Greetings, and welcome to the Leggett & Platt First Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David DeSonier, Senior Vice President, Strategy and Investor Relations for Leggett & Platt, Incorporated. Thank you. Mr. DeSonier, you may begin.

Good morning, and thank you for taking part in our first quarter conference call. With me this morning are the following: Dave Haffner, our CEO; Karl Glassman who is President and Chief Operating Officer; Matt Flanigan, our Executive Vice President and CFO; and Susan McCoy, our Staff VP of Investor Relations. Perry Davis who is Senior Vice President of the company and also President of the Residential Furnishings segment is also joining us this morning. We plan to periodically include each of the segment presidents in these calls to participate in Q&A, and this quarter we're starting with Perry. The agenda for the call this morning is as follows: Dave Haffner 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 2013. Karl Glassman will provide segment highlights, 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 contain summary financial information along with segment details. 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 pleased with our start to 2013 and remain optimistic longer term that we will continue to realize benefits from ongoing consumer and housing market recoveries. As we reported yesterday, first quarter earnings were $0.33 per share, up 10% versus the $0.30 per share we earned in the first quarter of 2012. First quarter same-location sales decreased 2% with lower trade sales from our rod mill and deflation in rod and wire prices contributing in roughly equal parts to the decline. Lower volumes in bedding, portions of residential furniture, office furniture and machinery were offset by growth in carpet underlay, store fixtures and Commercial Vehicle Products. Despite sluggish demand in some of our key businesses, earnings increased during the quarter from cost improvements and strong product mix within certain business units. These improvements were partially offset by an unusually high accrual for our TSR-driven and other long-term stock based incentive compensation plans. Matt will discuss this further in his comments. Including all of these issues, EBIT grew and EBIT margins also improved to 8.5% in the quarter compared to 7.9% in first quarter of 2012. Optimizing returns on capital employed continues to be a major focus for our operations. We ended the first quarter with working capital at 12.9% of annualized sales, well below our 15% target. Operating cash was $24 million during the quarter, which was consistent with our internal expectations. In February, we declared a quarterly dividend of $0.29 per share and extended to 42 years our record of consecutive annual dividend increases. At yesterday's closing price of $33.65, the current yield is 3.4%, which is one of the highest yields among all of the S&P 500's Dividend Aristocrats. During the quarter, we purchased 1.6 million shares…

Thank you, Dave, and good morning, everyone. As Dave mentioned, quarter earnings were impacted by an unusually high accrual of $0.03 per share related to our stock-based incentive compensation plans. This was primarily due to the significant increase in our relative TSR performance as our stock price increased from $27 to $34 during the quarter. In accordance with GAAP, we adjust our incentive compensation accruals each quarter to reflect the related performance metrics. For our TSR-based incentive plan, the stock price increase during the first quarter resulted in top quartile performance versus our 320-member peer group against which our performance is measured. This level of performance, if sustained, would result in a maximum payout for each of the 3 ongoing 3-year measurement periods, and therefore, our first quarter results included a large accrual to reflect the increase in the expected payout levels. Since the TSR-based incentive accruals now reflect maximum payout for each of the measurement periods to date, expense in subsequent quarters should be lower than the first quarter. In addition, if our relative TSR moves into a lower quartile of the peer group, then we would reduce our accruals to reflect the corresponding lower payout levels in accordance with GAAP. The majority of this incentive cost was recognized in the selling and administrative expense line of our income statement with a smaller amount also impacting cost of goods sold. The $10 million increase in SG&A costs versus the first quarter last year was comprised in roughly equal portions of this unusual stock-based compensation expense and an unfavorable ruling on a patent infringement case. Now on to a few other financial topics. The reduction in operating cash during the first quarter to $24 million versus $65 million in the first quarter of 2012 is consistent with our internal expectations…

Thank you, Matt. In the Residential Furnishings segment, same-location sales decreased 1% in the first quarter from lower unit volumes. In our U.S. Spring business, sales decreased 3% in the quarter compared to a relatively strong first quarter of 2012. Innerspring unit volumes were down 9% and boxspring units were down 1%, primarily from market weakness at promotional price points. Growth continued in Comfort Core, which is our pocketed coil product line with those units up 32% in the quarter. This category shift is driving higher average unit selling prices and a favorable product mix in U.S. Spring and offset some of the decline in unit volumes in the quarter. In furniture components, sales decreased 7% in the first quarter. Combined volume in our seating and sofa sleeper businesses were roughly flat during the quarter, but motion hardware unit volumes declined 14%, primarily from weak market demand at promotional price points. In both the bedding and furniture markets, the first quarter each year typically has a larger amount of volume at promotional price points as a result of the annual cash infusion consumers get from tax refunds. This year, a delay of those refunds past the key mid-quarter President's Day shopping period, along with the 2% payroll tax increase have had a negative impact on market demand. Adjustable bed units declined for the first time in several years with volume down 4% in the first quarter. We expect this to have been a temporary event and should return to unit volume growth in the second quarter. In carpet underlay, sales grew significantly in the first quarter. Margins in this business unit remain under pressure from rising scrap foam costs and we have implemented price increases to recover these higher costs. First quarter EBIT and EBIT margins increased versus the first…

Thank you, Karl and Matt, for those comments. As shareholders ourselves, we are pleased with the company's performance since making the strategic change a few years ago. We continue to focus on the multiple levers that influence total shareholder return, including profitable growth and margin enhancement. We demonstrated that focus in 2012 with the very attractive Western Pneumatic Tube acquisition in addition to meaningful margin increases that we realized. Our guidance anticipates additional margin expansion this year with an implied midpoint EBIT margin of approximately 10%, which, if achieved, would be the highest in over 10 years. While pleased with the progress, we're still not content with this level of performance. To further our focus on value generation, this year we've implemented additional initiatives to enhance profitable growth and EBITDA margins. And in closing, I'll repeat my initial comment. We're confident that as the overall consumer and housing markets recover, Leggett & Platt will realize corresponding benefits. And with those comments, I'll turn the call back over to David DeSonier.

That concludes our prepared remarks. We thank you for your attention, and we'll be glad to try to answer your questions. [Operator Instructions]. Claudia, we're ready to begin the Q&A.

[Operator Instructions] Our first question comes from the line of David MacGregor with Longbow Research.

This is Josh Borstein in for David MacGregor. On the adjustable foundations, you had mentioned this was the first time you had seen a decline. Was the -- 2012 had been up year-over-year. You said it was temporary, expect growth back in 2Q. Could you discuss a little bit what went on and what you saw to have that decline?

Yes, Josh. This is Karl. The first and second periods, January and February, sales were significantly softer than we had experienced in the past. Some of that is most probably embedded in the results of one of our large customers. Select Comfort's been very open that their volume was off in the first quarter. They have also said, and we can certainly confirm, that their volume recovered in March. Our adjustable bed business was up 8% in March. It continues to be strong in April. So while Select is a very, very important customer to us, they're not our only customer. The market was significantly impacted by the softness that we experienced across the whole bedding industry in January and February.

Okay, great. And then just one follow-up. On the Comfort Cores, again some nice performance there. When do you expect to anniversary the easy comps with your Comfort Cores?

Perry, why don't you go ahead and take that one?

Josh, I really don't expect to anniversary -- the category itself just continues to grow beyond any of our other product categories within the bedding group. Although we may see some slight reduction in the rate of growth over this year, but we really anticipate that product category to perform well beyond any of the other product categories for the bedding group.

Okay. And I know a lot of those Comfort Cores they'll go into the iSeries, but can you offer maybe the percentage of the Comfort Cores that go into iSeries as opposed to some of the other products. I'm just trying to get a sense for the breadth of customers that you have for that product.

All right, Josh, we don't -- this is Susan, obviously. We don't get quite that specific with any of our product line details to go to the customer level.

But we would probably say that the product is extremely broadly placed. The iSeries product line's important, but the product is being utilized by a number of different manufacturers as they all grow their hybrid offerings.

Our next question comes from the line of Keith Hughes with SunTrust Robinson Humphrey.

Questions on the commercial segments on the Store Fixtures, you're looking at some business from J.C. Penney last year. If you could just give us sort of an update on what that's going to look like moving forward and specifically what kind of comp you're going up against in the third quarter on that?

Okay, Keith. This is Karl. The new CEO of J.C. Penney, Mr. Ullman, has made it very clear that they were going to continue to release all programs that they had envisioned at least through the end of this second quarter. We're in the process of shipping a good bit of that product now. At this point, based on POs in the hand and commitments that we have, we would expect that the 2013 J.C. Penney-related Store Fixtures volume would be very close, if not slightly exceed, the demand that we saw in 2012. But a warning, remember that what was very heavy weighted to the third quarter of last year will be more equally spread through this year. But the heavy shipping period is right now with second quarter being the high point.

Okay. And then on Residential, what's sort of your outlook in the furniture and spring sales for the next quarter or 2 based on what your customers are telling you?

Keith, this is Perry. I'll take that question. Right now, after having just completed the High Point Market earlier this week, the overall attitude amongst our customers, I would say, is good. If you turn to the furniture side, most all of the major players that were representative -- represented at the market reported their order writing was brisk. A lot of new programs rolling out this year. We continue to see an upgrade in the product category. More and more product from the furniture side empowered motion. So the outlook amongst the furniture group was positive. As to bedding, although the first quarter was a little bit lackluster, we think for a variety of the reasons that Karl mentioned with the delayed tax refund situation and also a tax increase to hit in the first quarter, that outlook also is up. It seems to have a little lift over prior periods. In fact, over the last 4 weeks, I can report that our innerspring shipments are slightly up about 2% year-on-year.

Our next question comes from the line of John Baugh with Stifel. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: Yes, the first question is could you just address the annual sales guidance? Actually, I think you raised the lower end slightly, kept the higher end the same. And I guess the question is the first quarter was certainly below my model and I think most others on the Street. Was it on plan with your internal model or is there something, if it wasn't, that you're more optimistic now about the rest of the year?

Yes, John, this is Dave. It was fairly close to our internal expectation. We had not planned on a litigation expense, but -- and we realize that people develop their models differently and so we're certainly aren't critical of consensus being different than what our internal numbers are. It's just that the quarterly forecast that we had and some of those that were out there were different. We're very close to what we expected to see happen. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then you mentioned litigation, that was my follow-up. Could you just give us a little color on what happened there?

Yes, it has to do with a product that we developed several years ago having to do with some semiautomatic stapling of some foundation products. And while we feel comfortable that our design was novel, there were some other people that felt that it wasn't. And we certainly respect other people's intellectual property. And as a result of a ruling, which resulted in a $5 million penalty, we went ahead and booked that.

Our next question comes from the line of Herb Hardt with Monness, Crespi and Hardt. Herbert Hardt - Monness, Crespi, Hardt & Co., Inc., Research Division: If your stock would go back to where it was at the beginning of last quarter, down to $26 or $27, what kind of adjustment would there be in SG&A?

Herb, well, there are a lot of -- this is Matt. There are a lot of moving parts, of course, that go in that calculation. But assuming that our relative performance went down as well compared to the peer group, of course, in essence that we would be the one having that pullback versus the rest of that peer group, then we would largely clawback almost all of that incremental expense that appeared here in the first quarter. Again, it's quite a complicated calculation per GAAP. But sure enough, it would cough up quite a bit of accrual that is currently now maxed out.

[Operator Instructions] Our next question comes from the line of Daniel Moore with CJS Securities.

If we look back to prior housing recessions and recoveries, do bedding and furniture tend to lag recovery and housing starts? And if so, generally by how long?

Dan, this is Karl. Yes, there is certainly a lag. I need to take out the housing recovery of 2004, '05 and '06 because it was truly an outlier of anything that we've seen in the past. There was more speculation and more people in homes that, as we've seen retrospectively, couldn't afford those homes so they weren't fully furnished. So that we were criticized in the market or certainly questioned as housing was booming during that time frame, how come we weren't seeing a significant uplift in bedding and furniture sales. And like I said, we found out the consumer couldn't afford the house, much less the furnishings. So going prior to that, there's generally a lag of about 6 months to 1 year. As housing recovers, there's a higher correlation actually in consumer confidence. So as housing recovers, consumer becomes more confident, jobs are gained at a greater rate. And all of that rolls together in above-average GDP growth in the recoveries of those businesses. Knowing also that post any economic downturn because those -- the purchases of those products are deferrable, there is a little bit of pent-up demand and we believe that it's out there and we've yet to experience it.

Daniel, this is Dave. I think you probably know, we all know that the supply of available homes has fallen very significantly this past year and that's a good thing for companies like Leggett & Platt because if it takes 5 to 7 months now to gobble up the rest of that inventory, construction obviously is recommencing and there is this correlation between new housing and furniture and bedding. So that's one of the reasons I reiterated my statement of confidence as we see that recovery continue, we know that Leggett and many other companies that are associated with the housing market are going to feel the benefit of that.

And as a quick follow-up, much of the gains we've seen so far in the multi-family arena, what's the ratio of the benefit to Leggett of an uplift in multi-family versus, say, single-family housing starts?

Dan, we don't have that statistic. It's more tightly correlated, again, to consumer confidence than it is to housing. Housing moves are important, but it's probably only 30% of our demand. Remember, most of our products are replacement oriented. So I just don't know that data point, I apologize.

[Operator Instructions] Our next question comes from the line of Dan Stolper with Wells Fargo.

This is Herb Buchbinder. Can you comment on the aerospace business? I don't see any mention of how their sales did. Hopefully, they're still growing.

Herb, this is Karl again. Yes, they continued to grow. We're very pleased with the progression of that business. That acquisition, Western Pneumatic, is performing better than we originally had forecasted and the imputed growth rates are better than we expected a year ago now. We're very pleased.

Is there any acquisitions possible in that area? Or if you do something, it probably would not be in aerospace?

Herb, this is Dave. The answer is yes to the first question. We're looking at multiple opportunities, none of them great big, extraordinarily large. But we're looking at some businesses that would enhance the offering that we have for the current customer mix that we have. So we're not in a position to give specific details because of confidentiality arrangements. But as you know, and we talked about, the interest we had in not just making one acquisition but trying to grow a business group and that's exactly what we're doing. So stand by, if you will, and hopefully in the not-too-distant future, we'll have something to talk about in that regard.

Our next question comes from the line of David MacGregor with Longbow Research.

Josh Borstein again. Just on the Office Furniture business, sales declined there 6%, which seems somewhat a bit counter to recent numbers and commentary coming out of the Office Furniture names. Was there any share loss in that number? Is it temporary? Or is there any additional commentary you can offer to help us understand what's going on in that part of the business?

No, Josh, there certainly wasn't any share loss. The sales were softer in January and February than they were in March. We're very pleased with the programs that we have in place that will be launched at NeoCon here in a couple of months. And our current forecast show that, that business will be flat to slightly up the remainder of the year. It was just first quarter macro market weakness that was probably correlated to some of the softness that our customers are experiencing in the government area.

Okay. And then just on the tariff protection from your innersprings from the Chinese coils, I think they come up for rollover, I believe, in 2014. First, is that assumption correct? And if so, do you expect that tariff protection to be extended?

Go ahead, Perry.

Yes, it does come up for a sunset review. We're already working on that issue. We expect that decision to be reaffirmed.

Our next question is a follow-up from the line of John Baugh with Stifel. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: Yes, could you give us just a little help on a couple of things, expectations on LIFO for the year, where the share count might shake out with the increased exercise?

This is Matt, John. LIFO, we see it being relatively modest throughout the rest of the year. I mean, I don't think you'll see -- we don't know yet for sure, of course, but we don't see some dramatic swings, a total of $10 million for the full year. And then relative to share count, don't quite know in terms of the option exercise. By the end of the year, we would expect to have issued both through benefit plans and stock option exercise around the 4, maybe a little more than that, million share count such that at the end of the year, obviously this will be based upon how many shares we also buy back during the year, but we should be somewhere between 146, 147 or thereabouts.

That's the diluted share count.

Yes, fully diluted. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So you would expect -- because I think you ended last year at 146, it's a very slight increase maybe?

Although again, we'll be mindful of our share repurchase activity during the year as well, of course, and hope to have [indiscernible] to spend those dollars. But if we don't, we'll look to step up our share repurchase activity as well. John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division: Two other quickies. There was a reference to competitive pricing in the commercial segment. If you could discuss that and then also some strength in CVP and maybe discuss why that occurred and the outlook for the remainder of the year there.

I'll deal with the CVP issue first. That business is very, very cyclical; not so much seasonal, but cyclical. It's based on programs and there were a number of large programs that went through in the first quarter. So we were pleased with the demand there. As it relates to pricing pressure, that was really a Store Fixtures comment, not an Office comment. And as that business is seasonally weak in the first quarter, there's a number of us that are hunting for volume. So there was some pricing pressure there.

Our next question is a follow-up from the line of Daniel Moore with CJS Securities.

Focusing on Residential Furnishings, EBIT margin improved 50 bps despite the 1% revenue decline. Could you perhaps break that out between cost control and operational efficiency versus mix? And do you see the favorable mix shift being sustained through the remainder of the year?

It will have to do with some product mix obviously in some of the bedding products.

Let me just mention first, we don't have -- we're not going to provide a specific detail relative to the cost versus the mix. Both our contributing favorably. The mix issue is what, I think, Karl and Perry have both discussed relative to the growth of Comfort Core. But both are favorable. Both are likely going to continue to help us in the coming quarters.

Yes, and I might add -- Perry, sorry to get in front of you here. But Daniel, one of the things that will likely cause an improvement in those margins that volume, which we expect to see an uptick in volume, and obviously, we've got fixed costs that are observed over whatever volume we have. So if that volume picks up, we're going to see contribution margins pick up in both Residential and bedding.

Our next question is a follow-up from Herb Hardt with Monness, Crespi and Hardt. Herbert Hardt - Monness, Crespi, Hardt & Co., Inc., Research Division: Do you have any comments on the overseas business? You have some modest exposure there.

Actually, Herb, thank you for asking that question. We'd probably surprise some listeners to know that our European spring business was actually up strongly in the first quarter. The units were up 5%. The mix was good. We're pleased with that business. We made comment that the European automotive business was soft. That is really a year-on-year comp issue and that we were a little surprised that the demand held as strong as it did in the first half of last year and then really fell off in the back half. So we'll anniversary that comp. Asian demand continues to be very, very good in automotive, less strong in the residential side, mostly impacted by that softness in our promotional price point volume.

Our last question comes from the line of Fred Speece with Speece Thorson Capital.

What's your calculation of the incremental margin for this quarter? And what's your guidance for the midpoint assume?

Fred, I think we're coming close for the full year up to the 30% contribution margin that we've talked about. I mean, obviously, 25% to 35% continues to be our range. We've, at the midpoint of the guidance, have a very good strong contribution margin contributing there. Obviously, that's mix-sensitive. It matters where volume comes from. But as we peel the layers back, we would expect that somewhere in and around that sort of 30% range is close to what we were able to deliver in the quarter.

Fred, good to hear your voice. This is Dave. One thing you might be interested in and some of the other listeners may have an interest in it. As you know, we monitor our capacity utilization by business unit and each one of the business unit managers and segment heads, and Karl specifically really look over this closely, and so we still -- we're in the low 60% average utilizations. Those vary. There are some, they go all the way up to 100% like at the rod mill. But we're seeing some improvement in this utilization, which you would expect as our overall demand goes up. But we still have plenty of room. So depending upon mix, is that $400 million, $450 million, $500 million worth of incremental sales at that margin that Susan is suggesting? We think so. So not a lot of capital expenditure requirements for capacity are going to be needed here for at least another $400 million worth of top line.

There are no further questions at this time. I would now like to turn the floor back over to management for closing remarks.

We thank you for participation, and we'll talk to you again next quarter.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and we thank you for your participation.