LEG 6.30.2014 10Q


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 June 30, 2014
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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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
 
¨
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 July 23, 2014: 137,260,265




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
June 30,
2014
 
December 31,
2013
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
304.2

 
$
272.7

Trade receivables, net
553.5

 
434.8

Other receivables, net
49.9

 
32.6

Total receivables, net
603.4

 
467.4

Inventories
 
 
 
Finished goods
278.9

 
270.5

Work in process
58.1

 
59.3

Raw materials and supplies
263.4

 
239.4

LIFO reserve
(73.3
)
 
(73.3
)
Total inventories, net
527.1

 
495.9

Other current assets
54.8

 
45.7

Total current assets
1,489.5

 
1,281.7

PROPERTY, PLANT AND EQUIPMENT—AT COST
 
 
 
Machinery and equipment
1,220.6

 
1,184.5

Buildings and other
605.8

 
612.2

Land
43.8

 
44.5

Total property, plant and equipment
1,870.2

 
1,841.2

Less accumulated depreciation
1,287.6

 
1,266.6

Net property, plant and equipment
582.6

 
574.6

OTHER ASSETS
 
 
 
Goodwill
842.1

 
926.8

Other intangibles, less accumulated amortization of $124.1 and $114.4 as of June 30, 2014 and December 31, 2013, respectively
203.5

 
203.4

Sundry
125.7

 
121.6

Total other assets
1,171.3

 
1,251.8

TOTAL ASSETS
$
3,243.4

 
$
3,108.1

CURRENT LIABILITIES
 
 
 
Current maturities of long-term debt
$
181.3

 
$
181.1

Accounts payable
376.7

 
339.3

Accrued expenses
223.2

 
229.7

Other current liabilities
83.6

 
79.4

Total current liabilities
864.8

 
829.5

LONG-TERM LIABILITIES
 
 
 
Long-term debt
926.0

 
688.4

Other long-term liabilities
133.6

 
127.7

Deferred income taxes
56.6

 
63.3

Total long-term liabilities
1,116.2

 
879.4

COMMITMENTS AND CONTINGENCIES

 

EQUITY
 
 
 
Common stock
2.0

 
2.0

Additional contributed capital
484.3

 
479.1

Retained earnings
2,080.5

 
2,136.4

Accumulated other comprehensive income
92.9

 
94.5

Treasury stock
(1,406.4
)
 
(1,320.7
)
Total Leggett & Platt, Inc. equity
1,253.3

 
1,391.3

Noncontrolling interest
9.1

 
7.9

Total equity
1,262.4

 
1,399.2

TOTAL LIABILITIES AND EQUITY
$
3,243.4

 
$
3,108.1

See accompanying notes to consolidated condensed financial statements.

2


LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Six Months Ended
 
Three Months Ended
 
June 30,
 
June 30,
(Amounts in millions, except per share data)
2014
 
2013
 
2014
 
2013
Net sales
$
1,920.7

 
$
1,891.5

 
$
1,001.6

 
$
958.8

Cost of goods sold
1,535.5

 
1,503.5

 
796.4

 
759.7

Gross profit
385.2

 
388.0

 
205.2

 
199.1

Selling and administrative expenses
198.3

 
206.0

 
99.8

 
98.8

Amortization of intangibles
9.9

 
11.1

 
5.0

 
5.4

Impairment of goodwill
108.0

 
—

 
108.0

 
—

Other (income) expense, net
(6.6
)
 
(7.0
)
 
(.7
)
 
(3.6
)
Earnings (loss) from continuing operations before interest and income taxes
75.6

 
177.9

 
(6.9
)
 
98.5

Interest expense
20.8

 
23.7

 
10.4

 
10.9

Interest income
2.8

 
4.5

 
1.4

 
1.8

Earnings (loss) from continuing operations before income taxes
57.6

 
158.7

 
(15.9
)
 
89.4

Income taxes
27.0

 
44.2

 
7.2

 
24.3

Earnings (loss) from continuing operations
30.6

 
114.5

 
(23.1
)
 
65.1

Earnings from discontinued operations. net of tax
—

 
6.9

 
—

 
6.8

Net earnings (loss)
30.6

 
121.4

 
(23.1
)
 
71.9

(Earnings) attributable to noncontrolling interest, net of tax
(1.4
)
 
(1.0
)
 
(.8
)
 
(.6
)
Net earnings (loss) attributable to Leggett & Platt, Inc. common shareholders
$
29.2

 
$
120.4

 
$
(23.9
)
 
$
71.3

Earnings (loss) per share from continuing operations attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Basic
$
.21

 
$
.78

 
$
(.17
)
 
$
.44

Diluted
$
.20

 
$
.77

 
$
(.17
)
 
$
.44

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

 
$
.05

 
$
—

 
$
.05

Diluted
$
—

 
$
.05

 
$
—

 
$
.05

Net earnings (loss) per share attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Basic
$
.21

 
$
.83

 
$
(.17
)
 
$
.49

Diluted
$
.20

 
$
.81

 
$
(.17
)
 
$
.48

 
 
 
 
 
 
 
 
Cash dividends declared per share
$
.60

 
$
.58

 
$
.30

 
$
.29

 
 
 
 
 
 
 
 
Average shares outstanding
 
 
 
 
 
 
 
Basic
141.9

 
145.9

 
141.4

 
145.8

Diluted
143.6

 
148.0

 
141.4

 
148.1

See accompanying notes to consolidated condensed financial statements.

3


LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 
Six Months Ended
 
Three Months Ended
 
June 30,
 
June 30,
(Amounts in millions)
2014
 
2013
 
2014
 
2013
Net earnings (loss)
$
30.6

 
$
121.4

 
$
(23.1
)
 
$
71.9

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(4.3
)
 
(27.5
)
 
10.8

 
(11.2
)
Cash flow hedges
1.8

 
.9

 
1.9

 
.1

Defined benefit pension plans
.7

 
2.5

 
.1

 
1.1

Other comprehensive (loss) income
(1.8
)
 
(24.1
)
 
12.8

 
(10.0
)
Comprehensive income (loss)
28.8

 
97.3

 
(10.3
)
 
61.9

Less: comprehensive (income) attributable to noncontrolling interest
(1.2
)
 
(1.1
)
 
(.8
)
 
(.7
)
Comprehensive income (loss) attributable to Leggett & Platt, Inc.
$
27.6

 
$
96.2

 
$
(11.1
)
 
$
61.2

See accompanying notes to consolidated condensed financial statements.

4

LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
(Amounts in millions)
2014
 
2013
OPERATING ACTIVITIES
 
 
 
Net earnings
$
30.6

 
$
121.4

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
44.7

 
45.0

Amortization of intangibles and debt issuance costs
13.7

 
14.1

Provision for losses on accounts and notes receivable
1.8

 
3.2

Writedown of inventories
4.5

 
11.4

Goodwill impairment
108.0

 
—

Long-lived asset impairments
1.0

 
2.3

Net gain from sales of assets and businesses
(4.7
)
 
(7.7
)
Deferred income tax (benefit) expense
(6.1
)
 
10.5

Stock-based compensation
20.2

 
20.2

Other, net
(4.0
)
 
(.3
)
Other changes, excluding effects from acquisitions and divestitures:
 
 
 
Increase in accounts and other receivables
(136.9
)
 
(112.3
)
Increase in inventories
(25.2
)
 
(34.6
)
Increase in other current assets
(4.5
)
 
(1.4
)
Increase in accounts payable
41.8

 
53.5

Decrease in accrued expenses and other current liabilities
(1.5
)
 
(2.1
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
83.4

 
123.2

INVESTING ACTIVITIES
 
 
 
Additions to property, plant and equipment
(38.4
)
 
(41.9
)
Purchases of companies, net of cash acquired
(51.2
)
 
(10.1
)
Proceeds from sales of assets and businesses
9.8

 
14.4

Other, net
(14.6
)
 
(4.4
)
NET CASH USED FOR INVESTING ACTIVITIES
(94.4
)
 
(42.0
)
FINANCING ACTIVITIES
 
 
 
Payments on long-term debt
(6.7
)
 
(202.1
)
Change in commercial paper and short-term debt
244.4

 
128.8

Dividends paid
(83.7
)
 
(41.4
)
Issuances of common stock
8.8

 
32.5

Purchases of common stock
(118.1
)
 
(82.2
)
Excess tax benefits from stock-based compensation
2.0

 
5.9

Other, net
(.4
)
 
—

NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
46.3

 
(158.5
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(3.8
)
 
(1.5
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
31.5

 
(78.8
)
CASH AND CASH EQUIVALENTS—January 1,
272.7

 
359.1

CASH AND CASH EQUIVALENTS—June 30,
$
304.2

 
$
280.3

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 presentation 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 generally accepted accounting principles 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, 2013 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 accounting principles generally accepted in the United States of America ("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, 2013.
2. NEW ACCOUNTING GUIDANCE
In April 2014, the Financial Accounting Standards Board (FASB) issued updated guidance, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This guidance will be effective January 1, 2015 (however early adoption is permitted), and changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. We do not believe it will have a material impact on our future financial statements.
In May 2014, the FASB issued new authoritative literature, Revenue from Contracts with Customers, which supersedes much of the existing authoritative literature for revenue recognition. This guidance will be effective January 1, 2017. While we are currently evaluating the newly issued guidance, we do not anticipate that it will have a material impact on our future financial statements.
3. INVENTORIES
About 55% 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. Any change in the annual LIFO estimate will be reflected in future quarters.
The following table contains the LIFO benefit (expense) included in earnings for each of the periods presented.
 
 
Six Months Ended
June 30,
 
Three Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
LIFO benefit (expense)
$
—

 
$
4.8

 
$
—

 
$
2.2







6
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 


4. SEGMENT INFORMATION
We have four operating segments that supply a wide range of products:
•
Residential Furnishings—components for bedding, furniture and other furnishings, as well as related consumer products
•
Commercial Fixturing & Components—retail store fixtures, and components for office and institutional furnishings
•
Industrial Materials—drawn steel wire, specialty wire products, titanium and nickel tubing for the aerospace industry and welded steel tubing
•
Specialized Products—automotive seating components, specialized machinery and equipment, and commercial vehicle interiors
Our reportable segments are the same as our operating segments, which correspond with our management organizational structure. Each reportable segment has a senior operating vice-president that reports to the chief operating officer. The chief operating officer in turn reports directly to the chief operating decision maker. The operating results and financial information reported through the segment structure are regularly reviewed and used by the chief operating decision maker 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, except that the segment assets and income reflect the FIFO basis of accounting for inventory. Certain inventories are accounted for using the LIFO basis in the consolidated financial statements. We evaluate performance based on earnings from operations before interest and income 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. 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 are shown in the following tables.
 
External
Sales
 
Inter-
Segment
Sales
 
Total
Sales
 
EBIT
Three Months Ended June 30, 2014
 
 
 
 
 
 
 
Residential Furnishings
$
525.9

 
$
10.1

 
$
536.0

 
$
53.7

Commercial Fixturing & Components
94.9

 
1.5

 
96.4

 
(106.9
)
Industrial Materials
165.5

 
56.7

 
222.2

 
14.3

Specialized Products
215.3

 
15.5

 
230.8

 
35.4

Intersegment eliminations
 
 
 
 
 
 
(3.4
)
Change in LIFO reserve
 
 
 
 
 
 
—

 
$
1,001.6

 
$
83.8

 
$
1,085.4

 
$
(6.9
)
Three Months Ended June 30, 2013
 
 
 
 
 
Residential Furnishings
$
484.8

 
$
4.0

 
$
488.8

 
$
42.4

Commercial Fixturing & Components
126.2

 
1.2

 
127.4

 
7.9

Industrial Materials
155.8

 
60.9

 
216.7

 
21.9

Specialized Products
192.0

 
16.4

 
208.4

 
28.4

Intersegment eliminations
 
 
 
 
 
 
(4.3
)
Change in LIFO reserve
 
 
 
 
 
 
2.2

 
$
958.8

 
$
82.5

 
$
1,041.3

 
$
98.5

 

7
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 


 
External
Sales
 
Inter-
Segment
Sales
 
Total
Sales
 
EBIT
Six Months Ended June 30, 2014
 
 
 
 
 
 
 
Residential Furnishings
$
1,015.0

 
$
19.8

 
$
1,034.8

 
$
105.0

Commercial Fixturing & Components
183.4

 
2.9

 
186.3

 
(108.9
)
Industrial Materials
319.6

 
114.2

 
433.8

 
25.4

Specialized Products
402.7

 
26.4

 
429.1

 
60.4

Intersegment eliminations
 
 
 
 
 
 
(6.3
)
Change in LIFO reserve
 
 
 
 
 
 
—

 
$
1,920.7

 
$
163.3

 
$
2,084.0

 
$
75.6

Six Months Ended June 30, 2013
 
 
 
 
 
Residential Furnishings
$
969.7

 
$
5.9

 
$
975.6

 
$
84.7

Commercial Fixturing & Components
240.8

 
2.2

 
243.0

 
9.5

Industrial Materials
315.4

 
124.5

 
439.9

 
43.6

Specialized Products
365.6

 
29.1

 
394.7

 
44.1

Intersegment eliminations
 
 
 
 
 
 
(8.8
)
Change in LIFO reserve
 
 
 
 
 
 
4.8

 
$1,891.5
 
$
161.7

 
$
2,053.2

 
$
177.9

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. 
 
June 30,
2014
 
December 31,
2013
Residential Furnishings
$
583.6

 
$
586.5

Commercial Fixturing & Components
124.2

 
144.9

Industrial Materials
259.4

 
248.0

Specialized Products
243.3

 
225.0

Average current liabilities included in segment numbers above
504.3

 
460.6

Unallocated assets (1)
1,466.1

 
1,492.4

Difference between average assets and period-end balance sheet
62.5

 
(49.3
)
Total assets
$
3,243.4

 
$
3,108.1

 
(1)
Unallocated assets consist primarily of goodwill, other intangibles, cash and deferred tax assets.

5. DISCONTINUED OPERATIONS
 
In the second quarter of 2013 we exited three small operations:

•
We closed our final location that produced wire dishwasher racks, thereby discontinuing that line of business. This operation, which was previously in our Industrial Materials segment, was part of a restructuring plan that began in the fourth quarter of 2011. Tax benefits related to this business were recorded in the second quarters of both 2012 and 2013.
•
We divested the specialty trailers portion of the Commercial Vehicle Products (CVP) Unit. This branch was previously part of the Specialized Products segment. No significant gains or losses were realized on the sale of this business.
•
We closed a cotton-based erosion control products operation that was previously part of the Industrial Materials Segment. Charges of $1.9 were recorded in the second quarter of 2013 to reflect estimates of fair value less
costs to sell, including $1.5 of fixed asset impairments as discussed Note 6.
 



8
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 



The table below includes activity related to these operations:
 
Six Months Ended June 30,
 
Three Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
External sales:
 
 
 
 
 
 
 
Industrial Materials:
 
 
 
 
 
 
 
    Wire dishwasher racks
$
—

 
$
4.1

 
$
—

 
$
1.2

    Cotton-based erosion control products
—

 
—

 
—

 
—

Specialized Products - the specialty trailers portion of the CVP Unit
—

 
.5

 
—

 
.1

Total external sales
—

 
4.6

 
—

 
1.3

 
 
 
 
 
 
 
 
Earnings (loss):
 
 
 
 
 
 
 
Industrial Materials:
 
 
 
 
 
 
 
    Wire dishwasher racks
—

 
1.0

 
—

 
.2

    Cotton-based erosion control products
—

 
(2.6
)
 
—

 
(2.3
)
Specialized Products - the specialty trailers portion of the CVP Unit
—

 
(.7
)
 
—

 
(.4
)
Earnings (loss) before interest and income taxes
—

 
(2.3
)
 
—

 
(2.5
)
Income tax benefit (1)
—

 
9.2

 
—

 
9.3

Earnings from discontinued operations (net of tax)
$
—

 
$
6.9

 
$
—

 
$
6.8


(1) The 2013 tax benefit is primarily related to a worthless stock deduction associated with the subsidiary that produced wire dishwasher racks.
 
6. IMPAIRMENT CHARGES

Pre-tax impact of impairment charges is summarized in the following table.
 
Goodwill impairments associated with continuing operations are reported on the Statements of Operations in “Impairment of goodwill” and other asset impairments are reported in "Other (income) expense, net." Charges associated with discontinued operations are reported on the Statements of Operations in “Earnings (loss) from discontinued operations, net of tax.”
 
Six Months Ended June 30,
 
Three Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
 
Goodwill Impairment
 
Other Long-Lived Asset Impairments
 
Other Long-Lived Asset Impairments
 
Goodwill Impairment
 
Other Long-Lived Asset Impairments
 
Other Long-Lived Asset Impairments
Continuing operations:
 
 
 
 
 
 
 
 
 
 
 
Residential Furnishings
$
—

 
$
1.0

 
$
.8

 
$
—

 
$
.6

 
$
.6

Commercial Fixturing & Components - Store Fixtures
108.0

 
—

 
—

 
108.0

 
—

 
—

Total continuing operations
108.0

 
1.0

 
.8

 
108.0

 
.6

 
.6

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
Industrial Materials - Cotton-based erosion control products
—

 
—

 
1.5

 
—

 
—

 
1.5

Total discontinued operations
—

 
—

 
1.5

 
—

 
—

 
1.5

Total impairment charges
$
108.0

 
$
1.0

 
$
2.3

 
$
108.0

 
$
.6

 
$
2.1






9
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 



Other Long-Lived Assets
 
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 or third party estimates of fair vale less selling costs.
 
Goodwill
 
Goodwill is required to be tested for impairment at least once a year and as triggering events may occur. We perform our annual goodwill impairment review in the second quarter of each year.
 
Fair value of reporting units is determined using a combination of two valuation methods: a market approach and an income approach. Each method is generally given equal weight in determining the fair value assigned to each reporting unit. Absent an indication of fair value from a potential buyer or similar specific transaction, we believe that the use of these two methods provides a reasonable estimate of a reporting unit’s fair value. Assumptions common to both methods are operating plans and economic projections, which are used to project future revenues, earnings, and after-tax cash flows for each reporting unit. These assumptions are applied consistently for both methods.
 
The market approach estimates fair value by first determining price-to-earnings ratios for comparable publicly-traded companies with similar characteristics of the reporting unit. The price-to-earnings ratio for comparable companies is based upon current enterprise value compared to projected earnings for the next two years. The enterprise value is based upon current market capitalization and includes a 25% control premium. Projected earnings are based upon market analysts’ projections. The earnings ratios are applied to the projected earnings of the comparable reporting unit to estimate fair value. Management believes this approach is appropriate because it provides a fair value estimate using multiples from entities with operations and economic characteristics comparable to our reporting units.
 
The income approach is based on projected future (debt-free) cash flow that is discounted to present value using factors that consider the timing and risk of future cash flows. Management believes that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating cash flow performance. Discounted cash flow projections are based on 10-year financial forecasts developed from operating plans and economic projections noted above, sales growth, estimates of future expected changes in operating margins, terminal value growth rates, future capital expenditures and changes in working capital requirements.
 
If a triggering event occurs, special consideration is given to the new circumstances when determining the fair value of the impacted reporting unit.

Goodwill Impairment Reviews
 
We performed our annual goodwill impairment review in June 2014, and on July 14, 2014, concluded that a goodwill impairment charge was required for one reporting unit, Store Fixtures which is part of the Commercial Fixturing and Components segment.

The Store Fixtures reporting unit is dependent upon capital spending by retailers on both new stores and remodeling of existing stores. Because of the seasonal nature of the fixture & display industry (where revenue and profitability are typically expected to increase in the second and third quarters assuming the normal historical pattern of heavy shipments during these months) we reasonably anticipated being awarded significant customer orders in the second quarter of 2014. However, as the second quarter progressed, anticipated orders did not materialize and the Store Fixtures business deteriorated, with declines most pronounced in May and June. Taking these recent developments into account, we lowered our projection of future margins and growth rates (from 4.8% in prior year's review to .5% in the current year for 10-year compound annual growth rate for EBIT plus depreciation and amortization) and increased the discount rate from 10.5% to 12%, causing fair value to fall below carrying value. The lower expectations of future revenue and profitability are due to reduced overall market demand for the shelving, counters, showcases and garment racks as many retailers are reducing their investments in traditional store space and focusing more on e-commerce initiatives.

We have engaged an investment banker and are exploring strategic alternatives regarding the Store Fixtures reporting unit, including the possibility of divestiture of this business. However, not all of the held for sale criteria for Store Fixtures have been met. As a result, we determined a triggering event had occurred to test other long-lived assets which were evaluated for impairment under the held for use model. No long-lived asset impairments (excluding goodwill) were indicated during this review.

10
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 


 
Because the fair value of the Store Fixtures reporting unit had fallen below recorded book values, we performed the second step of the test which requires a fair value assessment of all assets and liabilities of the reporting unit to calculate an implied goodwill amount. This resulted in a $108.0 goodwill impairment charge that was recorded in the second quarter of 2014. This charge reflects the complete impairment of all goodwill associated with the Store Fixtures reporting unit.

The fair values of reporting units in relation to their respective carrying values and significant assumptions used in the June 2014 review are presented in the table below. The information below excludes Store Fixtures, as this unit had no goodwill remaining after the second quarter 2014 impairment.
Percentage of Fair Value in Excess of Carrying Value
June 30, 2014
Goodwill Value
 
10-year
Compound
Annual Growth
Rate Range for Sales
 
Terminal
Values Long-
term Growth
Rate for Debt-Free Cash Flow
 
Discount  Rate
Ranges
< 25%
$
—

 
 
 
 
 
 
25% - 49%
203.6

 
2.0% - 5.5%
 
3.0
%
 
9.5% - 10.0%
50% - 74%
399.3

 
.5% - 3.8%
 
3.0
%
 
9.0% - 12.0%
75%+
239.2

 
3.7% - 8.2%
 
3.0
%
 
9.0% - 9.5%
 
$
842.1

 
.5% - 8.2%
 
3.0
%
 
9.0% - 12.0%

7. EARNINGS PER SHARE

Basic and diluted earnings per share were calculated as follows:
 
Six Months Ended 
 June 30,
 
Three Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
Earnings:
 
 
 
 
 
 
 
Earnings from continuing operations
$
30.6

 
$
114.5

 
$
(23.1
)
 
$
65.1

(Earnings) attributable to noncontrolling interest, net of tax
(1.4
)
 
(1.0
)
 
(.8
)
 
(.6
)
Net earnings from continuing operations attributable to Leggett & Platt, Inc. common shareholders
29.2

 
113.5

 
(23.9
)
 
64.5

Earnings (loss) from discontinued operations, net of tax
—

 
6.9

 
—

 
6.8

Net earnings attributable to Leggett & Platt, Inc. common shareholders
$
29.2

 
$
120.4

 
$
(23.9
)
 
$
71.3

 
 
 
 
 
 
 
 
Weighted average number of shares (in millions):
 
 
 
 
 
 
 
Weighted average number of common shares used in basic EPS
141.9

 
145.9

 
141.4

 
145.8

Dilutive effect of equity-based compensation
1.7

 
2.1

 
—

 
2.3

Weighted average number of common shares and dilutive potential common shares used in diluted EPS
143.6

 
148.0

 
141.4

 
148.1

 
 
 
 
 
 
 
 
Basic and Diluted EPS:
 
 
 
 
 
 
 
Basic EPS attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Continuing operations
$
.21

 
$
.78

 
$
(.17
)
 
$
.44

Discontinued operations
—

 
.05
 
—

 
.05
Basic EPS attributable to Leggett & Platt, Inc. common shareholders
$
.21

 
$
.83

 
$
(.17
)
 
$
.49

Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Continuing operations
$
.20

 
$
.77

 
$
(.17
)
 
$
.44

Discontinued operations
—

 
.05

 
—

 
.05

Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
$
.20

 
$
.81

 
$
(.17
)
 
$
.48

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

 
—

 
—

 
—




11
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 


8. ACCOUNTS AND OTHER RECEIVABLES
Accounts and other receivables consisted of the following:
 
 
June 30, 2014
 
December 31, 2013
 
Current
 
Long-term
 
Current
 
Long-term
Gross receivables:
 
 
 
 
 
 
 
Trade accounts receivable
$
568.1

 
$
—

 
$
447.4

 
$
—

Trade notes receivable
2.0

 
1.6

 
2.6

 
2.3

Total trade receivables
570.1

 
1.6

 
450.0

 
2.3

Other notes receivable:
 
 
 
 
 
 
 
Notes received as partial payment for divestitures
1.2

 
4.4

 
.5

 
5.4

Other
2.9

 
.4

 
3.0

 
1.6

Other receivables
45.8

 
—

 
29.1

 
—

Subtotal other receivables
49.9

 
4.8

 
32.6

 
7.0

Total accounts and other receivables
620.0

 
6.4

 
482.6

 
9.3

Allowance for doubtful accounts:
 
 
 
 
 
 
 
Trade accounts receivable
(15.8
)
 
—

 
(14.6
)
 
—

Trade notes receivable
(.8
)
 
(1.2
)
 
(.6
)
 
(1.3
)
Total trade receivables
(16.6
)
 
(1.2
)
 
(15.2
)
 
(1.3
)
Other notes receivable
—

 
(.4
)
 
—

 
(1.1
)
Total allowance for doubtful accounts
(16.6
)
 
(1.6
)
 
(15.2
)
 
(2.4
)
Total net receivables
$
603.4

 
$
4.8

 
$
467.4

 
$
6.9

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, 2013
 
2014
Charges
 
2014
Charge-
offs,
Net of
Recoveries
 
Balance at June 30, 2014
Trade accounts receivable
$
14.6

 
$
1.7

 
$
.5

 
$
15.8

Trade notes receivable
1.9

 
.1

 
—

 
2.0

Total trade receivables
16.5

 
1.8

 
.5

 
17.8

Other notes receivable
1.1

 
—

 
.7

 
.4

Total allowance for doubtful accounts
$
17.6

 
$
1.8

 
$
1.2

 
$
18.2
















12
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 


9. STOCK-BASED COMPENSATION
The following table recaps the components of stock-based and stock-related compensation for each period presented:
 
 
Six Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
To be settled with stock
 
To be settled in cash
 
To be settled with stock
 
To be settled in cash
Options (1):
 
 
 
 
 
 
 
         Amortization of the grant date fair value
$
.4

 
$
—

 
$
1.0

 
$
—

         Cash payments in lieu of options
—

 
.9

 
—

 
.8

Stock-based retirement plans contributions (2)
3.3

 
.8

 
3.9

 
.7

Discounts on various stock awards:

 
 
 

 
 
Deferred Stock Compensation Program (1)
1.3

 
—

 
1.0

 
—

Stock-based retirement plans (2)
1.2

 
—

 
.7

 
—

Discount Stock Plan (6)
.5

 
—

 
.5

 
—

Performance Stock Unit awards (3)
3.1

 
2.4

 
3.2

 
3.4

Restricted Stock Unit awards (4)
1.7

 
—

 
2.6

 
—

Profitable Growth Incentive awards (5)
.8

 
.8

 
.5

 
.5

Other, primarily non-employee directors restricted stock
.6

 
—

 
.7

 
—

Total stock-related compensation expense
12.9

 
$
4.9

 
14.1

 
$
5.4

Employee contributions for above stock plans
7.3

 
 
 
6.1

 
 
Total stock-based compensation
$
20.2

 
 
 
$
20.2

 
 
Recognized tax benefits on stock-based compensation expense
$
4.9

 
 
 
$
5.4

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended 
 June 30,
 
Three Months Ended 
 June 30,
 
2014
 
2013
 
To be settled with stock
 
To be settled in cash
 
To be settled with stock
 
To be settled in cash
Options (1):
 
 
 
 
 
 
 
         Amortization of the grant date fair value
$
.2

 
$
—

 
$
.5

 
$
—

         Cash payments in lieu of options
—

 
—

 
—

 
—

Stock-based retirement plans contributions (2)
1.7

 
.3

 
1.6

 
.2

Discounts on various stock awards:
 
 
 
 
 
 
 
Deferred Stock Compensation Program (1)
.6

 
—

 
.3

 
—

Stock-based retirement plans (2)
.5

 
—

 
.2

 
—

Discount Stock Plan (6)
.2

 
—

 
.2

 
—

Performance Stock Unit awards (3)
1.6

 
1.2

 
1.6

 
(.9
)
Restricted Stock Unit awards (4)
.9

 
—

 
.9

 
—

Profitable Growth Incentive awards (5)
.4

 
.4

 
.3

 
.3

Other, primarily non-employee directors restricted stock
.3

 
—

 
.2

 
—

Total stock-related compensation expense
6.4

 
$
1.9

 
5.8

 
$
(.4
)
Employee contributions for above stock plans
3.3

 
 
 
2.9

 
 
Total stock-based compensation
$
9.7

 
 
 
$
8.7

 
 
Recognized tax benefits on stock-based compensation expense
$
2.4

 
 
 
$
2.3

 
 
 





13
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 


(1)
Stock Option Grants
Historically we have granted stock options in the following areas:
 
•
On a discretionary basis to a broad group of employees
•
In conjunction with our Deferred Compensation Program
•
As compensation of outside directors

Starting in 2013, we discontinued the broad annual option grant, and options are now offered only in conjunction with the Deferred Compensation Program discussed below, and were replaced with either cash awards or RSUs. Certain key management employees participated in a new Profitable Growth Incentive (PGI) program beginning in 2013, as discussed below.
        
Deferred Compensation Program
 
We offer a Deferred Compensation Program under which key managers and outside directors may elect to receive stock options, stock units or interest-bearing cash deferrals in lieu of cash compensation:
 
•
Stock options under this program are granted on the last business day of the year prior to the year the compensation is earned. The number of options granted equals the deferred compensation times five, divided by the stock’s market price on the date of grant. The option has a 10-year term. It vests as the associated compensation is earned and becomes exercisable beginning 15 months after the grant date. Stock is issued when the option is exercised.
•
Deferred stock units (DSU) under this program are acquired every two weeks (when the compensation would have otherwise been paid) at a 20% discount to the market price of our common stock on each acquisition date and they vest immediately. Expense is recorded as the compensation is earned. Stock units earn dividends at the same rate as cash dividends paid on our common stock. These dividends are used to acquire stock units at a 20% discount. Stock units are converted to common stock and distributed in accordance with the participant’s pre-set election. However, stock units may be settled in cash at the discretion of the Company. Participants must begin receiving distributions no later than ten years after the effective date of the deferral and installment distributions cannot exceed ten years.
•
Interest-bearing cash deferrals under this program are reported in Other long-term liabilities on the balance sheet.

(2) Stock-Based Retirement Plans
 
We have two stock-based retirement plans: the tax-qualified Stock Bonus Plan (SBP) for non-highly compensated employees, and the non-qualified Executive Stock Unit Program (ESUP) for highly compensated employees. We make matching contributions to both plans. In addition to the automatic 50% match, we will make another matching contribution of up to 50% of the employee’s contributions for the year if certain profitability levels, as defined in the SBP and the ESUP, are obtained. Company contributions to the ESUP, including dividend equivalents, are used to acquire stock units at 85% of the common stock market price on the acquisition date.

(3) 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. 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 comparator companies. Grant date fair values are amortized using the straight-line method over the three-year vesting period.



14
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
 
Six Months Ended
June 30,
 
2014
 
2013
Total shares base award
.2

 
.2

Grant date per share fair value
$
30.45

 
$
27.60

Risk-free interest rate
.8
%
 
.4
%
Expected life in years
3.0

 
3.0

Expected volatility (over expected life)
25.9
%
 
29.1
%
Expected dividend yield (over expected life)
3.9
%
 
4.2
%
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
 
Distribution Date
2010
 
December 31, 2012
 
46th percentile
 
91.0%
 
.3 million
 
January 2013
2011
 
December 31, 2013
 
55th percentile
 
64.2%
 
.2 million
 
January 2014

The above information represents the 65% portion of the award that we intend to pay in shares of our common stock, although we reserve the right to pay up to 100% in cash. There is also an additional amount that represents 35% of the award that we will settle in cash. It is recorded as a liability and is adjusted to fair value at each reporting period. 

(4) Restricted Stock Unit Awards
 
RSU awards are generally granted as follows:
 
•
To managers in lieu of annual option grants
•
On a discretionary basis to selected managers
•
To selected executive officers in connection with employment agreements
•
As compensation for outside directors, who have a choice to receive RSUs or restricted stock

The value of these awards is determined by the stock price on the day of the award, and expense is recognized over the vesting period.

(5) Profitable Growth Incentive Awards

Starting in 2013, certain key management employees participated in a new Profitable Growth Incentive (PGI) program in lieu of the annual option grant. 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 2014 and 2013 base target PGI awards were each .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.

(6) Discount Stock Plan
 
Under the Discount Stock Plan (DSP), a tax-qualified §423 stock purchase plan, eligible employees may purchase shares of Leggett common stock at 85% of the closing market price on the last business day of each month. Shares are purchased and issued on the last business day of each month and generally cannot be sold or transferred for one year.

10. 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 the periods presented, and any additional consideration

15
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 



paid for prior years’ acquisitions. 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.
 
Six Months Ended June 30,
 
2014
 
2013
Accounts receivable
$
1.0

 
$
1.5

Inventory
11.2

 
1.5

Property, plant and equipment
17.2

 
2.0

Goodwill (1)
23.9

 
5.2

Other intangible assets
2.3

 
4.0

Other current and long-term assets
4.1

 
.1

Current liabilities
(7.3
)
 
(4.3
)
Additional consideration for prior years’ acquisitions
—

 
.1

Fair value of net identifiable assets
52.4

 
10.1

Less: Non-cash consideration
1.2

 
—

Net cash consideration
$
51.2

 
$
10.1


(1) Goodwill associated with the 2014 acquisitions is expected to provide an income tax benefit. Goodwill associated with the 2013 acquisition is not expected to provide an income tax benefit.

The following table summarizes acquisitions for the periods presented.
Six Months Ended
 
Number of Acquisitions
 
Segment
 
Product/Service
June 30, 2014
 
3
 
Residential Furnishings
 
Foam carpet underlay; Fabric converting for furniture and bedding; Innersprings
June 30, 2013
 
1
 
Industrial Materials
 
Tubing for the aerospace industry
On June 30, 2014, we acquired Tempur Sealy's three U.S. innerspring component production facilities for a purchase price of $47.7 million. Factors contributing to the recognition of $18.4 million in goodwill from the acquisition included: additional production that enhances economies of scale; benefits from our vertical integration in steel rod and wire; and the optimization of manufacturing across a broad asset base.
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 2014 and 2013 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 June 30, 2014, there was no substantial remaining consideration payable.

11. EMPLOYEE BENEFIT PLANS
The following table provides interim information as to our domestic and foreign defined benefit pension plans. Expected 2014 employer contributions are not significantly different than the $3.4 previously reported at December 31, 2013.
 
 
Six Months Ended 
 June 30,
 
Three Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
Components of net pension expense
 
 
 
 
 
 
 
Service cost
$
1.5

 
$
1.7

 
$
.8

 
$
.8

Interest cost
6.4

 
6.0

 
3.2

 
3.0

Expected return on plan assets
(7.8
)
 
(7.6
)
 
(3.9
)
 
(3.8
)
Recognized net actuarial loss
1.6

 
3.2

 
.8

 
1.7

Net pension expense
$
1.7

 
$
3.3

 
$
.9

 
$
1.7




16
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 



12. STATEMENT OF CHANGES IN EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME
 
Six Months Ended June 30, 2014
 
Total
Equity
 
Retained
Earnings
 
Common
Stock &
Additional
Contributed
Capital
 
Treasury
Stock
 
Noncontrolling
Interest
 
Accumulated
Other
Comprehensive
Income
Beginning balance, January 1, 2014
$
1,399.2

 
$
2,136.4

 
$
481.1

 
$
(1,320.7
)
 
$
7.9

 
$
94.5

Net earnings
30.6

 
30.6

 
—

 
—

 
—

 
—

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

 
(1.4
)
 
—

 
—

 
1.4

 
—

Dividends declared
(82.7
)
 
(85.1
)
 
2.4

 
—

 
—

 
—

Treasury stock purchased
(124.3
)
 
—

 
—

 
(124.3
)
 
—

 
—

Treasury stock issued
26.7

 
—

 
(11.9
)
 
38.6

 
—

 
—

Foreign currency translation adjustments
(4.3
)
 
—

 
—

 
—

 
(.2
)
 
(4.1
)
Cash flow hedges, net of tax
1.8

 
—

 
—

 
—

 
—

 
1.8

Defined benefit pension plans, net of tax
.7

 
—

 
—

 
—

 
—

 
.7

Stock options and benefit plan transactions, net of tax
14.7

 
—

 
14.7

 
—

 
—

 
—

Ending balance, June 30, 2014
$
1,262.4

 
$
2,080.5

 
$
486.3

 
$
(1,406.4
)
 
$
9.1

 
$
92.9

 
 
Six Months Ended June 30, 2013
 
Total
Equity
 
Retained
Earnings
 
Common
Stock &
Additional
Contributed
Capital
 
Treasury
Stock
 
Noncontrolling
Interest
 
Accumulated
Other
Comprehensive
Income
Beginning balance, January 1, 2013
$
1,442.2

 
$
2,109.6

 
$
460.6

 
$
(1,206.7
)
 
$
7.7

 
$
71.0

Net earnings
121.4

 
121.4

 
—

 
—

 
—

 
—

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

 
(1.0
)
 
—

 
—

 
1.0

 
—

Dividends declared
(82.6
)
 
(83.7
)
 
1.1

 
—

 
—

 
—

Treasury stock purchased
(90.0
)
 
—

 
—

 
(90.0
)
 
—

 
—

Treasury stock issued
46.2

 
—

 
(12.2
)
 
58.4

 
—

 
—

Foreign currency translation adjustments
(27.5
)
 
—

 
—

 
—

 
.1

 
(27.6
)
Cash flow hedges, net of tax
.9

 
—

 
—

 
—

 
—

 
.9

Defined benefit pension plans, net of tax
2.5

 
—

 
—

 
—

 
—

 
2.5

Stock options and benefit plan transactions, net of tax
20.6

 
—

 
20.6

 
—

 
—

 
—

Ending balance, June 30, 2013
$
1,433.7

 
$
2,146.3

 
$
470.1

 
$
(1,238.3
)
 
$
8.8

 
$
46.8











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)
Beginning balance, January 1, 2014
$
158.3

 
$
(23.5
)
 
$
(40.3
)
 
$
94.5

Other comprehensive income (loss) before reclassifications, pretax
(4.3
)
 
.6

 
(.5
)
 
(4.2
)
Amounts reclassified from accumulated other comprehensive income, pretax:

 

 

 

Net Sales
—

 
.2

 
—

 
.2

Cost of goods sold; selling and administrative expenses
—

 
—

 
1.6

 
1.6

Interest expense
—

 
2.0

 
—

 
2.0

Subtotal of reclassifications, pretax
—

 
2.2

 
1.6

 
3.8

Other comprehensive income (loss), pretax
(4.3
)
 
2.8

 
1.1

 
(.4
)
Income tax effect
—

 
(1.0
)
 
(.4
)
 
(1.4
)
Attributable to noncontrolling interest
.2

 
—

 
—

 
.2

Ending balance, June 30, 2014
$
154.2

 
$
(21.7
)
 
$
(39.6
)
 
$
92.9

 
 
 
 
 
 
 
 
Beginning balance, January 1, 2013
$
163.5

 
$
(25.5
)
 
$
(67.0
)
 
$
71.0

Other comprehensive income (loss) before reclassifications, pretax
(27.5
)
 
(.6
)
 
.5

 
(27.6
)
Amounts reclassified from accumulated other comprehensive income, pretax:

 

 

 

Cost of goods sold; selling and administrative expenses
—

 
.2

 
3.2

 
3.4

Interest expense
—

 
2.0

 
—

 
2.0

Subtotal of reclassifications, pretax
—

 
2.2

 
3.2

 
5.4

Other comprehensive income (loss), pretax
(27.5
)
 
1.6

 
3.7

 
(22.2
)
Income tax effect
—

 
(.7
)
 
(1.2
)
 
(1.9
)
Attributable to noncontrolling interest
(.1
)
 
—

 
—

 
(.1
)
Ending balance, June 30, 2013
$
135.9

 
$
(24.6
)
 
$
(64.5
)
 
$
46.8

13. 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
The areas in which we utilize fair value measures of financial assets and liabilities are presented in the table below.
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.

18
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
 


 
As of June 30, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Bank time deposits with original maturities of three months or less
$
—

 
$
146.5

 
$
—

 
$
146.5

Derivative assets* (Note 14)
—

 
1.1

 
—

 
1.1

Diversified investments associated with the Executive Stock Unit Program (ESUP)* (Note 9)
17.2

 
—

 
—

 
17.2

Total assets
$
17.2