Good morning, and thank you for taking part in Leggett & Platt's second quarter conference call. I am Wendy Watson, Director of Investor Relations.

With me today are Karl Glassman, President and CEO; Matt Flanigan, Executive Vice President and CFO; Perry Davis, EVP and President of the Residential Products and Industrial Product segments and Mitch Dolloff, EVP and President of the Furniture Products and Specialized Products Segment. Susan McCoy, our Vice President of Investor Relations is not joining us today for the call.

She is out of the office pertaining to a medical-related issue. Cassie Branscum is also with us on today’s call.

She joined our Investor Relations team at the start of the year and works directly with me and Susan as Manager of IR. Cassie has been with Leggett since 2005 and has a strong background in accounting and financial analysis.

Cassie has held roles in acquisition due diligence, as a controller for one of our operations and for the past several years at our Corporate Development department working with many of our businesses to lead those acquisitions and divestitures. We are excited to have Cassie as the newest member of our IR team.

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 discuss financial details and address our outlook for the remainder of 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 any non-GAAP reconciliations. I need to remind you that today’s remarks 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 now turn the call over to Karl.

Good morning. Thank you for participating in our second quarter call.

Yesterday we reported strong quarterly sales growth. Second quarter sales increase 11% to $1.1 billion.

Organic sales grew 10%, reflecting a 6% volume growth and a 4% benefit from raw material-related price increases and currency impact. Acquisitions also added approximately 3% to sales growth while prior year divestitures reduced sales by 2%.

Our sales growth in the quarter came from strong performance in several businesses. Organic sales were up 48% in Adjustable Bed, 12% in Geo Components, 11% in Automotive, 7% in Work Furniture and 7% in U.S.

Spring. Notably in U.S.

Spring, Comfort Core innerspring units grew 25% in the second quarter from market share gains with traditional and direct-to-consumer mattress brands. We continue to gain higher value content in our customers’ mattresses through our Comfort Core and Quantum Edge perimeter spring products.

To accommodate this ongoing sales growth, we are increasing our full year estimates for capital expenditures by $25 million to approximately $185 million, primarily due to recently awarded business in our Bedding and Adjustable Bed business, although there will be start-up cost associated with these significant new programs that will affect our 2018 earnings, we are very excited about these new opportunities. Matt will discuss full year earnings and sales guidance later in the call.

Second quarter earnings per share were $0.63, down $0.01 from $0.64 in the second quarter last year. In our first quarter call, we explained continuing steel inflation would compress our second quarter earnings and EBIT margins due to the pricing lag associated with passing along the higher costs.

This primarily affected margins in our Residential and Furniture Products segments. Price increases went into effect during the quarter to recover higher steel costs, but we had not fully worked through our typical 90-day pricing lag.

While steel scrap costs were relatively stable in the quarter, steel rod prices further accelerated. The increase between scrap cost and rod prices improved the metal margins at our steel mill with a corresponding EBIT margin improvement in our Industrial Products segment.

If scrap – steel scrap cost do not further increase in the second half of 2018, margins should recover in the majority of our raw and wire consuming businesses. However, our Home Furniture business utilizes flat steel which has continued to increase in price in the U.S.

While we have implemented price increases, offshore competition limits our ability to fully recover higher cost in this business. We continue to focus on cost reduction and transferring production of some products to our Chinese operations to take advantage of lower input costs.

Last quarter, I briefly addressed the Section 232 steel tariffs announced early in the year, since that time, potential Section 301 tariffs that apply a 10% duty on a long list of products from China have been proposed. We are working through the list to determine what effects both positive and negative, these tariffs might have on our operations, but do not expect them to be material.

I’ll now turn the call over to Matt.

Thanks, Karl, and good morning, everyone. Cash from operations was $81 million in the second quarter, a decrease of $17 million versus the second quarter last year reflecting increased working capital investment to support higher sales.

We ended the quarter with adjusted working capital as a percentage of annualized sales at 12.5%. Accordingly, we have lowered our full year operating cash estimate by $25 million and now expect operating cash flow to approximate $425 million this year.

Dividend should require about $195 million of cash and as Karl mentioned, our full year estimate expenditures is now $185 million. As always, our top priorities for use of cash remain organic growth, dividends, and strategic acquisitions.

After funding these priorities, if there is still cash available, we generally intend to repurchase stock. Our financial base remains strong and this gives us considerable flexibility when making capital and investment decisions.

We repatriated $123 million of offshore cash in the second quarter and currently expect to repatriate approximately $300 million of cash for the full year. We ended the quarter with net debt to net capital of 41.6%, slightly above our target range of 30% to 40% and total debt was 2.5 times our trailing 12 months adjusted EBITDA.

Both of these metrics reflects increased working capital investment or typically higher stock repurchases in the first half of the year and the recent PHC acquisition. As we announced yesterday, we are lowering our sales guidance for 2018 due to demand softness in our Home Furniture and the Fashion Bed businesses and lower than previously expected sales to some of our major retailers in Adjustable Bed, despite strong year-over-year growth in that business unit.

Full year sales are now anticipated to be between $4.25 billion and $4.35 billion. This range represents an 8% to 10% increase versus our reported $3.94 billion of sales in 2017.

We continue to expect mid-single-digit volume growth from strength in several businesses, as well as raw material-related price increases and a positive currency impact. Acquisitions, net of divestitures are expected to add 2% to sales growth.

We are also lowering our 2018 EPS guidance and now expect full year earnings to be $2.55 to $2.70 per share versus our prior range of $2.60 to $2.80 per share. The three main changes in our full year EPS guidance are number one, lower sales expectations, number two, continued impact of steel cost inflation in Home Furniture, our offshore competition limits our ability to fully recover cost increases; and three, startup costs from new programs in Bedding and Adjustable Beds.

Based upon this guidance range, full year EBIT margins should be between 11.3% and 11.8% and assumes an approximate 21% full year tax rate. With those comments, I’ll now turn the call back over to Wendy.

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, please reenter the queue and we will answer those questions as well.

Michelle, we are ready to begin the Q&A session.

Thank you. Good morning, everyone.

Good morning, Susan.

Good morning.

My first question is around, you mentioned, obviously the sort of moving parts with the Home Furniture business. I guess, can you give us a little bit more color on where you are in terms of shifting some of those operations?

And how we should think about that timeline coming together over the next few quarters?

Sure, Susan. This is Mitch Dolloff.

So, when we sort of split it into two parts if that’s okay, there is sort of the demand side and then the steel inflation in the price side. So, on the demand side, really at the end of Q1, we were expecting the business, we are expecting the business actually be up slightly year over the year.

Since then, we’ve reduced our sales outlook based on two factors. The first is just weak demand in the industry generally and the second is some loss of market share as we shed low margins accounts.

So, as we pursued price increases, we are not willing to produce products if we are not going to make money on it. So, that lower demand had – definitely had some impact on our EBIT outlook.

And then, on the cost side, as Karl mentioned, the cost effect still continue to increase in the U.S. while we’ve implemented price increases, offshore competition limits our ability to fully recover higher raw material cost.

In Q1 and Q2, we passed along about 35% of the raw material inflation. So we still had a gap that impacted our year-over-year earnings adversely.

We expect to increase our recovery in the back half of the year, but we think we’ll still have somewhat of a gap. In the mean time, we’ve been reducing overhead and operating cost and transferring production of some of our products to our Chinese operations to take advantage of lower input costs.

In many cases, we are already tooled up for those products, both in the US and China. So we are moving those products as ratably as we can.

We are also looking at taking some capacity offline, but we are still working on those studies. So, we expect that to unfold through the back half of the year.

In the longer-term, we’ll manage our global footprint to optimize steel, labor and transportation cost as well as currency impacts. So, I think, we’ve made good progress, particularly in the second quarter, we still have more work to do in the back half of the year, but our goal is to be substantially done with whatever restructuring activity we have by the end of the year, early into 2019.

Gotcha. Okay, that’s helpful.

And then, my next question is around the investments that you are making in Bedding. The $25 million for – to support some of the new programs that are coming through, I guess, can you give us a little bit more detail on that?

And then, how should we think about the offsetting revenue that will come from that and the timing and may be how it will come together?

Susan, this is Perry Davis. I kind of address, at least part of that.

We’ve been able to pick up some additional share. In addition to the content gains that we talk about regularly, we are pleased to be supplying products now to several of the box bed entities.

We have some that are introducing new lines. Others, who are actually transitioning some beds that had formerly been foam, all foam beds, now to a hybrid product.

So that’s Comfort Core product. In a lot of cases, it’s a Quantum Edge Comfort Core.

So, as we look at not only new business we picked up, but shifts to our mix, continual shifts to our mix. We have the need to invest in those assets that will enhance our production capabilities.

We look to add assets through the remainder of this year and likely into 2019 as we continue to grow and we’re favored with more business.

And Susan, to add to that, Perry’s narrative which is spot on, that there is a great opportunity for the company, because this additional volume then flows upstream into the Industrial Materials segment, as well. So, Comfort Core, as you know is high carbon, high quality wire.

So the grade of product that is produced through the value chain is really accretive. There are startup costs associated with every new program and there is a number of them.

And Susan, I just ask – or add at the tail end of that that relative to the specific $25 million number, which you mentioned, about two-thirds of that is associated with the bedding commentary that Perry and Karl just touched which we are very excited about. And then about a third of the $25 million is tied to Adjustable Bed-related activity.

I mean, a little few pieces elsewhere, but those are the two big pieces of the $25 million already increased. Again, in places we really like to spend our capital, our shareholders’ capital.

Gotcha. Okay, thank you very much for the color and good luck.

Thanks, Susan.

Thank you and good morning to everybody and congrats on a good volume quarter.

Nice, Bobby.

I guess, I first want to follow-up on Susan’s question about the Home Furniture Group. It’s been a couple quarters now, we’ve seen kind of weakness at the top-line perspective.

If the weakness more in the lower-end versus the higher end or anyway you can help us kind of understand what’s going on in that end-dynamic of the market. And then, given that, it’s kind of maybe competitor type issues as well, how do you kind of see that stabilizing or is there a way that you can’t stabilize as we move into 2019?

Okay, Bobby. This is Mitch.

I’ll take a shot at that again. So, we really see more of the weakness, I guess, actually both today, both on the US side and in China, but the dynamic of lower cost finished motion furniture coming into the US from China definitely has created some disruption in the industry.

So, I think most of our – most of the softness really is related to the motion hardware for us. We have another side of that business that distributes singulars wires, sleep boxes, and a variety of other components that go into finished goods, mainly to US manufacturers.

That side of the business has stabilized pretty well. So, on the motion side, that’s where a real effort is to move to optimize our production to reduce cost as much as we can to become more competitive and that means, taking cost out of the organization, as well as shifting more production to China.

So, we think that, we can make – we made progress in that so far and we think as we go - head into 2019, we would just simply be at a better cost position to be more competitive.

Bobby, to add-on to that a little bit is, it really is, if you look at the price stratification of the products, we are in good shape on the high-end value-added IP protected product. It’s the commodity side of the business, to Mitch’s earlier statement that’s has become very competitive, as you know, there is about a 60% delta in the cost of steel in the United States versus China.

And on that low-end commodity product that is continuing to grow, we are just not going to – out our equipment to do a lot of sales volume with no margin associated with it. So, I would expect - and definitely expect the Home Furniture business to shrink, especially in the hardware mechanism side and to be more focused on areas where we can add significant value.

Yes, that’s a great way to say – within and that’s sort of the disruption as Bobby mentioned that we’ve seen in Q1 and Q2, I have a little bit of it in the back half, but that was where making our way towards rightsizing it along those lines.

Thank you. And then, I guess, lastly from me is, trying to understand a little bit better around the new program, more particularly in Adjustable Bed and I guess how it relates to the capital investments coming in to support the growth but we are kind of seeing a slowdown in the second half.

Maybe just help us get a little bit better clarity on kind of the ramp or the program or the wind down of maybe an old program inside there?

Okay, Bobby.

Mitch is having a lot of fun this morning. I am leaving saying that our Adjustable Bed story is a wonderful story.

But…

Yes, and let me, sort of answer both parts of that question, if that’s okay. So, our Adjustable Bed sales were up 22% year-over-year in Q1 and 48% year-over-year in Q2.

And we expect our full year 2018 sales growth to be well north of 30%. So, as Karl said, a very positive story.

As we finished Q1, our customer forecasts were even stronger than that, too strong, I guess in hindsight. And so that led us to cut back a bit on our outlook for 2018.

But still bringing us back to the 30 to 35 – 30 plus percent year-over-year growth that we are talking about now. So, I know it’s a little bit confusing, but it’s slightly less good, I think is the way to think about it.

But still very strong at growth at north of 30%.

And we believe the category will continue to grow. You’ve heard on Tempur Sealy’s call the other day that – or yesterday that their adjustable bed business grew 25% in the second quarter.

You also heard Sleep Number say that they are now fully engaged in 360. The market is growing and there is customer awareness.

What we are really optimistic about is the back half is, both of those providers and mattress firm to be real frank are committed to advertising the category. So, the business will continue to grow just at a lesser rate than we originally had forecasted.

So it is a bit confusing, but it is an outstanding story for us. And we are – we really need to continue to invest capital, because we believe long-term the categories just is going to continue to grow.

Thank you. I appreciate the detail.

I mean, if it pick on too much there, Mitch, but I do appreciate all the extra color.

It’s just good training for him, actually, Bobby. And Bobby, on a personal note from all of us, congratulations on the promotion.

Good morning, Karl. Good morning, Matt and all the best to Susan.

Thanks, Justin. Good morning to you as well.

I wanted to just start-off on better understanding of the guidance bridge, is it sort of safe to say then that the three drivers, the lower sales expectations, the steel prices in Home Furniture and the start-up costs, those are sort of ranked in order of magnitude in terms of the earnings guide change or…

Yes.

Yes.

Yes, and for sure. The sales down draft is certainly number one, in the litany there and then, yes, as you sequence them, they were in relative order of importance.

Okay. And then, the sales down draft, I mean, that, I guess, you are lowering your revenue guide by about 1%.

If that’s sort of entirely centered around furniture products and you are basically lowering the sales guide for that segment by about 4%?

The sales in general are about two-thirds associated with the furniture hardware story that Mitch just mentioned and about a third maybe a tad less, relative to the Adjustable Bed dynamics which, again, you just heard quite a bit about. Those are the two main pieces there.

But the bulk of the sales midpoint drop is furniture hardware-related.

So, therefore your point is correct. It’s embodied in that Furniture Products segment.

Okay. And then, the final sort of part of this question is, I guess, a lot of your business seems to be firing pretty well.

And I guess, what I am trying to figure out is, aren’t there some positive offsets in specialized products or in the residential business that are positive contributors to guidance versus early expectations? Or is the strength on these sort of meeting the expectations that you had set out earlier in the year?

As a matter of fact, that’s a good way to put it. There are – there is wonderful stories in 12 of our 14 business units that are performing extremely well.

But to your point, that we had – our guidance earlier – earlier guidance was based on a continuation of that outsize performance. So, definitely our second quarter, we were right on a number that we expected, albeit with a little bit of tax rate help, but offset by interest expense.

So, 2Q turned out just as we had forecasted. So from a future perspective that, I guess we have taken the task a little bit in at the end of the first quarter when we said that we expected units would grow and our guidance was based on units growing mid-single-digits.

Well, we were comfortable that they would grow that 6% in the second quarter. So, our guidance is unchanged other than these two headwinds of Home Furniture and the slight change in Adjustable Bed.

Okay. Thank you.

You are welcome. Thank you.

Good morning. Thank you for the time and the color.

I can know it’s number three in terms of the impact to the EPS guide, but maybe quantify the startup cost that what you are referring to in the second half of the year and do you expect those to linger into 2019? And a quick follow-up.

The startup costs really are embedded in the growth of the Bedding business. And a remerchandising of an Adjustable Bed program which is a good opportunity.

We had a large program that is a little aged and needs to be remerchandized and every time our programs are remerchandized that there is a little bit of margin pressure as the sellout of the old line and this ramp of the new line. So, those are the two primary drivers and no, we do not expect that they will continue to be a 2019 issue.

We really see this as a one-time event.

Very helpful. A similar question with CapEx.

It sounds like moving to a little bit of an elevated state. I know, you don’t want to get into 2019 guide, but is the $180 million give or take a decent runrate to think about?

Or are there programs this year that might roll off and might come back to where your prior guide was for this year?

Dan, I really don’t know how to answer the question. I hope our CapEx next year is at the same rate, because it would be indicative of continued market share gains and program wins.

But I just – I don’t know, not being coy with you, I don’t know. I hope that if – that 2019 CapEx looks like 2018, because it’s – there are monies that are well invested for our shareholders.

But I just don’t know.

Yes, Dan, this is Mitch, I might add to that. Since we started the year, as you know at 160 million as our best guess, now it’s moved to $185 million, probably, as we sit here today, our best guess for 2019 wouldn’t start at $160 million.

It probably starts closer to that $180 million again, based upon a lot of the organic things that are in the mix. But again, just like Karl said, it’s too early to try to pin down really where we think that might be, but there certainly is a bias up from starting this coming year at a $160 million level would be my guess.

Very helpful. Lastly, if you had a comment on the performance of PHC, now that it’s been in the portfolio for a couple of quarters relative to your expectations?

Sure, this is Mitch Dolloff, again. We’ve been very pleased that PHC’s business has integrated well into our Leggett systems.

Feel very good about the management team. They are doing a terrific job and are a great cultural fit with us.

Demand is very, very strong in the industry there, both in the US and in Europe. We are struggling a little bit to keep with demand.

I think the whole supply chain is. So we’ve got a little bit of inefficiency, a little bit of extra overtime, but it’s a very positive problem for us to solve.

We expect that we may even make some capacity expansions there. So, overall, very, very pleased with that business.

Very good. Thank you.

And obviously, please do pass along the best to Susan as well.

Thank you, Dan. We’ll certainly do that and I will tell all the listeners, she is listening right now.

She is feeling the love. So, thank you for that.

Thank you. I have to go back to this again, but on the Home Furniture, just from a big picture perspective, is this a demand problem from US consumers or is this just a market where pricing has gone down at the low-end of the markets and where you are just not willing to go to make money?

Hey, Keith. This is Mitch.

I think the answer is, a little bit of both, right. So, there is weak demand in US consumers Home Furniture and there is also, as Karl mentioned, there is expansion at the very low-end, particularly on the motion hardware furniture.

So, motion has been big part of upholster furniture for a long time. There are other consumers just not buying that as much now.

I think that it’s much, so I think that there is still demand on the motion side, but I think we see that price point really going to the low end. So I think that’s where really where the issue is.

Okay. And the – just to be clear on the numbers, you are up – assuming you are up in Adjustables about 30% - 30 something percent in the first half and on Home Furniture you are down about 8% in the first half and under the guidance, would similar results need to be seen to the guidance range?

I would say, yes on Adjustables. Home Furniture has an easier comp going forward.

They had a really strong first half last year, a softer back half. I think that’s right.

But I haven’t dug that.

It is clearly going to be down. You are assuming it’s going to be down, right?

Yes.

Yes, and Home Furniture, I’d see it being down about 5% year-over-year.

Thank you.

And for that segment, Keith, we would have said, particularly based on the strong growth in Adjustables, up high-single-digits for the full year and now we would say that segment would be up low-single-digits.

I am sorry, which segment is up?

Furniture.

Furniture. Okay.

All right. Thank you.

Thank you.

Thanks, Keith.

Good morning and Cassie, welcome to the team and Susan, all the best. Timing right in.

I guess, my first question is, is there any impact to the outlook for the year from the LIFO change?

Well, we update, as you know, John, our full year LIFO estimate to essentially $37.5 million. So, that’s quite a bit more than we started out after the first quarter.

We are closer to – 10-ish or. So we ramp that up and keeping with the inflationary environment we see.

So what is that 10s is that for the full year in the back half, we have about $18 million to $19 million of LIFO expense plugged in if that turns out to be a perfect estimate for the full year. And of course, as you well know, once we get into the third quarter, we’ll refresh that expectation and see what it tell us at that point in time, both in terms of crisis in the market and our inventory levels and then we’ll adjust accordingly.

But, yes, it’s now significantly higher than we thought 90 days ago. And it’s baked into the updated earnings guidance obviously as if that is a correct assumption for the rest of the year.

So, so, translated as we look at the guidance today, versus 90-days ago, there is a negative impact from a higher LIFO reserve or do I not understand that correctly?

No, for sure there is, yes.

Okay. And then, how is – same question quickly on the spread between scrap and rod.

How does that outlook for the rest of the year and I understand that’s all gets worked in the back half. But, what changed if anything good or bad in the second quarter as it relates to that?

Yes, John, this is Perry. The spreads, obviously has growth as the years progressed.

The rod pricing strength in the marketplace of those rod producers is pretty good right now. They’ve been able to push through increases and in a lot of cases in excess of scrap increases and been able to hold that.

Part of that has to do with the 232 and some of the tariffs and the thread in tariffs. But more so, by the dumping actions that were taken and cited at the end of last year and the first part of this year.

It’s kind of effectively eliminated, not a 100%, but for the most part it’s eliminated imports rod from the picture and so the domestic suppliers have been able to pick up that slack and they are all running pretty full right now. They have pricing power, because the buyers of those rod products – their choices have been reduced.

They no longer look to imported rods to supplement their domestic supply. So, how sustainable that is going forward?

It’s hard to gauge, it’s the steel market, but we suspect that we won’t see a lot of weakness in the rod markets over the next several months.

Okay. So just to sum up steel, if had this wrong, please tell me.

We’ve got the issue with flat furniture steel inflating and you can’t really raise prices there. So that’s one issue and then we have somewhat higher LIFO reserve.

But the scrap rods spread is more or less playing out so far as you would have guessed 90 days ago.

Yes, I think that’s right. It maybe actually a little higher than what we might have thought at the time.

But, going back to LIFO, as we said in our release, the first six months of last year, we took about $2.5 million in LIFO expense this year first half $18.8 million. So there is $16.3 million delta right there in LIFO expense in the first half of the year for the company.

And John, lot of LIFO talk here. I know, we are aware and everybody out I am sure, but the increase in our LIFO expectations compared to 90 days ago has been a little bit more than $14 million for the full year.

So, if you want to know what – how much more have we now – do we think is in the mix, given where all of those ingredients have gone, it’s up $14 million from what our estimate was at the beginning of last quarter or at the end of last quarter.

Okay. Thank you.

And then, pivoting to Bedding quickly, I guess, this is for Karl or Perry. I would assume your open coil entry price points for Domestic Bedding producers was none too great.

If I had that wrong, correct me, but the question is, when you give your guidance and we know what the – is king of going on there and there might be a dumping petition filed. Is there anything in your guidance that assumes whatever that trend is, changes as a result of a dumping petition?

Yes, John. There is not.

We don’t include that in anything looking forward. If it happens, we will address that at that time, but right now, it’s not baked into any of our forecast going forward.

Great. Thank you for the color and good luck.

Thank you, John.

Hi. Thanks, good morning to everyone and hi, to Susan.

I wanted to look at the Bedding business and certainly the interpsring unit growth being positive as this notable callout. I guess that Perry and Karl, do you feel like you’ve turned the corner with some content and share gains such that, now going forward, you have some visibility that business could continue to run positive year-on-year?

We believe it will. We looked for a back half of higher unit volume than we had last year.

Obviously, a tremendous amount of disruption last year that now we kind of lapped and we are getting past that. The mix changes continue to happen and going back to just a minute ago on John’s comments, yes, the open coil products that we historically have produced have become – there has been some cannibalization by higher value and for core interpsrings.

We believe that in the Bedding market right now, that the lower end part of the market is suffering some, probably more so than the mid to upper-ends. And a lot of that we think is due to the import situation.

But, yes, looking at our business, where we are today, the programs that we have coming in the back half of the year, we are pretty upbeat about that business.

Okay, fantastic. Second last question for me and just maybe filling on John’s last question around the steel dynamics.

So you have been talking in recent months about this very favorable spread between rod and scrap. If I am putting the pieces together, within the guidance, are you anticipating that this favorable spread is maintained or that it could revert also to more historical norm?

Can you help us understand, I guess, your thoughts around how the spreads could play out in the back half of the year from your advantage point?

We – so basically, you can say that, where we are at today is kind of where we are forecasting will remain through the remainder of the year. There is one thing for sure, we are going to be wrong, it’s just a matter of degree as to how wrong we are.

But, we believe that the spreads are sustainable at this point, given the dynamics in the marketplace today, I spoke up a few minutes ago. You end up kind of pile along to that, Peter, that not giving 2019 guidance, but because of the dynamics in the steel market related to as Perry said the anti-dumping petitions that were put in place and awarded late last year, we expect that spread to be outsized into next year and we won’t have the negative LIFO impact offset as we see it today.

But I will admit forecasting steel is a fool’s game. So, I just declared what I am.

But the market dynamics support a long-term higher greater spread.

Okay, terrific. I appreciate the insights and best of luck.

Thanks, Peter.

Good morning.

Good morning, Hardt.

And best to Susan, as well. Actually two questions.

One is, given the commentary on the order business in recent months, not just tariffs but demand changes and the patterns. You’ve often highlighted the length of the cycle and as things gets specked in, is there any change in your own expectations?

Herb, this is Mitch. Thanks for your question.

No, I don’t think there is any change in our expectations in the long-term. As we mentioned, sales were up 11% year-over-year in Q2 after removing the currency benefit.

So, we remain confident in meeting our goal of exceeding growth in vehicle production by a 1000 basis points in 2018 and in the longer-term. And we see that as a target of around 11% to 12%.

While there is some choppiness in year-over-year growth forecast for the major markets, US, Europe and China, Japan, South Korea at about 1% for 2018 and remain at that rate for the next several years and while that’s not a huge percentage, it is on a very healthy build of over 81 million vehicles. So, it results in a lot more vehicles on the road.

The press rate is – growth rate is even higher in the developing markets, closer to 7%. So that brings the total global market to around 2%.

So that’s how we get our 11% to 12%. As you mentioned, we do have good long-term visibility, programs usually launch about two years after we win the award and run for about six years.

There is some exceptions to that. We typically have sort of that cycle of new programs coming on and old programs dying off.

And we are winning sufficient business to give us confidence to meet our target. I think I have mentioned before that in 2017, we won over $300 million in new awards.

Now, you mentioned that there is some news in the market and may have seen recent OEMs’ earnings releases in the last few days that were pretty mixed. And I think, trade wars, fuel economy standards, new fuel testing requirements that are coming online in Europe, Japan and South Korea may create a little bit of choppiness in the short-term.

But we still remain committed to our long-term goal of 11% to 12%. So, we don’t see any fundamental negative changes in the business, just some sort of temporary issues that may push demand one way or the other in the quarter or two, but fundamentally, we are really positive on the business in the long-term.

Thank you. My second question is, you used the word repatriation for paying cash back and what are the tax implications of that?

Good question, Hardt - Herb, this is Matt. Basically, we are bringing net cash back and keeping with TCJA, the incurred tax at the beginning of the year, but there is no incremental tax or cost to getting that cash back onshore.

Doing a lot of planning to make that happen. We started out at the beginning of the year.

As you may recall, saying we’ll bring back. We estimated about $300 million this year.

We thought most of the $300 million with again, this planning and coordinating would cause that to mostly come back in the back half of the year. As you read, we actually got back quite a bit of it earlier, $123 million came in the second quarter.

So, all of that is right on track, in fact a little bit ahead of schedule, I believe and the upshot is it’s not causing us anymore at all, compared to what we just had to true up with TCJA when they put in that tax reform.

Thank you very much.

Thanks, Herb.

Yes, thank you for participating, yes, go ahead, Wendy.

Thank you all for participating and we’ll talk to you next quarter.

Thank you everyone.