Attached files

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EX-32.2 - EXHIBIT 32.2 SECTION 906 CERTIFICATION OF MATTHEW C. FLANIGAN - LEGGETT & PLATT INClegex322q12017.htm
EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATION OF KARL G. GLASSMAN - LEGGETT & PLATT INClegex321q12017.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATION OF MATTHEW C. FLANIGAN - LEGGETT & PLATT INClegex312q12017.htm
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATION OF KARL G. GLASSMAN - LEGGETT & PLATT INClegex311q12017.htm
EX-12 - EXHIBIT 12 RATIO OF EARNINGS TO FIXED CHARGES - LEGGETT & PLATT INClegex12q12017.htm
EX-10.1 - EXHIBIT10.1 AMENDED AND RESTATED SEVERANCE BENEFIT AGREEMENT-J. MITCHELL DOLLOFF - LEGGETT & PLATT INClegex101dolloffseverancebe.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from             to
Commission File Number 001-07845
LEGGETT & PLATT, INCORPORATED
(Exact name of registrant as specified in its charter)
 
Missouri
 
44-0324630
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
No. 1 Leggett Road
Carthage, Missouri
 
64836
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (417) 358-8131
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
  
 
Accelerated filer
¨
 
 
 
 
 
 
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
 
Smaller reporting company
¨
 
 
 
 
 
 
 
 
  
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   ý
Common stock outstanding as of May 1, 2017: 132,307,307




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(Amounts in millions)
March 31,
2017
 
December 31,
2016
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
268.6

 
$
281.9

Trade receivables, net
523.0

 
450.8

Other receivables, net
32.4

 
35.8

Total receivables, net
555.4

 
486.6

Inventories
 
 
 
Finished goods
274.7

 
255.7

Work in process
57.8

 
52.6

Raw materials and supplies
257.9

 
245.1

LIFO reserve
(34.2
)
 
(33.8
)
Total inventories, net
556.2

 
519.6

Prepaid expenses and other current assets
32.9

 
36.8

Total current assets
1,413.1

 
1,324.9

PROPERTY, PLANT AND EQUIPMENT—AT COST
 
 
 
Machinery and equipment
1,141.0

 
1,133.8

Buildings and other
595.4

 
559.4

Land
38.4

 
37.7

Total property, plant and equipment
1,774.8

 
1,730.9

Less accumulated depreciation
1,186.0

 
1,165.4

Net property, plant and equipment
588.8

 
565.5

OTHER ASSETS
 
 
 
Goodwill
812.7

 
791.3

Other intangibles, less accumulated amortization of $143.1 and $137.0 as of March 31, 2017 and December 31, 2016, respectively
174.6

 
164.9

Sundry
130.3

 
137.5

Total other assets
1,117.6

 
1,093.7

TOTAL ASSETS
$
3,119.5

 
$
2,984.1

CURRENT LIABILITIES
 
 
 
Current maturities of long-term debt
$
3.4

 
$
3.6

Accounts payable
387.8

 
351.1

Accrued expenses
241.7

 
257.7

Other current liabilities
83.7

 
94.2

Total current liabilities
716.6

 
706.6

LONG-TERM LIABILITIES
 
 
 
Long-term debt
1,119.9

 
956.2

Other long-term liabilities
165.7

 
173.0

Deferred income taxes
51.9

 
54.3

Total long-term liabilities
1,337.5

 
1,183.5

COMMITMENTS AND CONTINGENCIES

 

EQUITY
 
 
 
Common stock
2.0

 
2.0

Additional contributed capital
499.5

 
506.2

Retained earnings
2,451.6

 
2,410.5

Accumulated other comprehensive loss
(96.2
)
 
(113.6
)
Treasury stock
(1,792.9
)
 
(1,713.5
)
Total Leggett & Platt, Inc. equity
1,064.0

 
1,091.6

Noncontrolling interest
1.4

 
2.4

Total equity
1,065.4

 
1,094.0

TOTAL LIABILITIES AND EQUITY
$
3,119.5

 
$
2,984.1

See accompanying notes to consolidated condensed financial statements.

2



LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended
 
March 31,
(Amounts in millions, except per share data)
2017
 
2016
Net sales
$
960.3

 
$
938.4

Cost of goods sold
734.3

 
704.8

Gross profit
226.0

 
233.6

Selling and administrative expenses
106.4

 
105.1

Amortization of intangibles
5.1

 
5.1

Gain from sale of assets and businesses
(.2
)
 
(2.5
)
Other (income) expense, net
(1.2
)
 
(1.2
)
Earnings from continuing operations before interest and income taxes
115.9

 
127.1

Interest expense
10.6

 
9.2

Interest income
2.0

 
.8

Earnings from continuing operations before income taxes
107.3

 
118.7

Income taxes
21.2

 
27.7

Earnings from continuing operations
86.1

 
91.0

Earnings from discontinued operations, net of tax

 
.1

Net earnings
86.1

 
91.1

Earnings attributable to noncontrolling interest, net of tax

 
(1.6
)
Net earnings attributable to Leggett & Platt, Inc. common shareholders
$
86.1

 
$
89.5

Earnings per share from continuing operations attributable to Leggett & Platt, Inc. common shareholders
 
 
 
Basic
$
.63

 
$
.64

Diluted
$
.62

 
$
.63

Earnings per share from discontinued operations attributable to Leggett & Platt, Inc. common shareholders
 
 
 
Basic
$

 
$

Diluted
$

 
$

Net earnings per share attributable to Leggett & Platt, Inc. common shareholders
 
 
 
Basic
$
.63

 
$
.64

Diluted
$
.62

 
$
.63

 
 
 
 
Cash dividends declared per share
$
.34

 
$
.32

 
 
 
 
Average shares outstanding
 
 
 
Basic
136.8

 
139.1

Diluted
138.1

 
141.2

See accompanying notes to consolidated condensed financial statements.

3



LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 
Three Months Ended
 
March 31,
(Amounts in millions)
2017
 
2016
Net earnings
$
86.1

 
$
91.1

Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments, including acquisition of non-controlling interest
14.3

 
22.4

Cash flow hedges
2.5

 
6.5

Defined benefit pension plans
.6

 
.7

Other comprehensive income
17.4

 
29.6

Comprehensive income
103.5

 
120.7

Less: comprehensive income attributable to noncontrolling interest

 
(1.6
)
Comprehensive income attributable to Leggett & Platt, Inc.
$
103.5

 
$
119.1

See accompanying notes to consolidated condensed financial statements.

4


LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
(Amounts in millions)
2017
 
2016
OPERATING ACTIVITIES
 
 
 
Net earnings
$
86.1

 
$
91.1

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
22.8

 
21.1

Amortization of intangibles and debt issuance costs
7.5

 
7.2

Provision for losses on accounts and notes receivable
1.6

 
1.2

Writedown of inventories
1.3

 
1.6

Net gain from sales of assets and businesses
(.2
)
 
(2.5
)
Deferred income tax expense
6.4

 
6.0

Stock-based compensation
10.3

 
12.4

Other, net
1.4

 
(.1
)
Increases/decreases in, excluding effects from acquisitions and divestitures:
 
 
 
Accounts and other receivables
(59.7
)
 
(4.0
)
Inventories
(30.1
)
 
(13.9
)
Other current assets
4.5

 
1.8

Accounts payable
28.8

 
22.2

Accrued expenses and other current liabilities
(23.0
)
 
(32.8
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
57.7

 
111.3

INVESTING ACTIVITIES
 
 
 
Additions to property, plant and equipment
(34.3
)
 
(27.7
)
Purchases of companies, net of cash acquired
(37.9
)
 
(16.4
)
Proceeds from sales of assets and businesses
1.3

 
2.3

Other, net
(6.6
)
 
(5.3
)
NET CASH USED FOR INVESTING ACTIVITIES
(77.5
)
 
(47.1
)
FINANCING ACTIVITIES
 
 
 
Payments on long-term debt
(4.9
)
 
(.6
)
Change in commercial paper and short-term debt
159.1

 
81.4

Dividends paid
(45.4
)
 
(43.5
)
Issuances of common stock
1.3

 
1.2

Purchases of common stock
(104.2
)
 
(106.6
)
Purchase of remaining interest in noncontrolling interest
(2.6
)
 

Other, net
(.8
)
 
(1.7
)
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
2.5

 
(69.8
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
4.0

 
2.6

DECREASE IN CASH AND CASH EQUIVALENTS
(13.3
)
 
(3.0
)
CASH AND CASH EQUIVALENTS—January 1,
281.9

 
253.2

CASH AND CASH EQUIVALENTS—March 31,
$
268.6

 
$
250.2

See accompanying notes to consolidated condensed financial statements.






5



LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions, except per share data)
1. INTERIM PRESENTATION
The interim financial statements of Leggett & Platt, Incorporated (“we”, “us” or “our”) included herein have not been audited by an independent registered public accounting firm. The statements include all adjustments, including normal recurring accruals, which management considers necessary for a fair statement of our financial position and operating results for the periods presented. We have prepared the statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of results to be expected for an entire year.
The December 31, 2016 financial position data included herein was derived from the audited consolidated financial statements included in Form 10-K, but does not include all disclosures required by GAAP. For further information, refer to the financial statements and footnotes included in our annual report on Form 10-K for the year ended December 31, 2016.
Reclassifications
Certain reclassifications have been made to the prior period's information in the Notes to the Consolidated Condensed Financial Statements to conform to the first quarter 2017 for segment reporting changes in our management structure and all related internal reporting, as well as the presentation of LIFO expense or benefit within the segments to which they relate (See Note 4 - Segment Information). These reclassifications did not impact our consolidated earnings or assets of the company, and all prior periods presented have been restated to conform with these changes.

2. ACCOUNTING STANDARD UPDATES
    
The Financial Accounting Standards Board (FASB) regularly issues updates to the FASB Accounting Standards Codification that are communicated through issuance of an Accounting Standards Update (ASU).   Below is a summary of the ASUs, effective for current or future periods, most relevant to our financial statements. The FASB has issued accounting guidance, in addition to the items discussed below, effective for future periods which we do not believe will have a material impact on our future financial statements.

Adopted in 2017:
 
ASU 2016-16 "Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory": Eliminates deferral of the tax effects of all intra-entity asset sales other than inventory, resulting in tax expense being recorded on the sale of the asset in the seller's tax jurisdiction when the sale occurs, even though the pretax effects of the transaction are eliminated in consolidation. Any deferred tax asset arising in the buyer's jurisdiction is also recognized at the time of sale. We adopted this guidance in the first quarter of 2017. The modified retrospective approach was required, and as a result, we recorded a $1.2 increase to beginning retained earnings on January 1, 2017. Adoption of this new guidance did not materially impact our 2017 Consolidated Condensed Statements of Operations.

To be adopted in future years:

ASU 2014-09 “Revenue from Contracts with Customers”:  Supersedes most of the existing authoritative literature for revenue recognition and prescribes a five-step model for recognizing revenue from contracts with customers. In July 2015, the FASB deferred the effective date of this ASU by one year, which results in the new standard being effective January 1, 2018. In addition, the FASB issued several amendments to the standard during 2016. This standard permits two transition methods, the full retrospective method or the modified retrospective method. The new standard will also require expanded disclosures pertaining to revenues from contracts with customers in the notes to the financial statements.


6

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

We established a cross-functional implementation team in 2014 to assess all potential impacts of this standard and are evaluating the standard on a business unit by business unit basis. We are analyzing the ASU’s impact on our contract portfolio, comparing historical accounting policies and practices to the requirements of the new guidance and identifying potential differences from applying the requirements of the new guidance to the contracts. We are also evaluating new disclosure requirements and identifying and documenting current business practices compared to terms and conditions contained in our contracts in light of the new revenue standard. We have not yet selected a transition method. We will apply the guidance at the new revenue standard’s effective date of January 1, 2018.

ASU 2016-02 “ Leases”:  Requires that a lessee recognize a right-of-use asset and a lease liability on the balance sheet for most lease arrangements. This ASU will be effective January 1, 2019, and we are assessing all potential impacts of the standard. Currently, we anticipate adopting this standard January 1, 2019. We believe it will increase our assets and liabilities for the addition of right-of-use assets and the corresponding lease liabilities on the balance sheet. We are evaluating its impact on our Consolidated Condensed Statements of Operations and Cash Flows.

ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment": This ASU simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under this ASU, the annual goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value up to the total amount of goodwill for the reporting unit. This ASU will be effective January 1, 2020, with early adoption permitted. We are currently evaluating this guidance, and do not expect it to materially impact our future financial statements.

ASUs 2016-13 “Financial Instruments - Credit Losses”, 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)”, and 2017-07 "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" are currently being evaluated. However, we do not expect these updates to materially impact our future financial statements.
 





3. INVENTORIES
Approximately 50% of our inventories are valued using the Last-In, First-Out (LIFO) cost method and the remainder using the First-In, First-Out (FIFO) cost method. We calculate our LIFO reserve (the excess of FIFO cost over LIFO cost) on an annual basis. During interim periods, we estimate the current year annual change in the LIFO reserve (i.e., the annual LIFO expense or benefit) and allocate that change ratably to the four quarters. Because accurately predicting inventory prices for the year is difficult, the change in the LIFO reserve for the full year could be significantly different from the amount currently estimated. In addition, a variation in expected ending inventory levels could also impact total change in the LIFO reserve for the year.
The following table contains the LIFO expense included in continuing operations for each of the periods presented.
 
 
Three Months Ended March 31,
 
2017
 
2016
LIFO expense
$
.4

 
$




7

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

4. SEGMENT INFORMATION
Our reportable segments are the same as our operating segments, which also correspond with our management structure. In conjunction with a change in executive officers, our management structure and all related internal reporting changed as of January 1, 2017. As a result, the composition of our four segments also changed to reflect the new structure.

The new structure is largely the same as prior years except the Home Furniture Group moved from Residential Products to Furniture Products (formerly Commercial Products) and the Machinery Group moved from Specialized Products to Residential Products. In addition, the changes in LIFO reserve will now be recognized within the segments to which they relate (primarily Industrial Products). Previously segment EBIT (Earnings Before Interest and Taxes) reflected the FIFO basis of accounting for certain inventories and an adjustment to the LIFO basis for these inventories was made at the consolidated financial statement level. These changes were retrospectively applied to all prior periods presented. The methods and assumptions that we use in estimating our LIFO reserve did not change (See Note 3 - Inventories).
We have four operating segments that supply a wide range of products:

Residential Products: This segment supplies a variety of components and machinery used by bedding manufacturers in the production and assembly of their finished products. We also produce or distribute carpet cushion, fabric, and geo components.
Industrial Products: These operations primarily supply steel rod and drawn steel wire to our other operations and to external customers. Our customers use this wire to make bedding, mechanical springs, and many other end products.
Furniture Products: Operations in this segment supply a wide range of components for residential and work furniture manufacturers, as well as select lines of private-label finished furniture, adjustable bed bases, fashion beds, and bed frames.
Specialized Products: From this segment we supply mechanical and pneumatic lumbar support systems, seat suspension systems, motors and actuators, and control cables used by automotive manufacturers. We also produce and distribute titanium and nickel tubing and tube assemblies for the aerospace industry.

Each reportable segment has an executive vice president that reports to the chief executive officer, who is the chief operating decision maker (CODM). The operating results and financial information reported through the segment structure are regularly reviewed and used by the CODM to evaluate segment performance, allocate overall resources and determine management incentive compensation.
 
Separately, we also utilize a role-based approach (Grow, Core, Fix or Divest) as a supplemental management tool to ensure capital (which is a subset of the overall resources referred to above) is efficiently allocated within the reportable segment structure.
The accounting principles used in the preparation of the segment information are the same as those used for the consolidated financial statements. We evaluate performance based on EBIT. Intersegment sales are made primarily at prices that approximate market-based selling prices. Centrally incurred costs are allocated to the segments based on estimates of services used by the segment. Certain of our general and administrative costs and miscellaneous corporate income and expenses are allocated to the segments based on sales or other appropriate metrics. These allocated corporate costs include depreciation and other costs and income related to assets that are not allocated or otherwise included in the segment assets.








8

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

A summary of segment results from continuing operations are shown in the following tables.
 
 
Trade
Sales
 
Inter-
Segment
Sales
 
Total
Sales
 
EBIT
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
Residential Products
$
391.3

 
$
4.8

 
$
396.1

 
$
42.5

Industrial Products
69.8

 
65.6

 
135.4

 
8.8

Furniture Products
264.8

 
6.3

 
271.1

 
20.3

Specialized Products
234.4

 
1.9

 
236.3

 
43.0

Intersegment eliminations and other
 
 
 
 
 
 
1.3

 
$
960.3

 
$
78.6

 
$
1,038.9

 
$
115.9

Three Months Ended March 31, 2016
 
 
 
 
 
Residential Products
$
390.2

 
$
4.9

 
$
395.1

 
$
33.1

Industrial Products
77.1

 
80.1

 
157.2

 
20.1

Furniture Products
251.3

 
21.0

 
272.3

 
31.5

Specialized Products
219.8

 
1.7

 
221.5

 
43.5

Intersegment eliminations and other
 
 
 
 
 
 
(1.1
)
 
$
938.4

 
$
107.7

 
$
1,046.1

 
$
127.1

Average assets for our segments are shown in the table below and reflect the basis for return measures used by management to evaluate segment performance. These segment totals include working capital (all current assets and current liabilities) plus net property, plant and equipment. Segment assets for all years are reflected at their estimated average for the periods presented. 
 
March 31,
2017
 
December 31,
2016
Residential Products
$
530.4

 
$
527.2

Industrial Products
140.4

 
147.4

Furniture Products
227.0

 
219.4

Specialized Products
263.9

 
248.7

Other (1)

 
.2

Average current liabilities included in segment numbers above
516.3

 
495.9

Unallocated assets (2)
1,380.7

 
1,378.3

Difference between average assets and period-end balance sheet
60.8

 
(33.0
)
Total assets
$
3,119.5

 
$
2,984.1

 
(1)
Businesses sold or classified as discontinued operations.
(2)
Unallocated assets consist primarily of goodwill, other intangibles, cash and deferred tax assets.    


9

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)


5. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
 
 
 
 
Discontinued Operations and Assets Held for Sale

We had no material discontinued operations or items held for sale at March 31, 2017 or December 31, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Divestitures
The following businesses were divested during the periods presented, but did not meet the discontinued operations criteria.
 
Quarter
 
Three Months Ended March 31,
 
Divested
 
2017
 
2016
Trade sales:
 
 
 
 
 
Residential Products:
 
 
 
 
 
Machinery operation
Fourth quarter 2016
 
$

 
$
.8

Industrial Products:
 
 
 
 
 
Wire Products operation
Fourth quarter 2016
 

 
4.6

Wire Products operation
Second quarter 2016
 

 
11.4

Specialized Products:
 
 
 
 
 
Commercial Vehicle Products (CVP) operation
Second quarter 2016
 

 
7.5

Total trade sales
 
 
$

 
$
24.3

EBIT:
 
 
 
 
 
Residential Products:
 
 
 
 
 
Machinery operation
Fourth quarter 2016
 
$

 
$

Industrial Products:
 
 
 
 
 
Wire Products operation
Fourth quarter 2016
 

 
.2

Wire Products operation
Second quarter 2016
 

 
.4

Specialized Products:
 
 
 
 
 
CVP operation
Second quarter 2016
 

 
1.5

Total EBIT
 
 
$

 
$
2.1

In 2016 we realized gains of $21.2 related to the sales of the Wire Products operations and $11.2 related to the sale of the CVP operation. No material gains or losses were realized on the sale of other businesses.




10

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

6. EARNINGS PER SHARE

Basic and diluted earnings per share were calculated as follows:
 
Three Months Ended 
 March 31,
 
2017
 
2016
Earnings:
 
 
 
Earnings from continuing operations
$
86.1

 
$
91.0

Earnings attributable to noncontrolling interest, net of tax

 
(1.6
)
Net earnings from continuing operations attributable to Leggett & Platt, Inc. common shareholders
86.1

 
89.4

Earnings from discontinued operations, net of tax

 
.1

Net earnings attributable to Leggett & Platt, Inc. common shareholders
$
86.1

 
$
89.5

 
 
 
 
Weighted average number of shares (in millions):
 
 
 
Weighted average number of common shares used in basic EPS
136.8

 
139.1

Dilutive effect of stock-based compensation
1.3

 
2.1

Weighted average number of common shares and dilutive potential common shares used in diluted EPS
138.1

 
141.2

 
 
 
 
Basic and Diluted EPS:
 
 
 
Basic EPS attributable to Leggett & Platt, Inc. common shareholders
 
 
 
Continuing operations
$
.63

 
$
.64

Discontinued operations

 

Basic EPS attributable to Leggett & Platt, Inc. common shareholders
$
.63

 
$
.64

Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
 
 
 
Continuing operations
$
.62

 
$
.63

Discontinued operations

 

Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
$
.62

 
$
.63

 
 
 
 
Other information:
 
 
 
Anti-dilutive shares excluded from diluted EPS computation

 





11

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

7. ACCOUNTS AND OTHER RECEIVABLES
Accounts and other receivables consisted of the following:
 
 
March 31, 2017
 
December 31, 2016
 
Current
 
Long-term
 
Current
 
Long-term
Trade accounts receivable
$
530.8

 
$

 
$
456.5

 
$

Trade notes receivable
.7

 
.6

 
1.5

 
.7

Total trade receivables
531.5

 
.6

 
458.0

 
.7

Other notes receivable

 
24.6

 

 
24.6

Income tax receivables
8.1

 

 
9.1

 

Other receivables
24.3

 

 
26.7

 

Subtotal other receivables
32.4

 
24.6

 
35.8

 
24.6

Total trade and other receivables
563.9

 
25.2

 
493.8

 
25.3

Allowance for doubtful accounts:
 
 
 
 
 
 
 
  Trade accounts receivable
(8.3
)
 

 
(7.1
)
 

  Trade notes receivable
(.2
)
 
(.1
)
 
(.1
)
 
(.2
)
Total trade receivables
(8.5
)
 
(.1
)
 
(7.2
)
 
(.2
)
  Other notes receivable

 

 

 

Total allowance for doubtful accounts
(8.5
)
 
(.1
)
 
(7.2
)
 
(.2
)
Total net receivables
$
555.4

 
$
25.1

 
$
486.6

 
$
25.1

Notes that were past due more than 90 days or had been placed on non-accrual status were not significant for the periods presented.
Activity related to the allowance for doubtful accounts is reflected below:
 
 
Balance at December 31, 2016
 
2017
Charges
 
2017
Charge-
offs,
Net of
Recoveries
 
Balance at March 31, 2017
Trade accounts receivable
$
7.1

 
$
1.6

 
$
.4

 
$
8.3

Trade notes receivable
.3

 

 

 
.3

Total trade receivables
7.4

 
1.6

 
.4

 
8.6

Other notes receivable

 

 

 

Total allowance for doubtful accounts
$
7.4

 
$
1.6

 
$
.4

 
$
8.6


    

12

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

8. STOCK-BASED COMPENSATION
The following table recaps the components of stock-based and stock-related compensation for each period presented:
 
 
Three Months Ended 
 March 31, 2017
 
Three Months Ended 
 March 31, 2016
 
To be settled with stock
 
To be settled in cash
 
To be settled with stock
 
To be settled in cash
Options:
 
 
 
 
 
 
 
         Amortization of the grant date fair value
$

 
$

 
$
.9

 
$

         Cash payments in lieu of options

 

 

 
1.1

Stock-based retirement plans contributions
1.4

 
.4

 
1.8

 
.4

Discounts on various stock awards:

 
 
 

 
 
Deferred Stock Compensation Program
.7

 

 
.6

 

Stock-based retirement plans
.3

 

 
.4

 

Discount Stock Plan
.3

 

 
.3

 

Performance Stock Unit awards (1)
1.3

 
.2

 
1.2

 
2.2

Restricted Stock Unit awards
.6

 

 
.7

 

Profitable Growth Incentive awards (2)
.4

 
.5

 
1.6

 
1.2

Other, primarily non-employee directors restricted stock
.2

 

 
.4

 

Total stock-related compensation expense
5.2

 
$
1.1

 
7.9

 
$
4.9

Employee contributions for above stock plans
5.1

 
 
 
4.5

 
 
Total stock-based compensation
$
10.3

 
 
 
$
12.4

 
 
 
 
 
 
 
 
 
 
Tax benefits on stock-based compensation expense
$
1.9

 
 
 
$
2.9

 
 
Tax benefits on stock-based compensation payments
8.8

 
 
 
5.8

 
 
Total tax benefits associated with stock-based compensation
$
10.7

 
 
 
$
8.7

 
 
 
 
 
 
 
 
 
 
 
 
Included below is the activity in our most significant stock-based plans:

(1) Performance Stock Unit Awards
We grant Performance Stock Unit (PSU) awards in the first quarter of each year to selected officers and other key managers. Expense is recognized using the straight-line method over the three-year vesting period. These awards contain the following conditions:

A service requirement—Awards generally “cliff” vest three years following the grant date; and
A market condition—Awards are based on our Total Shareholder Return [TSR = (Change in Stock Price + Dividends) / Beginning Stock Price] as compared to the TSR of a group of peer companies. The peer group consists of all the companies in the Industrial, Materials and Consumer Discretionary sectors of the S&P 500 and S&P Midcap 400 (approximately 320 companies). Participants will earn from 0% to 175% of the base award depending upon how our Total Shareholder Return ranks within the peer group at the end of the 3-year performance period.
Grant date fair values are calculated using a Monte Carlo simulation of stock and volatility data for Leggett and each of the peer companies.





13

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)


Below is a summary of the number of shares and related grant date fair value of PSU’s for the periods presented.
 
Three Months Ended March 31,
 
2017
 
2016
Total shares base award
.1

 
.1

Grant date per share fair value
$
50.75

 
$
40.16

Risk-free interest rate
1.5
%
 
1.3
%
Expected life in years
3.0

 
3.0

Expected volatility (over expected life)
19.5
%
 
19.2
%
Expected dividend yield (over expected life)
2.8
%
 
3.1
%
Three-Year Performance Cycle
Award Year
 
Completion Date
 
TSR Performance
Relative to the  Peer Group (1%=Best)
 
Payout as a
Percent of the
Base Award
 
Number of Shares
Distributed
 
Cash Portion
 
Distribution Date
2013
 
December 31, 2015
 
27th percentile
 
165.4%
 
.4 million
 
$
8.5

 
January 2016
2014
 
December 31, 2016
 
10th percentile
 
175.0%
 
.4 million
 
$
9.8

 
January 2017

For outstanding awards, we intend to pay 65% in shares of our common stock, although we reserve the right to pay up to 100% in cash. The additional amount that represents 35% of the award will be settled in cash, and is recorded as a liability and adjusted to fair value at each reporting period.

(2) Profitable Growth Incentive Awards

Certain key management employees participate in a Profitable Growth Incentive (PGI) program. The PGI awards are issued as growth performance stock units (GPSUs). The GPSUs vest (0% to 250%) at the end of a two-year performance period. Vesting is based on the Company's or applicable profit center's revenue growth (adjusted by a GDP factor when applicable) and EBITDA margin at the end of a two-year performance period. The 2017 and 2016 base target PGI awards were less than .1 shares. If earned, we intend to pay half in shares of our common stock and half in cash, although we reserve the right to pay up to 100% in cash. Both components are adjusted to fair value at each reporting period.

Two-Year Performance Cycle
Award Year
 
Completion Date
 
Average Payout as a
Percent of the
Base Award
 
Number of  Shares
Distributed
 
Cash Portion
 
Distribution Date
2014
 
December 31, 2015
 
224.7%
 
.2 million
 
$
6.7

 
March 2016
2015
 
December 31, 2016
 
36.0%
 
<.1 million
 
$
.8

 
March 2017



14

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

9. ACQUISITIONS
The following table contains the estimated fair values (using inputs as discussed in Note 12) of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions during the periods presented. The majority of the goodwill included in the table below is expected to provide an income tax benefit.
 
Three Months Ended March 31,
 
2017
 
2016
Accounts receivable
$
6.1

 
$
1.3

Inventory
5.3

 
4.4

Property, plant and equipment
5.1

 
2.2

Goodwill
18.7

 
3.4

Other intangible assets, primarily customer-related intangibles
12.7

 
7.4

Other current and long-term assets
.1

 

Current liabilities
(3.1
)
 
(1.9
)
Long-term liabilities
(3.5
)
 

Non-controlling interest
(1.4
)
 

Fair value of net identifiable assets
40.0

 
16.8

Less: Additional consideration payable
2.1

 
.4

Net cash consideration
$
37.9

 
$
16.4



The following table summarizes acquisitions for the periods presented.
Three Months Ended
 
Number of Acquisitions
 
Segment
 
Product/Service
March 31, 2017
 
2
 
Residential Products; Furniture Products
 
Distributor and installer of geosynthetic products; Surface-critical bent tube components
March 31, 2016
 
1
 
Specialized Products
 
Fabricated tubing and pipe assemblies
We are finalizing all the information required to complete the purchase price allocations related to certain recent acquisitions and do not anticipate any material modifications.

The results of operations of the above acquired companies have been included in the consolidated financial statements since the dates of acquisition. The unaudited pro forma consolidated net sales, net earnings and earnings per share as though the 2017 and 2016 acquisitions had occurred on January 1 of each year presented are not materially different from the amounts reflected in the accompanying financial statements.

Certain of our acquisition agreements provide for additional consideration to be paid in cash at a later date and are recorded as a liability at the acquisition date. At March 31, 2017 and December 31, 2016, our liability for these future payments was $16.2 ($9.3 current and $6.9 long-term) and $14.5 ($2.4 current and $12.1 long-term), respectively.  Components of the liability are based on estimates and future events and the amounts may fluctuate significantly until the payment dates.
A brief description of our acquisition activity by year for the periods presented is included below.
2017
We acquired two businesses in the first quarter of 2017 for $40.0. The first, a distributor and installer of geosynthetic products, expands the geographic scope and capabilities of our Geo Components business. The second manufactures surface-critical bent tube components in support of the private-label finished seating strategy in our Work Furniture business. These businesses broaden our geographic scope, capabilities, and product offerings, and added $18.7 ($6.8 to Residential Products and $11.9 to Furniture Products) of goodwill. We also acquired the remaining 20% ownership in an Asian joint venture in our Work Furniture business for $2.6.
2016
We expanded our Aerospace Products business unit with the acquisition of a U.S. fabricated tubing business. This operation expands our tube forming and fabrication capabilities, and adds precision machining to our aerospace platform.

15

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

10. EMPLOYEE BENEFIT PLANS
The following table provides interim information as to our domestic and foreign defined benefit pension plans. Employer contributions for 2017 are expected to approximate $5.8.
 
 
Three Months Ended 
 March 31,
 
2017
 
2016
Components of net pension expense
 
 
 
Service cost
$
1.2

 
$
1.2

Interest cost
2.8

 
2.9

Expected return on plan assets
(3.4
)
 
(3.3
)
Recognized net actuarial loss
1.2

 
1.2

Net pension expense
$
1.8

 
$
2.0



11. STATEMENT OF CHANGES IN EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 
Three Months Ended March 31, 2017
 
Total
Equity
 
Retained
Earnings
 
Common
Stock &
Additional
Contributed
Capital
 
Treasury
Stock
 
Noncontrolling
Interest
 
Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance, January 1, 2017
$
1,094.0

 
$
2,410.5

 
$
508.2

 
$
(1,713.5
)
 
$
2.4

 
$
(113.6
)
Effect of accounting change on prior years (See Note 2)
1.2

 
1.2

 

 

 

 

Adjusted beginning balance, January 1, 2017
1,095.2

 
2,411.7

 
508.2

 
(1,713.5
)
 
2.4

 
(113.6
)
Net earnings
86.1

 
86.1

 

 

 

 

(Earnings) loss attributable to noncontrolling interest, net of tax

 

 

 

 

 

Dividends declared
(45.0
)
 
(46.2
)
 
1.2

 

 

 

Treasury stock purchased
(106.4
)
 

 

 
(106.4
)
 

 

Treasury stock issued
8.2

 

 
(18.8
)
 
27.0

 

 

Foreign currency translation adjustments
14.3

 

 

 

 

 
14.3

Cash flow hedges, net of tax
2.5

 

 

 

 

 
2.5

Defined benefit pension plans, net of tax
.6

 

 

 

 

 
.6

Stock options and benefit plan transactions, net of tax
11.5

 

 
11.5

 

 

 

Purchase of remaining interest in noncontrolling interest, net of acquisitions
(1.6
)
 

 
(.6
)
 

 
(1.0
)
 

Ending balance, March 31, 2017
$
1,065.4

 
$
2,451.6

 
$
501.5

 
$
(1,792.9
)
 
$
1.4

 
$
(96.2
)
 

16

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

 
Three Months Ended March 31, 2016
 
Total
Equity
 
Retained
Earnings
 
Common
Stock &
Additional
Contributed
Capital
 
Treasury
Stock
 
Noncontrolling
Interest
 
Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance, January 1, 2016
$
1,097.7

 
$
2,209.2

 
$
531.5

 
$
(1,564.0
)
 
$
12.1

 
$
(91.1
)
Net earnings
91.1

 
91.1

 

 

 

 

(Earnings) loss attributable to noncontrolling interest, net of tax

 
(1.6
)
 

 

 
1.6

 

Dividends declared
(43.0
)
 
(44.3
)
 
1.3

 

 

 

Dividends paid to noncontrolling interest
(1.6
)
 

 

 

 
(1.6
)
 

Treasury stock purchased
(107.2
)
 

 

 
(107.2
)
 

 

Treasury stock issued
12.7

 

 
(14.6
)
 
27.3

 

 

Foreign currency translation adjustments
22.4

 

 

 

 

 
22.4

Cash flow hedges, net of tax
6.5

 

 

 

 

 
6.5

Defined benefit pension plans, net of tax
.7

 

 

 

 

 
.7

Stock options and benefit plan transactions, net of tax
11.9

 

 
11.9

 

 

 

Ending balance, March 31, 2016
$
1,091.2

 
$
2,254.4

 
$
530.1

 
$
(1,643.9
)
 
$
12.1

 
$
(61.5
)

































17

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The following tables set forth the components of and changes in each component of accumulated other comprehensive income (loss) for each of the periods presented:
 
 
Foreign
Currency
Translation
Adjustments
 
Cash
Flow
Hedges
 
Defined
Benefit
Pension
Plans
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance, January 1, 2017
$
(38.6
)
 
$
(17.8
)
 
$
(57.2
)
 
$
(113.6
)
Other comprehensive income (loss)
14.3

 
.4

 
(.2
)
 
14.5

Reclassifications, pretax (1)

 
2.9

 
1.2

 
4.1

Income tax effect

 
(.8
)
 
(.4
)
 
(1.2
)
Attributable to noncontrolling interest

 

 

 

Balance, March 31, 2017
$
(24.3
)
 
$
(15.3
)
 
$
(56.6
)
 
$
(96.2
)
 
 
 
 
 
 
 
 
Balance, January 1, 2016
$
(4.8
)
 
$
(28.2
)
 
$
(58.1
)
 
$
(91.1
)
Other comprehensive income (loss)
22.4

 
4.9

 
(.1
)
 
27.2

Reclassifications, pretax (2)

 
3.8

 
1.2

 
5.0

Income tax effect

 
(2.2
)
 
(.4
)
 
(2.6
)
Attributable to noncontrolling interest

 

 

 

Balance, March 31, 2016
$
17.6

 
$
(21.7
)
 
$
(57.4
)
 
$
(61.5
)
 
 
 
 
 
 
 
 
(1) 2017 pretax reclassifications are comprised of:
 
 
 
 
 
 
 
Net sales
$

 
$
1.6

 
$

 
$
1.6

Cost of goods sold; selling and administrative expenses

 
.2

 
1.2

 
1.4

Interest expense

 
1.1

 

 
1.1

Other income (expense), net

 

 

 

Total reclassifications, pretax
$

 
$
2.9

 
$
1.2

 
$
4.1

 
 
 
 
 
 
 
 
(2) 2016 pretax reclassifications are comprised of:
 
 
 
 
 
 
 
Net sales
$

 
$
2.7

 
$

 
$
2.7

Cost of goods sold; selling and administrative expenses

 
.1

 
1.2

 
1.3

Interest expense

 
1.0

 

 
1.0

Other income (expense), net

 

 

 

Total reclassifications, pretax
$

 
$
3.8

 
$
1.2

 
$
5.0



18

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

12. FAIR VALUE
We utilize fair value measures for both financial and non-financial assets and liabilities.
Items measured at fair value on a recurring basis
Fair value measurements are established using a three level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following categories:
Level 1: Quoted prices for identical assets or liabilities in active markets.
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. Short-term investments in this category are valued using discounted cash flow techniques with all significant inputs derived from or corroborated by observable market data. Derivative assets and liabilities in this category are valued using models that consider various assumptions and information from market-corroborated sources. The models used are primarily industry-standard models that consider items such as quoted prices, market interest rate curves applicable to the instruments being valued as of the end of each period, discounted cash flows, volatility factors, current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3: Unobservable inputs that are not corroborated by market data.
The areas in which we utilize fair value measures of financial assets and liabilities are presented in the table below.
 
As of March 31, 2017
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Bank time deposits with original maturities of three months or less
$

 
$
149.2

 
$

 
$
149.2

Derivative assets (Note 13)

 
.9

 

 
.9

Diversified investments associated with the Executive Stock Unit Program (ESUP)*
29.4

 

 

 
29.4

Total assets
$
29.4

 
$
150.1

 
$

 
$
179.5

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities* (Note 13)
$

 
$
2.0

 
$

 
$
2.0

Liabilities associated with the ESUP*
29.0

 

 

 
29.0

Total liabilities
$
29.0

 
$
2.0

 
$

 
$
31.0

 
 
As of December 31, 2016
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Bank time deposits with original maturities of three months or less
$

 
$
145.8

 
$

 
$
145.8

Derivative assets (Note 13)

 
.8

 

 
.8

Diversified investments associated with the ESUP*
26.8

 

 

 
26.8

Total assets
$
26.8

 
$
146.6

 
$

 
$
173.4

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities* (Note 13)
$

 
$
4.1

 
$

 
$
4.1

Liabilities associated with the ESUP*
25.6

 

 

 
25.6

Total liabilities
$
25.6

 
$
4.1

 
$

 
$
29.7

* Includes both current and long-term amounts combined.
There were no transfers between Level 1 and Level 2 for any of the periods presented.

19

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The fair value for fixed rate debt (Level 2) was greater than its $750 carrying value by approximately $31 and $25 at March 31, 2017, and December 31, 2016, respectively. We value this debt using discounted cash flow and secondary market rates provided by Bloomberg.
Items measured at fair value on a non-recurring basis
The primary areas in which we use fair value measurements of non-financial assets and liabilities are allocating purchase price to the assets and liabilities of acquired companies as discussed in Note 9, and evaluating long-term assets (including goodwill) for potential impairment. Determining fair values for these items requires significant judgment and includes a variety of methods and models that utilize significant Level 3 inputs.
Long lived assets, acquisitions and the second step of a goodwill impairment test utilize the following methodologies in determining fair value: (i) Buildings and machinery are valued at an estimated replacement cost for an asset of comparable age and condition. Market pricing of comparable assets is used to estimate replacement cost where available. (ii) The most common identified intangible assets are customer relationships and tradenames. Customer relationships are valued using an excess earnings method, using various inputs such as the estimated customer attrition rate, future earnings forecast, the amount of contributory asset charges, and a discount rate. Tradenames are valued using a relief from royalty method, which is based upon comparable market royalty rates for tradenames of similar value. (iii) Inventory is valued at current replacement cost for raw materials, with a step-up for work in process and finished goods items that reflects the amount of ultimate profit earned as of the valuation date. (iv) Other working capital items are generally recorded at face value, unless there are known conditions that would impact the ultimate settlement amount of the particular item.  

13. DERIVATIVE FINANCIAL INSTRUMENTS
Cash Flow Hedges
Derivative financial instruments that we use to hedge forecasted transactions and anticipated cash flows are as follows:

Currency Cash Flow Hedges—The foreign currency hedges manage risk associated with exchange rate volatility of various currencies.

We have also occasionally used interest rate cash flow hedges to manage interest rate risks.
The effective changes in fair value of unexpired contracts are recorded in accumulated other comprehensive income and reclassified to income or expense in the period in which earnings are impacted. Cash flows from settled contracts are presented in the category consistent with the nature of the item being hedged. (Settlements associated with the sale or production of product are presented in operating cash flows, and settlements associated with debt issuance are presented in financing cash flows.) 

Fair Value Hedges and Derivatives not Designated as Hedging Instruments
These derivatives typically manage foreign currency risk associated with subsidiaries’ assets and liabilities, and gains or losses are recognized currently in earnings. Cash flows from settled contracts are presented in the category consistent with the nature of the item being hedged.
Hedge Effectiveness
We have deemed ineffectiveness to be immaterial, and as a result, have not recorded any amounts for ineffectiveness. If a hedge was not highly effective, the portion of the change in fair value considered to be ineffective would be recognized immediately in the consolidated statements of operations.





20

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

We have recorded the following assets and liabilities representing the fair value for our most significant derivative financial instruments. The fair values of the derivatives reflect the change in the market value of the derivative from the date of the trade execution and do not consider the offsetting underlying hedged item.
 
Expiring at various dates through:
 
Total USD
Equivalent
Notional
Amount
 
As of March 31, 2017
 
         Assets
 
Liabilities
Other Current
Assets
 
Other Current
Liabilities
 
Other Long-Term Liabilities
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
 
 
 
Currency hedges:
 
 
 
 
 
 
 
 
 
Future USD sales of Canadian, Chinese and Swiss subsidiaries
Jun 2018
 
$
130.9

 
$
.1

 
$
.7

 
$
.1

Future DKK sales of Polish subsidiary
Dec 2017
 
6.4

 
.3

 

 

Future USD purchases of Canadian, European and South Korean subsidiaries
Dec 2017
 
9.6

 
.1

 
.1

 

Future EUR sales of UK, Chinese and Swiss subsidiaries
Dec 2017
 
15.5

 
.1

 
.1

 

Future MXN purchases of a USD subsidiary
Dec 2017
 
4.4

 

 
.3

 

Future JPY sales of Chinese subsidiary
Jun 2018
 
7.3

 

 
.1

 

Total cash flow hedges
 
 
 
 
.6

 
1.3

 
.1

Fair value hedges:
 
 
 
 
 
 
 
 
 
DKK inter-company liability on a GBP subsidiary
Jun 2017
 
12.0

 

 
.1

 

ZAR inter-company note receivable on a USD subsidiary
Dec 2017
 
2.3

 

 
.2

 

USD inter-company note receivable on a Swiss subsidiary
Aug 2017
 
5.5

 
.1

 

 

Total fair value hedges
 
 
 
 
.1

 
.3

 

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Non-deliverable hedge on EUR exposure to CNY
Dec 2017
 
5.3

 
.2

 

 

Non-deliverable hedge on JPY exposure to CNY
Mar 2018
 
2.7

 

 
.1

 

Hedge of EUR Cash on USD subsidiary
Apr 2017
 
19.2

 

 
.2

 

Total derivatives not designated as hedging instruments
 
 
 
 
.2

 
.3

 

 
 
 
 
 
$
.9

 
$
1.9

 
$
.1


 

21

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

 
Expiring at various dates through:
 
Total USD
Equivalent
Notional
Amount
 
As of December 31, 2016
 
Assets
 
Liabilities
Other Current
Assets
 
Other Current
Liabilities
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
 
 
Currency hedges:
 
 
 
 
 
 
 
Future USD sales of Canadian, Chinese and Swiss subsidiaries
Dec 2017
 
$
80.4

 
$

 
$
2.4

Future USD purchases of European subsidiaries
Dec 2017
 
3.8

 
.1

 

Future MXN purchases of a USD subsidiary
Dec 2017
 
5.8

 

 
.9

Future JPY sales of a Chinese subsidiary
Dec 2017
 
3.5

 
.3

 

Future DKK sales of a Polish subsidiary
Mar 2017
 
10.1

 
.1

 

Future EUR sales of Chinese, Swiss and UK subsidiaries
Dec 2017
 
6.4

 

 
.2

Total cash flow hedges
 
 
 
 
.5

 
3.5

Fair value hedges:
 
 
 
 
 
 
 
USD inter-company note receivable on a CAD subsidiary
Jan 2017
 
24.0

 
.2

 
.1

PLN inter-company note receivable on GBP subsidiary
Jun 2017
 
2.3

 
.1

 

ZAR inter-company note receivable on a USD subsidiary
Dec 2017
 
2.3

 

 
.1

Total fair value hedges
 
 
 
 
.3

 
.2

Derivatives not designated as hedging instruments
 
 
 
 
 
 
Non-deliverable hedge on USD exposure to CNY
Dec 2017
 
19.0

 

 
.3

Hedge of EUR Cash on USD subsidiary
Jan 2017
 
5.9

 

 
.1

Total derivatives not designated as hedging instruments
 
 
 
 

 
.4

 
 
 
 
 
$
.8

 
$
4.1


















22

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The following table sets forth the pre-tax (gains) losses for our hedging activities for the years presented. This schedule includes reclassifications from accumulated other comprehensive income (see Note 11) as well as derivative settlements recorded directly to income or expense.
  
Income Statement
Caption
 
Amount of (Gain) Loss Recorded in Income Three Months Ended March 31,
2017
 
2016
Derivatives designated as hedging instruments
 
 
 
 
 
Interest rate cash flow hedges
Interest expense
 
$
1.1

 
$
1.0

Currency cash flow hedges
Net sales
 
1.3

 
3.1

Currency cash flow hedges
Cost of goods sold
 
.1

 
.1

Total cash flow hedges
 
 
2.5