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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
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
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $.01 par value LEG New York Stock Exchange
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        No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).     Yes        No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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    Accelerated filer
Non-accelerated filer 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   
Common stock outstanding as of April 29, 2020: 132,276,805



LEGGETT & PLATT, INCORPORATED
FORM 10-Q
TABLE OF CONTENTS

  Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at March 31, 2020 and December 31, 2019
2
Consolidated Condensed Statements of Operations for the three months ended March 31, 2020 and 2019
3
Consolidated Condensed Statements of Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019
4
Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2020 and 2019
5
Notes to Consolidated Condensed Financial Statements
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
SIGNATURES

1


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions) March 31,
2020
December 31,
2019
CURRENT ASSETS
Cash and cash equivalents $ 505.8    $ 247.6   
Trade receivables, net 546.0    564.4   
Other receivables, net 22.2    27.5   
Total receivables, net 568.2    591.9   
Total inventories, net 655.5    636.7   
Prepaid expenses and other current assets 52.5    61.9   
Total current assets 1,782.0    1,538.1   
PROPERTY, PLANT AND EQUIPMENT—AT COST
Machinery and equipment 1,369.6    1,388.8   
Buildings and other 696.3    719.0   
Land 41.7    43.5   
Total property, plant and equipment 2,107.6    2,151.3   
Less accumulated depreciation 1,298.1    1,320.5   
Net property, plant and equipment 809.5    830.8   
OTHER ASSETS
Goodwill 1,391.4    1,406.3   
Other intangibles, less accumulated amortization of $237.6 and $222.3 as of March 31, 2020 and December 31, 2019, respectively
744.0    764.0   
Operating lease right-of-use assets 155.3    158.8   
Sundry 99.8    118.4   
Total other assets 2,390.5    2,447.5   
TOTAL ASSETS $ 4,982.0    $ 4,816.4   
CURRENT LIABILITIES
Current maturities of long-term debt $ 51.2    $ 51.1   
Current portion of operating lease liabilities 39.6    39.3   
Accounts payable 429.1    463.4   
Accrued expenses 244.0    281.0   
Other current liabilities 90.8    93.3   
Total current liabilities 854.7    928.1   
LONG-TERM LIABILITIES
Long-term debt 2,415.2    2,066.5   
Operating lease liabilities 117.9    121.6   
Other long-term liabilities 158.5    173.5   
Deferred income taxes 197.1    214.2   
Total long-term liabilities 2,888.7    2,575.8   
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock 2.0    2.0   
Additional contributed capital 533.5    536.1   
Retained earnings 2,723.5    2,734.5   
Accumulated other comprehensive loss (147.3)   (76.8)  
Treasury stock (1,873.5)   (1,883.8)  
Total Leggett & Platt, Inc. equity 1,238.2    1,312.0   
Noncontrolling interest .4    .5   
Total equity 1,238.6    1,312.5   
TOTAL LIABILITIES AND EQUITY $ 4,982.0    $ 4,816.4   
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) 2020 2019
Net trade sales $ 1,045.5    $ 1,155.1   
Cost of goods sold 822.7    922.1   
Gross profit 222.8    233.0   
Selling and administrative expenses 117.8    118.6   
Amortization of intangibles 16.4    14.1   
Impairments 3.5    2.9   
Other (income) expense, net 4.4    (.8)  
Earnings before interest and income taxes 80.7    98.2   
Interest expense 20.9    21.4   
Interest income .9    1.4   
Earnings before income taxes 60.7    78.2   
Income taxes 15.0    17.1   
Net earnings 45.7    61.1   
Loss attributable to noncontrolling interest, net of tax —    .1   
Net earnings attributable to Leggett & Platt, Inc. common shareholders $ 45.7    $ 61.2   
Net earnings per share attributable to Leggett & Platt, Inc. common shareholders
Basic $ .34    $ .46   
Diluted $ .34    $ .45   
Weighted average shares outstanding
Basic 135.4    134.4   
Diluted 135.6    135.0   
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) 2020 2019
Net earnings $ 45.7    $ 61.1   
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (65.5)   8.8   
Cash flow hedges (6.3)   3.9   
Defined benefit pension plans 1.2    .5   
Other comprehensive income (loss) (70.6)   13.2   
Comprehensive income (loss) (24.9)   74.3   
Add: comprehensive loss attributable to noncontrolling interest .1    .1   
Comprehensive income (loss) attributable to Leggett & Platt, Inc. $ (24.8)   $ 74.4   
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) 2020 2019
OPERATING ACTIVITIES
Net earnings $ 45.7    $ 61.1   
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation 30.1    29.1   
Amortization of intangibles and supply agreements 17.4    17.2   
Impairments 3.5    2.9   
Provision for losses on accounts and notes receivable 19.8    .9   
Writedown of inventories 3.1    4.7   
Deferred income tax (benefit) expense (15.1)   3.8   
Stock-based compensation 7.5    7.8   
Other, net 7.8    (3.3)  
Increases/decreases in, excluding effects from acquisitions and divestitures:
Accounts and other receivables (7.1)   (17.4)  
Inventories (34.3)   13.9   
Other current assets (3.4)   (2.9)  
Accounts payable (27.8)   (67.1)  
Accrued expenses and other current liabilities (36.8)   (19.3)  
NET CASH PROVIDED BY OPERATING ACTIVITIES 10.4    31.4   
INVESTING ACTIVITIES
Additions to property, plant and equipment (24.2)   (31.8)  
Purchases of companies, net of cash acquired —    (1,244.3)  
Other, net 6.9    (1.1)  
NET CASH USED FOR INVESTING ACTIVITIES (17.3)   (1,277.2)  
FINANCING ACTIVITIES
Additions to long-term debt —    993.3   
Payments on long-term debt (12.5)   (.9)  
Change in commercial paper and short-term debt 352.6    296.9   
Dividends paid (52.7)   (49.6)  
Issuances of common stock .6    6.5   
Purchases of common stock (8.2)   (8.5)  
Other, net (.8)   (1.0)  
NET CASH PROVIDED BY FINANCING ACTIVITIES 279.0    1,236.7   
EFFECT OF EXCHANGE RATE CHANGES ON CASH (13.9)   4.3   
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 258.2    (4.8)  
CASH AND CASH EQUIVALENTS—January 1, 247.6    268.1   
CASH AND CASH EQUIVALENTS—March 31,
$ 505.8    $ 263.3   
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 (SEC). 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, 2019 financial position data included herein was derived from the audited consolidated financial statements, but does not include all disclosures required by GAAP.

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 2020 for segment reporting changes in our management structure and all related internal reporting (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.

Adopted in 2020:

On January 1, 2020, we adopted ASU 2016-13 “Financial Instruments—Credit Losses” (Topic 326) as discussed in Note 7.

ASU 2017-04 “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. We adopted this ASU on January 1, 2020. This ASU simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The annual goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount and 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. We will apply this guidance to our annual goodwill impairment testing which will be completed in the second quarter of 2020.

ASU 2018-15 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)”.  We adopted this ASU on January 1, 2020. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.  The adoption of this ASU did not materially impact our financial statements.
6

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
To be adopted in future years:

ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”: This ASU will be effective January 1, 2021 and is a part of the FASB overall simplification initiative. We are currently evaluating this guidance.

The FASB has issued accounting guidance, in addition to the issuance discussed above, effective for current and future periods. This guidance did not have a material impact on our current financial statements, and we do not believe it will have a material impact on our future financial statements.
 
3. REVENUE
        
Performance Obligations and Shipping and Handling Costs
We recognize revenue when performance obligations under the terms of a contract with our customers are satisfied. Substantially all of our revenue is recognized upon transfer of control of our products to our customers, which is generally upon shipment from our facilities or upon delivery to our customers' facilities and is dependent on the terms of the specific contract. This conclusion considers the point at which our customers have the ability to direct the use of and obtain substantially all of the remaining benefits of the products that are transferred. Substantially all unsatisfied performance obligations as of March 31, 2020, will be satisfied within one year or less. Shipping and handling costs are included as a component of "Cost of goods sold".
Sales, value added, and other taxes collected in connection with revenue-producing activities are excluded from revenue.
Sales Allowances and Returns
The amount of consideration we receive and revenue we recognize varies with changes in various sales allowances, discounts and rebates (variable consideration) that we offer to our customers. We reduce revenue by our estimates of variable consideration based on contract terms and historical experience. Changes in estimates of variable consideration for the periods presented were not material.
Some of our products transferred to customers can be returned, and we recognize the following for this right:
An estimated refund liability and a corresponding reduction to revenue based on historical returns experience.
An asset and a corresponding reduction to cost of sales for our right to recover products from customers upon settling the refund liability. We reduce the carrying amount of these assets by estimates of costs associated with the recovery and any additional expected reduction in value.

Our refund liability and the corresponding asset associated with our right to recover products from our customers were immaterial at March 31, 2020.
Other
We expect that at contract inception, the time period between when we transfer a promised good to our customer and our receipt of payment from that customer for that good will be one year or less (our typical trade terms are 30 to 60 days for U.S. customers and up to 90 days for our international customers).

We generally expense costs of obtaining a contract because the amortization period would be one year or less.

7

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Revenue by Product Line
We disaggregate revenue by customer group, which is the same as our product lines for each of our segments, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. For information on our new segment structure, see Note 4.
  Three Months Ended March 31,
  2020 2019
Bedding Products  
Bedding group $ 490.6    $ 554.3   
  490.6    554.3   
Specialized Products    
Automotive group 173.7    196.1   
Aerospace Products group 38.4    39.4   
Hydraulic Cylinders group 22.4    27.4   
  234.5    262.9   
Furniture, Flooring & Textile Products  
Home Furniture group 81.2    90.9   
Work Furniture group 63.6    73.2   
Flooring & Textile Products group 175.6    173.8   
  320.4    337.9   
  $ 1,045.5    $ 1,155.1   

4. SEGMENT INFORMATION
Our reportable segments are the same as our operating segments, which also correspond with our management organizational structure. To reflect how we manage our newly aligned businesses and in conjunction with the change in executive officer leadership, our management organizational structure and all related internal reporting changed effective January 1, 2020. As a result, our segment reporting has changed to reflect the new structure. This segment change was retrospectively applied to all prior periods presented.
The new Bedding Products segment consists of the former Residential Products and Industrial Products segments, plus the Consumer Products Group (which is renamed the Adjustable Bed business unit), minus the Fabric & Flooring Products Group (which is renamed the Flooring & Textile Products Group).
The new Furniture, Flooring & Textile Products segment consists of the former Furniture Products segment, plus the Fabric & Flooring Products Group (which is renamed the Flooring & Textile Products Group) minus the Consumer Products Group (which is renamed the Adjustable Bed business unit).
Our Specialized Products segment was not changed.

We have three operating segments that supply a wide range of products:

Bedding Products: This segment supplies a variety of components and machinery used by bedding manufacturers in the production and assembly of their finished products, as well as produces private-label finished mattresses for bedding brands and steel rod and drawn steel wire to our other operations and to external customers to make mechanical springs and many other end products. We also produce adjustable bed bases.
Specialized Products: This segment supplies lumbar support systems, seat suspension systems, motors and actuators, and control cables used by automotive manufacturers. We also produce and distribute tubing and tube assemblies for the aerospace industry and engineered hydraulic cylinders used in the material-handling and construction industries.
8

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Furniture, Flooring & Textile Products: This segment supplies a wide range of components for residential and work furniture manufacturers, as well as select lines of private-label finished furniture. We also produce or distribute flooring underlayment, fabric, and geo components.

Each reportable segment has an executive vice president who has accountability to and maintains regular contact with our 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.
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 Earnings Before Interest and Taxes (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.
A summary of segment results from continuing operations is shown in the following tables.

Trade 1
Sales
Inter-
Segment
Sales
Total
Sales
EBIT Depreciation and Amortization
Three Months Ended March 31, 2020
Bedding Products $ 490.6    $ 9.6    $ 500.2    $ 30.0    $ 26.8   
Specialized Products 234.5    .8    235.3    27.7    11.2   
Furniture, Flooring & Textile Products 320.4    5.2    325.6    26.5    6.5   
Intersegment eliminations and other 2, 3
(3.5)   3.0   
$ 1,045.5    $ 15.6    $ 1,061.1    $ 80.7    $ 47.5   
Three Months Ended March 31, 2019
Bedding Products $ 554.3    $ 10.2    $ 564.5    $ 44.1    $ 24.8   
Specialized Products 262.9    .9    263.8    35.7    10.2   
Furniture, Flooring & Textile Products 337.9    4.3    342.2    18.4    6.6   
Intersegment eliminations and other 2
—    4.7   
$ 1,155.1    $ 15.4    $ 1,170.5    $ 98.2    $ 46.3   
1 See Note 3 for revenue by product line.
2 Depreciation and Amortization: Other relates to non-operating assets (assets not included in segment assets) and is allocated to segment EBIT as discussed above.
3 2020 EBIT: Other includes a charge to write off stock associated with a business divested in 2008.

9

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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,
2020
December 31,
2019
Bedding Products $ 788.7    $ 816.9   
Specialized Products 309.7    346.4   
Furniture, Flooring & Textile Products 353.9    383.2   
Average current liabilities included in segment numbers above 666.4    735.3   
Unallocated assets 1
2,912.8    2,662.7   
Difference between average assets and period-end balance sheet (49.5)   (128.1)  
Total assets $ 4,982.0    $ 4,816.4   
 
1 Unallocated assets consist primarily of goodwill, other intangibles, cash and deferred tax assets. 

5. RESTRUCTURING AND IMPAIRMENT CHARGES

We implemented various cost reduction initiatives to improve our operating cost structures in the periods presented. These cost initiatives have, among other actions, included workforce reductions and the closure or consolidation of certain operations. Except for the 2018 Restructuring Plan (Plan) discussed below, none of these initiatives has individually resulted in a material charge to earnings.

In December 2018, we committed to the Plan primarily associated with our Furniture, Flooring & Textiles Products and Bedding Products segments, including the Home Furniture Group (which produces furniture components for the upholstered furniture industry) and a portion of the Adjustable Bed business (which supplied ornamental beds, bed frames and other sleep accessories sold to retailers). Both of these businesses had underperformed expectations primarily from weaker demand and higher raw material costs. These restructuring activities were substantially complete as of December 31, 2019.

In 2019, we modified the Plan to include four small facilities in the Bedding Products segment, most of which were substantially complete by the end of the year. All restructuring activities with this Plan are materially complete. The following table presents information associated with this Plan:
Total Amount Incurred to Date Three Months Ended 
 March 31, 2020
Total Incurred Full Year 2019 and 2018
2018 Restructuring Plan
Restructuring and restructuring-related $ 19.4    $ .7    $ 18.7   
Impairment costs associated with this plan 12.7    —    12.7   
$ 32.1    $ .7    $ 31.4   
Amount of total that represents cash charges $ 15.5    $ .6    $ 14.9   

10

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
The table below presents all restructuring and restructuring-related activity for the periods presented; the majority of the 2020 costs are related to the Plan:
  Three Months Ended March 31,
  2020 2019
Charged to other (income) expense, net:    
Severance and other restructuring costs $ .6    $ 1.2   
Charged to cost of goods sold:
Inventory obsolescence and other .1    2.4   
Total restructuring and restructuring-related costs $ .7    $ 3.6   
Amount of total that represents cash charges $ .6    $ 1.2   

Restructuring and restructuring-related charges by segment were as follows:
  Three Months Ended March 31,
  2020 2019
Bedding Products $ .6    $ 2.9   
Furniture, Flooring & Textile Products .1    .7   
Total $ .7    $ 3.6   

The accrued liability associated with our total restructuring initiatives consisted of the following:
Balance at December 31, 2019 Add: 2020 Charges Less: 2020 Payments Balance at March 31, 2020
Termination benefits $ 3.5    $ .2    $ 1.2    $ 2.5   
Other restructuring costs .7    .4    .5    .6   
  $ 4.2    $ .6    $ 1.7    $ 3.1   
        

Impairment charges

Impairment charges (pretax) are reported in “Impairments” in the Consolidated Condensed Statements of Operations and are summarized in the following table:
Three Months Ended March 31,
2020 2019
  Other Long-Lived Assets Impairments Other Long-Lived Assets Impairments
Bedding Products $ —    $ 2.9   
Unallocated 1
3.5    —   
Total impairment charges $ 3.5    $ 2.9   
1 This is a charge to write off stock associated with a business divested in 2008.

We test other long-lived assets for recoverability at year end and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Fair value and the resulting impairment charges noted above were based primarily upon offers from potential buyers, third-party estimates of fair value less selling costs or estimated future cash flows.
        
11

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,
  2020 2019
Net earnings:    
Net earnings $ 45.7    $ 61.1   
Earnings attributable to noncontrolling interest, net of tax $ —    $ .1   
Net earnings attributable to Leggett & Platt common shareholders $ 45.7    $ 61.2   
Weighted average number of shares (in millions):    
Weighted average number of common shares used in basic EPS 135.4    134.4   
Dilutive effect of stock-based compensation .2    .6   
Weighted average number of common shares and dilutive potential common shares used in diluted EPS 135.6    135.0   
Basic and Diluted EPS:    
Basic EPS attributable to Leggett & Platt common shareholders $ .34    $ .46   
Diluted EPS attributable to Leggett & Platt common shareholders $ .34    $ .45   
Other information:    
Anti-dilutive shares excluded from diluted EPS computation .2    .1   
Cash dividends declared per share $ .40    $ .38   

7. ACCOUNTS AND OTHER RECEIVABLES
Initial adoption of new ASU
Effective January 1, 2020, we adopted ASU 2016-13 “Financial Instruments—Credit Losses” (Topic 326), which amended the impairment model to require a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. In accordance with guidance, the new standard was adopted using the modified retrospective approach as of the effective date; prior periods were not restated. The increase to the allowance for doubtful accounts, net of the deferred tax impact, was recorded as an adjustment to opening retained earnings.
12

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
The cumulative effect of applying Topic 326 to our Consolidated Condensed Balance Sheet was as follows:
Balance at December 31, 2019 as Previously Reported Topic 326 Adjustments Balance at January 1, 2020
Trade receivables, net 1
$ 564.4    $ (3.3)   $ 561.1   
Other current assets 973.7    —    973.7   
Property, plant and equipment 830.8    —    830.8   
Other assets 2,447.5    —    2,447.5   
Total assets $ 4,816.4    $ (3.3)   $ 4,813.1   
Current liabilities $ 928.1    $ —    $ 928.1   
Long-term liabilities 2
2,575.8    (.8)   2,575.0   
Retained earnings 2,734.5    (2.5)   2,732.0   
Other equity (1,422.0)   —    (1,422.0)  
Total assets $ 4,816.4    $ (3.3)   $ 4,813.1   
1 This adjustment is to increase our allowance for doubtful accounts for estimated expected credit losses on trade receivables over their contractual life.
2 This adjustment is to reflect a decrease in deferred income tax liability as a result of the change in the allowance for doubtful accounts.

Trade receivables are recorded at the invoiced amount and generally do not bear interest. Credit is also occasionally extended in the form of a note receivable to facilitate our customers' operating cycles. Other notes receivable are established in special circumstances, such as in partial payment for the sale of a business or to support other business opportunities. Other notes receivable generally bear interest at market rates commensurate with the corresponding credit risk on the date of the origination.
To determine our allowance for doubtful accounts under the new guidance, we are utilizing a pool approach to group our receivables with similar risk characteristics. Our pools correspond with our business units, which generally have similar terms, industry-specific conditions, and historical or expected loss patterns. Reserves are established for each pool based on their level of risk exposure. When credit deterioration occurs on a specific customer within a pool, we evaluate the receivable separately to estimate the expected credit loss based on the specific risk characteristics. Management reviews individual accounts and pools for factors such as the length of time that receivables are past due, the financial health of the companies involved, industry and macroeconomic considerations, and historical loss experience. A qualitative reserve is also established for any current macroeconomic conditions or reasonable and supportable forecasts that could impact the expected collectibility of all or a portion of our receivables portfolio.
Account balances are charged against the allowance when it is probable the receivable will not be recovered. Interest income is not recognized for nonperforming accounts that are placed on nonaccrual status. For accounts on nonaccrual status, any interest payments received are applied against the balance of the nonaccrual account.
13

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Accounts and other receivables consisted of the following:
  March 31, 2020 December 31, 2019
  Current Long-term Current Long-term
Trade accounts receivable 1
$ 567.3    $ —    $ 571.8    $ —   
Trade notes receivable
1.2    .8    1.1    .6   
Total trade receivables 568.5    .8    572.9    .6   
Other notes receivable 1
—    23.4    —    23.4   
Taxes receivable, including income taxes 14.0    —    15.8    —   
Other receivables 8.2    —    11.7    —   
Subtotal other receivables 22.2    23.4    27.5    23.4   
Total trade and other receivables 590.7    24.2    600.4    24.0   
Allowance for doubtful accounts:
  Trade accounts receivable 1,2
(22.4)   —    (8.4)   —   
  Trade notes receivable (.1)   —    (.1)   —   
Total trade receivables (22.5)   —    (8.5)   —   
  Other notes receivable 1
—    (23.4)   —    (15.0)  
Total allowance for doubtful accounts (22.5)   (23.4)   (8.5)   (15.0)  
Total net receivables $ 568.2    $ .8    $ 591.9    $ 9.0   
1 The “Trade accounts receivable” and “Other notes receivable” line items above include $25.7 and $26.0 as of March 31, 2020 and December 31, 2019, respectively, from a customer in our Bedding Products segment who is experiencing financial difficulty and liquidity problems. This customer was placed on nonaccrual status in 2018, and became delinquent in quarterly interest payments in the first quarter of 2020. As a result, we have increased our reserve at March 31, 2020 to $25.7 ($23.4 for the note and $2.3 for the trade receivable). The reserve for this customer at December 31, 2019, was $16.0 ($15.0 for the note and $1.0 for the trade receivable).
2 The COVID-19 pandemic and resulting social and governmental restrictions have adversely impacted the operations of many of our customers, which have and could further impact their ability to pay their debts to us. As a result, we increased the reserves on "Trade accounts receivable" during the first quarter 2020 to reflect this increased collectibility risk.

Activity related to the allowance for doubtful accounts is reflected below: 
Balance at December 31, 2019 Topic 326 Adjustment Balance at January 1, 2020 Add:
Charges
Less:
Net Charge-offs/
(Recoveries) and Other
Balance at March 31, 2020
Trade accounts receivable $ 8.4    $ 3.3    $ 11.7    $ 11.4    $ .7    $ 22.4   
Trade notes receivable .1    —    .1    —    —    .1   
Total trade receivables
8.5    3.3    11.8    11.4    .7    22.5   
Other notes receivable 15.0    —    15.0    8.4    —    23.4   
Total allowance for doubtful accounts $ 23.5    $ 3.3    $ 26.8    $ 19.8    $ .7    $ 45.9   


14

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 Three Months Ended 
March 31, 2020 March 31, 2019
To be settled with stock To be settled in cash To be settled with stock To be settled in cash
Stock-based retirement plans contributions 1
$ (.3)   $ .1    $ .6    $ .1   
Discounts on various stock awards:
Deferred Stock Compensation Program .5    —    .6    —   
Stock-based retirement plans .2    —    .2    —   
Discount Stock Plan .3    —    .3    —   
Performance Stock Unit (PSU) awards: 2
     2018 and later PSU - TSR based 2A
.9    (2.8)   .7    .8   
     2018 and later PSU - EBIT CAGR based 2B
(2.1)   (2.8)   1.6    2.0   
     2017 and prior PSU awards 2C
—    .1    .5    .4   
Restricted Stock Unit (RSU) awards 3
4.7    —    .5    —   
Profitable Growth Incentive (PGI) awards 4
—    —    —    —   
Other, primarily non-employee directors restricted stock .4    —    .2    —   
Total stock-related compensation expense 4.6    $ (5.4)   5.2    $ 3.3   
Employee contributions for above stock plans 2.9    2.6   
Total stock-based compensation $ 7.5    $ 7.8   
Tax benefits on stock-based compensation expense $ 1.1    $ 1.2   
Tax benefits on stock-based compensation payments 2.8    1.9   
Total tax benefits associated with stock-based compensation $ 3.9    $ 3.1   

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

1 Stock-Based Retirement Plans
Participants in the Executive Stock Unit Program may contribute up to 10% (depending on certain qualifications) of their compensation above the threshold. Participant contributions are credited to a diversified investment account established for the participant. Leggett matching contributions to the plan, including dividend equivalents, are used to acquire stock units. Stock units are converted to common stock at a 1-to-1 ratio upon distribution from the program.


2 PSU Awards
2020 Changes to the PSU and RSU awards
In November 2019, the Compensation Committee approved changes to our PSU and RSU award programs for 2020. Changes to the plans for executive officers are as follows:
Two-thirds of the target award value will be granted as PSUs based on relative TSR and EBIT CAGR over a three-year performance period.
One-third of the target award value will be granted as RSUs vesting in one-third increments over three years.

15

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
During 2019 PSU awards were based on two equal measures: (i) Relative Total Shareholder Return (TSR = (Change in Stock Price + Dividends) ÷ Beginning Stock Price) and (ii) EBIT Compound Annual Growth Rate (EBIT CAGR). These components are discussed below.
We intend to pay 50% in shares of our common stock and 50% in cash; although, we reserve the right, subject to Compensation Committee approval, to pay up to 100% in cash.


 2A 2018 PSU - TSR based
Most of the 2018 and later PSU awards are based 50% upon our TSR compared to a peer group. A small number of PSU awards are based 100% upon relative TSR for certain business unit employees to complement their particular mix of incentive compensation. Grant date fair values are calculated using a Monte Carlo simulation of stock and volatility data for Leggett and each of the peer companies. Grant date fair values are amortized using the straight-line method over the three-year vesting period.
The relative TSR vesting condition of the 2018 and later PSU awards contains 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 TSR 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 300 companies). Participants will earn from 0% to 200% of the base award depending upon how our TSR ranks within the peer group at the end of the three-year performance period.

2B 2018 PSU - EBIT CAGR based
Most of the 2018 and later PSU awards are based 50% upon our or the applicable segment's EBIT CAGR. Grant date fair values are calculated using the grant date stock price discounted for dividends over the vesting period. Expense is adjusted every quarter over the three-year vesting period based on the number of shares expected to vest.
The EBIT CAGR portion of this award contains the following conditions:
A service requirement—Awards generally “cliff” vest three years following the grant date; and
A performance condition—Awards are based on achieving specified EBIT CAGR performance targets for our or the applicable segment's EBIT during the third year of the performance period compared to the EBIT during the fiscal year immediately preceding the performance period. Participants will earn from 0% to 200% of the base award.
In connection with the decision to move a significant portion of the long-term incentive opportunity from a two-year to a three-year performance period by eliminating PGI awards, in February 2018, we also granted participants a one-time transition PSU award, based upon EBIT CAGR over a two-year performance period. This award was paid in the first quarter 2020. Average payout percentage of base award was 114%, and the number of shares paid was .1. The cash portion pay out was $4.1.

2C 2017 and prior PSU Awards
The 2017 and prior PSU awards were based solely on relative TSR. Vesting conditions were the same as (2A) above other than the maximum payout of 175% of the base award. The 2017 PSU award was paid out Q1 2020.

16

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,
2020 2019
TSR based
Total shares base award .1    .1   
Grant date per share fair value $ 38.23    $ 57.86   
Risk-free interest rate 1.4  % 2.4  %
Expected life in years 3.0 3.0
Expected volatility (over expected life) 24.0  % 21.5  %
Expected dividend yield (over expected life) 3.6  % 3.4  %
EBIT CAGR based
Total shares base award .1    .1   
Grant date per share fair value $ 40.52    $ 39.98   
Vesting period in years 3.0 3.0

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
2016 December 31, 2018 78th percentile    —% $ —    First quarter 2019
2017 December 31, 2019 63rd percentile    49.0% .1 million $ 1.6    First quarter 2020


3 RSU Awards

The RSU award has been amended so that those who retire (1) after age 65 or (2) after the date where the participant’s age plus years of service are greater than or equal to 70 years, will continue to receive shares that will vest after the retirement date. Expense associated with these retirement-eligible employees will be recognized immediately at the RSU grant date. For those employees who become retirement eligible after the grant date, any remaining expense associated with those RSUs will be recognized at the date the employee meets the retirement-eligible criteria. For more information on the 2020 RSU award changes see the PSU section above.


4 PGI Awards

In 2017 and prior years, certain key management employees participated in a PGI program. The PGI awards were eliminated during 2018, and were replaced with the PSU EBIT CAGR award discussed above. In the first quarter 2019, all PGI awards were paid out with a distribution of shares (less than .1 million) and cash ($2.2).

17

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 13) of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions during 2019. Of the goodwill included in the table below, $126.4 is expected to be deductible for tax purposes.
  Three Months Ended March 31,
  2019
Accounts receivable $ 72.4   
Inventory 60.1   
Property, plant and equipment 80.2   
Goodwill 558.8   
Other intangible assets:
Customer relationships (15-year life)
372.7   
Technology (15-year life)
173.3   
Trademarks and trade names (15-year life)
65.8   
Non-compete agreements and other (5-year life)
28.1   
Other current and long-term assets 27.4   
Current liabilities (43.9)  
Deferred income taxes (129.0)  
Other long-term liabilities (21.6)  
Net cash consideration $ 1,244.3   



The following table summarizes acquisitions for the periods presented.
Three Months Ended Number of Acquisitions Segment Product/Service
March 31, 2020 None
March 31, 2019 1 Bedding Products A leader in proprietary specialized foam technology, primarily for the bedding and furniture industries
Certain of our prior years' acquisition agreements provide for additional consideration to be paid in cash at a later date and are recorded as liabilities at the acquisition date. At March 31, 2020 and December 31, 2019, our current liability for these future payments was $7.9 and $9.2, respectively.  Components of the liability are based on estimates and contingent upon future events, therefore, the amounts may fluctuate materially until the payment dates.
2020
No businesses were acquired during the first quarter 2020.
2019
We acquired one business:
ECS, a leader in proprietary specialized foam technology, primarily for the bedding and furniture industries. Through this acquisition, we gained critical capabilities in proprietary foam technology, along with scale in the production of private-label finished mattresses. The acquisition date was January 16. The purchase price was $1,244.3 and, upon finalization of the purchase price allocation, added $559.3 of goodwill. The most significant other intangibles added were customer relationships and technology, whose finalized values were $372.3 and $173.3, respectively. There was no contingent consideration associated with this acquisition.
18

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
Pro forma Results
The following table summarizes, on an unaudited pro forma basis, the combined results of operations of Leggett and ECS as though the acquisition had occurred as of January 1, 2018. We have not provided pro forma results of operations related to other acquisitions, as these results were not material.
The unaudited proforma financial information below is not necessarily indicative of the results of operations that would have been realized had the ECS acquisition occurred as of January 1, 2018, nor is it meant to be indicative of any future results of operations. It does not include benefits expected from revenue or product mix enhancements, operating synergies or cost savings that may be realized or any estimated future costs that may be incurred to integrate the ECS business.
Three Months Ended
March 31,
2019
Net trade sales $ 1,176.7   
Net earnings 62.9   
EPS basic .47   
EPS diluted .47   

The information above reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including:

Amortization and depreciation adjustments relating to fair value estimates of intangible and tangible assets;
Incremental interest expense on debt incurred in connection with the ECS acquisition;
Amortization of the fair value adjustment to inventory as though the transaction occurred on January 1, 2018;
Recognition of transaction costs as though the transaction occurred on January 1, 2018; and
Estimated tax impacts of the pro forma adjustments.

10. INVENTORIES
The following table recaps the components of inventory for each period presented:
March 31,
2020
December 31,
2019
Finished goods $ 316.6    $ 308.7   
Work in process 52.0    54.4   
Raw materials and supplies 334.8    323.5   
LIFO reserve (47.9)   (49.9)  
Total inventories, net $ 655.5    $ 636.7   

All inventories are stated at the lower of cost or net realizable value. We generally use standard costs which include materials, labor and production overhead at normal production capacity. The last-in, first-out (LIFO) method is primarily used to value our domestic steel-related inventories. LIFO represents approximately 40% of our inventories. For the remainder of the inventories, we principally use the first-in, first-out (FIFO) method, which is representative of our standard costs. For these inventories, the FIFO cost for the periods presented approximated expected replacement cost.
Inventories are reviewed at least quarterly for slow-moving and potentially obsolete items using actual inventory turnover and, if necessary, are written down to estimated net realizable value. Restructuring activity and decisions to narrow product offerings (as discussed in Note 5) also impact the estimated net realizable value of inventories. We have had no material changes in inventory writedowns or slow-moving and obsolete inventory reserves in any of the years presented.
The following table contains the LIFO benefit for each of the periods presented.
 
  Three Months Ended March 31,
  2020 2019
LIFO benefit $ 2.0    $ —   
19

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

11. EMPLOYEE BENEFIT PLANS
Employer contributions for 2020 are expected to approximate $2.0.

The following table provides interim information as to our domestic and foreign defined benefit pension plans:
 
  Three Months Ended 
 March 31,
  2020 2019
Components of net pension expense
Service cost $ 1.1    $ 1.0   
Interest cost 1.9    2.2   
Expected return on plan assets (3.0)   (2.9)  
Recognized net actuarial loss 1.0    .8   
Net pension expense $ 1.0    $ 1.1   

        The components of net pension expense, other than the service cost component, are included in the line item “Other (income) expense, net” in the Consolidated Condensed Statements of Operations.



20

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
12. STATEMENT OF CHANGES IN EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Three Months Ended March 31, 2020
  Total
Equity
Retained
Earnings
Common
Stock &
Additional
Contributed
Capital
Treasury
Stock
Noncontrolling
Interest
Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance, January 1, 2020 $ 1,312.5    $ 2,734.5    $ 538.1    $ (1,883.8)   $ .5    $ (76.8)  
Effect of accounting change on prior years, net of tax (Topic 326-See Note 7)
(2.5)   (2.5)   —    —    —    —   
Adjusted beginning balance, January 1, 2020
1,310.0    2,732.0    538.1    (1,883.8)   .5    (76.8)  
Net earnings attributable to Leggett & Platt, Inc. common shareholders 45.7    45.7    —    —    —    —   
Dividends declared (See Note 6)
(52.8)   (54.2)   1.4    —    —    —   
Treasury stock purchased (8.4)   —    —    (8.4)   —    —   
Treasury stock issued 2.5    —    (16.2)   18.7    —    —   
Foreign currency translation adjustments (65.5)   —    —    —    (.1)   (65.4)  
Cash flow hedges, net of tax (6.3)   —    —    —    —    (6.3)  
Defined benefit pension plans, net of tax 1.2    —    —    —    —    1.2   
Stock-based compensation transactions, net of tax 12.2    —    12.2    —    —    —   
Ending balance, March 31, 2020 $ 1,238.6    $ 2,723.5    $ 535.5    $ (1,873.5)   $ .4    $ (147.3)  

21

LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
  Three Months Ended March 31, 2019
  Total
Equity
Retained
Earnings
Common
Stock &
Additional
Contributed
Capital
Treasury
Stock
Noncontrolling
Interest
Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance, January 1, 2019 $ 1,157.6    $ 2,613.8    $ 529.1    $ (1,908.3)   $ .6    $ (77.6)  
Effect of accounting change on prior years, net of tax (Topic 842) .1    .1    —    —    —    —   
Adjusted beginning balance, January 1, 2019
1,157.7    2,613.9    529.1    (1,908.3)   .6    (77.6)  
Net earnings attributable to Leggett & Platt, Inc. common shareholders 61.1