyone.

HI, Bob.

Good morning, Bob.

Some question now on steel prices – the steel has some price increases. It seems that scrap has started to moderate, move down a little bit.

What does that mean for margins in each of the individual segments in the second half of the year? Does that type of outlook cooked into your current 2010 forecast?

It's baked into that forecast, Bob. What happened to us is on the first quarter call, we have concern that there would be continued – there be a second round of steel inflation.

Counter to that now, it looks like steel has kind of topped out a little bit which that helps us is we're not dealing with the line, obviously, going forward. But the spread at the Sterling spring mill of that metal margin is back to normal levels.

We don't expect there to be much of a regression in selling prices.

Understood. But I mean, doesn't that imply margin expansion for the second half?

It does. It's certainly in the Industrial Material segment as it relates to that steel mill were back to normalcy.

Okay, great. And then just following on, I guess a question, a couple of questions ago.

How important is the bounce back – first off, what's utilization in your Commercial Furniture business, and how important is that to the contribution margin that being a more normalized level (to then)?

The utilization in – when you say Commercial Furniture business, I assume you mean office?

Yes.

The utilization at the end of the second quarter was about 43%. So there is plenty of capacity there.

Thus, the comment Dave made about increased contribution capability in that business as the economy recovers.

Thanks, guys.

You're welcome.

Thank you, Bob.

Thank you. Good morning, everybody.

Hi, Joel.

Hi, Joel.

Guys, in the past you all talked about an ongoing study to identify longer term, higher growth, higher profit potential fields of acquisition that maybe outside of the existing core. What progress is going on there, or has that really gone on hold as we've worked through the challenges sort of the previous 18 months or so?

Joel, relative to pure acquisition, we've really contracted or pulled that back by design waiting –?

I know as far as activity but I'm talking about the strategic analysis process that was underway previously.

Right, and that's where I was going. If we looked at what we could do externally and what we could do internally.

And so while we pulled back, we still are looking for those types of things in acquisition candidates. What we haven't restricted is our internal investigation relative to some of the products that might provide those higher technical content, higher margins, intellectual property, et cetera.

An example of that type of work that continues to gain momentum is the non-conductive power transfer that we're doing with Fulton industries, we've called it eCoupled publicly. That continues to gain significant steam.

We've also asked some of our teams to go out and look into various industries such as alternative power, aerospace. What are things out there that we might be able to make that would use some of our core competencies and provide some of those positive attributes that you just mentioned and simultaneously increase our pass-through utilization.

We found some of that business; some examples are in our Machinery Products group. And so we continue to look for that.

And if we are able to find more of that and it consumes substantial (knowledge) of unused capacity, that's a very good thing. It gives us capacity, full capacity utilization quicker and we'll be investing more money for productive capacity sooner.

But the returns are substantially better. We haven't given up on that.

We have taken a more cautious tact at acquisitions in a (inaudible).

Okay. Dave, is that to say that analysis continues but there is nothing particularly in the pipeline?

Well, I really do – I don't want to overplay this eCoupled thing but this is not a minor product. This is going to be a significant opportunity for all of the companies that are involved in it.

And we're getting closer, Joel. We're already selling some of that product and you may recall we produced the componentry on the primary side and the other devices have the secondary coils in them.

And virtually all of the telecommunication companies are in that technology consortium and are preparing their strategy and product launches. So there's some things that are coming to fruition in the not too distant future.

Very good. All right, thanks, guys.

Best of luck.

Okay. We appreciate your attention and we'll talk to you in about three months.

Thanks.