Edgar Filing: LEGGETT & PLATT INC

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

LEG Q1 2015 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 March 31, 2015



¨	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.

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 April 24, 2015: 137,779,784

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LEGGETT & PLATT, INCORPORATED

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)



(Amounts in millions)	March 31, 2015			December 31, 2014
CURRENT ASSETS
Cash and cash equivalents	$	262.2		$	332.8
Trade receivables, net	482.5			470.4
Other receivables, net	49.5			52.9
Total receivables, net	532.0			523.3
Inventories
Finished goods	257.1			252.1
Work in process	51.2			55.5
Raw materials and supplies	259.6			247.0
LIFO reserve	(61.7		)	(73.0		)
Total inventories, net	506.2			481.6
Other current assets	108.9			91.9
Total current assets	1,409.3			1,429.6
PROPERTY, PLANT AND EQUIPMENT—AT COST
Machinery and equipment	1,101.7			1,161.5
Buildings and other	529.9			551.1
Land	39.9			40.1
Total property, plant and equipment	1,671.5			1,752.7
Less accumulated depreciation	1,138.3			1,193.8
Net property, plant and equipment	533.2			558.9
OTHER ASSETS
Goodwill	809.0			819.0
Other intangibles, less accumulated amortization of $133.6 and $129.7 as of March 31, 2015 and December 31, 2014, respectively	211.9			204.7
Sundry	139.8			128.4
Total other assets	1,160.7			1,152.1
TOTAL ASSETS	$	3,103.2		$	3,140.6
CURRENT LIABILITIES
Current maturities of long-term debt	$	202.2		$	201.7
Accounts payable	357.5			369.8
Accrued expenses	304.6			337.6
Other current liabilities	88.8			83.1
Total current liabilities	953.1			992.2
LONG-TERM LIABILITIES
Long-term debt	798.0			766.7
Other long-term liabilities	184.9			185.0
Deferred income taxes	50.8			41.8
Total long-term liabilities	1,033.7			993.5
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock	2.0			2.0
Additional contributed capital	506.8			502.4
Retained earnings	2,089.0			2,061.3
Accumulated other comprehensive loss	(40.8		)	(2.6		)
Treasury stock	(1,450.1		)	(1,416.6		)
Total Leggett & Platt, Inc. equity	1,106.9			1,146.5
Noncontrolling interest	9.5			8.4
Total equity	1,116.4			1,154.9
TOTAL LIABILITIES AND EQUITY	$	3,103.2		$	3,140.6

See accompanying notes to consolidated condensed financial statements.

LEGGETT & PLATT, INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended
	March 31,
(Amounts in millions, except per share data)	2015			2014
Net sales	$	966.2		$	875.5
Cost of goods sold	748.4			698.7
Gross profit	217.8			176.8
Selling and administrative expenses	97.5			92.1
Amortization of intangibles	5.2			4.8
Other (income) expense, net	3.4			(5.9		)
Earnings (loss) from continuing operations before interest and income taxes	111.7			85.8
Interest expense	11.0			10.4
Interest income	1.3			1.4
Earnings (loss) from continuing operations before income taxes	102.0			76.8
Income taxes	28.7			20.8
Earnings (loss) from continuing operations	73.3			56.0
Earnings (loss) from discontinued operations. net of tax	(.5		)	(2.3		)
Net earnings (loss)	72.8			53.7
(Earnings) attributable to noncontrolling interest, net of tax	(1.1		)	(.6		)
Net earnings (loss) attributable to Leggett & Platt, Inc. common shareholders	$	71.7		$	53.1
Earnings (loss) per share from continuing operations attributable to Leggett & Platt, Inc. common shareholders
Basic	$	.51		$	.39
Diluted	$	.50		$	.38
Earnings (loss) per share from discontinued operations attributable to Leggett & Platt, Inc. common shareholders
Basic	$	—		$	(.02	)
Diluted	$	—		$	(.02	)
Net earnings (loss) per share attributable to Leggett & Platt, Inc. common shareholders
Basic	$	.51		$	.37
Diluted	$	.50		$	.37

Cash dividends declared per share	$	.31		$	.30

Average shares outstanding
Basic	141.9			142.4
Diluted	143.8			144.0

See accompanying notes to consolidated condensed financial statements.

LEGGETT & PLATT, INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)



	Three Months Ended
	March 31,
(Amounts in millions)	2015			2014
Net earnings	$	72.8		$	53.7
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(37.8		)	(15.1		)
Cash flow hedges	(1.7		)	(.1		)
Defined benefit pension plans	1.3			.6
Other comprehensive loss	(38.2		)	(14.6		)
Comprehensive income	34.6			39.1
Less: comprehensive (income) attributable to noncontrolling interest	(1.1		)	(.4		)
Comprehensive income attributable to Leggett & Platt, Inc.	$	33.5		$	38.7

See accompanying notes to consolidated condensed financial statements.

LEGGETT & PLATT, INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)



	Three Months Ended March 31,
(Amounts in millions)	2015			2014
OPERATING ACTIVITIES
Net earnings	$	72.8		$	53.7
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	22.5			22.1
Amortization of intangibles and debt issuance costs	7.1			6.8
Provision for losses on accounts and notes receivable	1.5			1.1
Writedown of inventories	2.5			2.4
Goodwill impairment	4.1			—
Long-lived asset impairments	1.8			.5
Net gain from sales of assets and businesses	(1.5		)	(4.1		)
Deferred income tax expense	9.9			10.7
Stock-based compensation	12.2			10.5
Excess tax benefits from stock-based compensation	(11.4		)	(1.3		)
Other, net	4.9			1.6
Increases/decreases in, excluding effects from acquisitions and divestitures:
Accounts and other receivables	(28.5		)	(96.5		)
Inventories	(36.8		)	(27.6		)
Other current assets	(.1		)	(1.7		)
Accounts payable	(5.0		)	18.0
Accrued expenses and other current liabilities	(23.9		)	(15.9		)
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	32.1			(19.7		)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(21.7		)	(15.1		)
Purchases of companies, net of cash acquired	(12.2		)	(2.0		)
Proceeds from sales of assets and businesses	6.3			8.5
Other, net	(4.8		)	(5.7		)
NET CASH USED FOR INVESTING ACTIVITIES	(32.4		)	(14.3		)
FINANCING ACTIVITIES
Payments on long-term debt	(2.5		)	(6.0		)
Additions to long-term debt	.4			—
Change in commercial paper and short-term debt	32.8			126.4
Dividends paid	(42.7		)	(42.0		)
Issuances of common stock	3.5			4.3
Purchases of common stock	(63.9		)	(50.0		)
Excess tax benefits from stock-based compensation	11.4			1.3
Other, net	(1.8		)	(.4		)
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES	(62.8		)	33.6
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(7.5		)	(3.7		)
DECREASE IN CASH AND CASH EQUIVALENTS	(70.6		)	(4.1		)
CASH AND CASH EQUIVALENTS—January 1,	332.8			272.7
CASH AND CASH EQUIVALENTS—March 31,	$	262.2		$	268.6

See accompanying notes to consolidated condensed financial statements.

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, 2014 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, 2014.

Reclassifications

Certain reclassifications have been made to the prior year's information in the Notes to Consolidated Condensed Financial Statements to conform to the first quarter 2015 presentation as a result of changes in our management organizational structure and all related internal reporting (See Note 4 - Segment Information).

2. NEW ACCOUNTING GUIDANCE

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires those costs to be presented in the balance sheet as a direct deduction from the associated debt liability. We will adopt this guidance on January 1, 2016, and we do not believe it will have a material impact on our future financial statements.

In April 2014, the FASB issued updated guidance, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This guidance changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. We adopted this guidance on January 1, 2015, and 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. We are currently evaluating the newly issued guidance and the impact on our future financial statements.

3. INVENTORIES

About 50% of our inventories are valued using the Last-In, First-Out (LIFO) cost method and the remainder using the First-In, First-Out (FIFO) cost method. We calculate our LIFO reserve (the excess of FIFO cost over LIFO cost) on an annual basis. During interim periods, we estimate the current year annual change in the LIFO reserve (i.e., the annual LIFO expense or benefit) and allocate that change ratably to the four quarters. Because accurately predicting inventory prices for the year is difficult, the change in the LIFO reserve for the full year could be significantly different from the amount currently estimated. In addition, a variation in expected ending inventory levels could also impact total change in the LIFO reserve for the year. Any change in the annual LIFO estimate will be reflected in future quarters.

The following table contains the LIFO benefit (expense) included in continuing operations for each of the periods presented.



	Three Months Ended March 31,
	2015		2014
LIFO benefit (expense)	$	5.0	$	(.2	)

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

4. SEGMENT INFORMATION

Our reportable segments are the same as our operating segments, which also correspond with our management organizational structure. Because of the recent divestiture of the majority of the Store Fixtures business unit (formerly in the Commercial Products segment) along with the retirement of the senior operating vice president of the Industrial Materials segment, our management organizational structure and all related internal reporting changed during the first quarter of 2015. As a result, the composition of our four reportable segments changed to reflect the new structure beginning in the first quarter of 2015. The segment changes include: (i) the Adjustable Bed and Fashion Bed (formerly named Consumer Products) business units moved from Residential Furnishings to Commercial Products; (ii) the Aerospace Products business unit moved from Industrial Materials to Specialized Products; and (iii) the Spuhl machinery division moved from Specialized Products to Residential Furnishings. These segment changes were retrospectively applied to all prior periods presented.

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


•	Residential Furnishings—components for bedding and furniture, fabric and carpet cushion


•	Commercial Products—components for office and institutional furnishings, adjustable beds and consumer products


•	Industrial Materials—drawn steel wire, fabricated wire products, steel rod and welded steel tubing


•	Specialized Products—automotive seating components; titanium, nickel alloy and stainless steel tubing for the aerospace industry; specialized machinery and equipment; and commercial vehicle interiors

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 March 31, 2015
Residential Furnishings	$	511.7	$	17.8	$	529.5	$	52.1
Commercial Products	123.5		17.5		141.0		8.0
Industrial Materials	112.0		80.4		192.4		8.0
Specialized Products	219.0		9.5		228.5		39.3
Intersegment eliminations and other							(.7		)
Change in LIFO reserve							5.0
	$	966.2	$	125.2	$	1,091.4	$	111.7
Three Months Ended March 31, 2014
Residential Furnishings	$	432.8	$	15.6	$	448.4	$	46.8
Commercial Products	111.4		5.2		116.6		5.7
Industrial Materials	123.2		57.5		180.7		7.7
Specialized Products	208.1		7.8		215.9		27.6
Intersegment eliminations and other							(1.8		)
Change in LIFO reserve							(.2		)
	$	875.5	$	86.1	$	961.6	$	85.8

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, 2015		December 31, 2014
Residential Furnishings	$	626.3	$	588.1
Commercial Products	97.6		96.2
Industrial Materials	188.0		200.9
Specialized Products	258.5		260.5
Other (1)	44.8		90.4
Average current liabilities included in segment numbers above	522.8		520.2
Unallocated assets (2)	1,347.1		1,451.4
Difference between average assets and period-end balance sheet	18.1		(67.1		)
Total assets	$	3,103.2	$	3,140.6


(1)	Businesses sold or classified as discontinued operations.


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

5. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

During 2014 we engaged an investment banker and began exploring strategic alternatives regarding the Store Fixtures reporting unit, including the possibility of divestiture of this business. During the third quarter of 2014, all of the criteria to classify this unit as held for sale and discontinued operations were met. On November 1, 2014, we sold the majority of the Store Fixtures reporting unit for total consideration of $59.2 and recorded an after-tax loss of $4.7, which was recognized in discontinued operations. We continue to pursue the sale of the remaining portion of the reporting unit. Store Fixtures was previously part of the Commercial Products Segment and is classified as discontinued operations, net of income taxes, in the Consolidated Condensed Statements of Operations for the periods presented.

The table below includes activity related to these operations:



	Three Months Ended March 31,
	2015			2014
External sales:
Commercial Products - Store Fixtures	$	6.2		$	43.6

Earnings (loss):
Commercial Products - Store Fixtures	.4			(3.3		)
Subsequent activity related to previous divestitures	(.8		)	—
Earnings (loss) before interest and income taxes	(.4		)	(3.3		)
Income tax (expense) benefit	(.1		)	1.0
Earnings (loss) from discontinued operations, net of tax	$	(.5	)	$	(2.3	)

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Net assets held for sale by segment were as follows:



	March 31, 2015						December 31, 2014
	Assets		Liabilities		Net Assets		Assets		Liabilities		Net Assets
Residential Furnishings	$	2.5	$	—	$	2.5	$	4.1	$	—	$	4.1
Commercial Products	18.5		2.7		15.8		20.1		5.6		14.5
Industrial Materials	39.7		8.7		31.0		3.4		—		3.4
Specialized Products	5.2		—		5.2		5.2		—		5.2
	$	65.9	$	11.4	$	54.5	$	32.8	$	5.6	$	27.2

The major classes of assets and liabilities held for sale included in the Consolidated Condensed Balance Sheets were as follows:



	March 31, 2015		December 31, 2014
Current assets associated with discontinued operations:
Trade receivables, net	$	4.5	$	7.0
Other receivables, net	.1		.3
Inventories, net	2.8		3.0
Other current assets	.1		.1
Total current assets held for sale associated with discontinued operations	7.5		10.4
Current assets held for sale not associated with discontinued operations (1)	22.5		—
Total current assets held for sale	30.0		10.4
Non-current assets associated with discontinued operations:
Property, plant and equipment, net	4.8		5.2
Other intangibles, net	.9		.6
Sundry	1.4		1.4
Total non-current assets held for sale associated with discontinued operations	7.1		7.2
Non-current assets held for sale not assoc.with discontinued operations (1) (2)	28.8		15.2
Total non-current assets held for sale	35.9		22.4
Total assets held for sale	65.9		32.8
Current liabilities associated with discontinued operations:
Accounts payable	1.9		3.7
Accrued expenses	.5		1.5
Other current liabilities	.2		.3
Total current liabilities held for sale associated with discontinued operations	2.6		5.5
Total current liabilities held for sale not assoc. with discontinued operations (1)	8.7		—
Total current liabilities held for sale	11.3		5.5
Long term liabilities associated with discontinued operations:
Deferred income tax	.1		.1
Total liabilities held for sale	11.4		5.6

Net assets held for sale	$	54.5	$	27.2

(1) The Steel Tubing business reached held for sale status in the first quarter of 2015, but did not qualify for discontinued operations treatment.

(2) This table includes $14.9 and $15.2 of property, plant and equipment held for sale at March 31, 2015 and December 31, 2014, respectively, primarily associated with the closings of various operations and prior year restructurings.

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

6. IMPAIRMENT CHARGES

Pre-tax impact of impairment charges is summarized in the following table.

Other long-lived 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.”



	Three Months Ended March 31,
	2015				2014
	Goodwill Impairment		Other Long-Lived Asset Impairments		Other Long-Lived Asset Impairments
Continuing operations:
Residential Furnishings	$	—	$	.2	$	.4
Industrial Materials - Steel Tubing	4.1		1.4		—
Total continuing operations	4.1		1.6		.4
Discontinued operations:
Subsequent activity related to previous divestitures	—		.2		.1
Total discontinued operations	—		.2		.1
Total impairment charges	$	4.1	$	1.8	$	.5

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 value 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.

We have not had any triggering events since the last annual goodwill impairment review in the second quarter of 2014. As discussed in Note 4, our internal management organizational structure and all related internal reporting changed during the first quarter of 2015. We reassigned the assets and liabilities of the reporting units affected, and also reassigned goodwill using a relative fair value approach. The results in the table below reflect the updated reporting unit structure.

The Steel Tubing unit met the held for sale criteria during the first quarter of 2015, and is not reflected in the table below. Because fair value less costs to sell had fallen below recorded book value, we fully impaired this unit's goodwill and incurred a $4.1 goodwill impairment charge in the first quarter of 2015.

The reassigned 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.



Percentage of Fair Value in Excess of Carrying Value	March 31, 2015 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%	150.7		4.0% - 5.5%	3.0	%	10.0%
50% - 74%	435.1		.5% - 3.8%	3.0	%	9.0% - 12.0%
75%+	223.2		3.7% - 8.2%	3.0	%	9.0% - 9.5%
	$	809.0	.5% - 8.2%	3.0	%	9.0% - 12.0%

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

7. EARNINGS PER SHARE

Basic and diluted earnings per share were calculated as follows:



	Three Months Ended March 31,
	2015			2014
Earnings:
Earnings from continuing operations	$	73.3		$	56.0
(Earnings) attributable to noncontrolling interest, net of tax	(1.1		)	(.6		)
Net earnings from continuing operations attributable to Leggett & Platt, Inc. common shareholders	72.2			55.4
Earnings (loss) from discontinued operations, net of tax	(.5		)	(2.3		)
Net earnings attributable to Leggett & Platt, Inc. common shareholders	$	71.7		$	53.1

Weighted average number of shares (in millions):
Weighted average number of common shares used in basic EPS	141.9			142.4
Dilutive effect of equity-based compensation	1.9			1.6
Weighted average number of common shares and dilutive potential common shares used in diluted EPS	143.8			144.0

Basic and Diluted EPS:
Basic EPS attributable to Leggett & Platt, Inc. common shareholders
Continuing operations	$	.51		$	.39
Discontinued operations	—			(.02		)
Basic EPS attributable to Leggett & Platt, Inc. common shareholders	$	.51		$	.37
Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
Continuing operations	$	.50		$	.38
Discontinued operations	—			(.02		)
Diluted EPS attributable to Leggett & Platt, Inc. common shareholders	$	.50		$	.37

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

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

8. ACCOUNTS AND OTHER RECEIVABLES

Accounts and other receivables consisted of the following:



	March 31, 2015						December 31, 2014
	Current			Long-term			Current			Long-term
Trade accounts receivable	$	495.5		$	—		$	484.0		$	—
Trade notes receivable	1.1			2.9			1.1			2.9
Total trade receivables	496.6			2.9			485.1			2.9
Other notes receivable:
Notes received as partial payment for divestitures	—			—			.9			—
Other	—			3.3			—			3.3
Income tax receivables	18.9			—			14.0			—
Other receivables	30.6			—			38.0			—
Subtotal other receivables	49.5			3.3			52.9			3.3
Total trade and other receivables	546.1			6.2			538.0			6.2
Allowance for doubtful accounts:
Trade accounts receivable	(14.0		)	—			(14.7		)	—
Trade notes receivable	(.1		)	(2.3		)	—			(2.1		)
Total trade receivables	(14.1		)	(2.3		)	(14.7		)	(2.1		)
Other notes receivable	—			(.4		)	—			(.4		)
Total allowance for doubtful accounts	(14.1		)	(2.7		)	(14.7		)	(2.5		)
Total net receivables	$	532.0		$	3.5		$	523.3		$	3.7

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, 2014		2015 Charges		2015 Charge- offs, Net of Recoveries		Balance at March 31, 2015
Trade accounts receivable	$	14.7	$	1.2	$	1.9	$	14.0
Trade notes receivable	2.1		.3		—		2.4
Total trade receivables	16.8		1.5		1.9		16.4
Other notes receivable	.4		—		—		.4
Total allowance for doubtful accounts	$	17.2	$	1.5	$	1.9	$	16.8

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:



	Three Months Ended March 31,				Three Months Ended March 31,
	2015				2014
	To be settled with stock		To be settled in cash		To be settled with stock		To be settled in cash
Options:
Amortization of the grant date fair value	$	.1	$	—	$	.2	$	—
Cash payments in lieu of options	—		1.0		—		.9
Stock-based retirement plans contributions	2.2		.4		1.6		.5
Discounts on various stock awards:
Deferred Stock Compensation Program	.6		—		.7		—
Stock-based retirement plans	.4		—		.7		—
Discount Stock Plan	.3		—		.3		—
Performance Stock Unit awards (1)	1.6		2.9		1.5		1.2
Restricted Stock Unit awards	.9		—		.8		—
Profitable Growth Incentive awards (2)	1.9		1.7		.4		.4
Other, primarily non-employee directors restricted stock	.4		—		.3		—
Total stock-related compensation expense	8.4		$	6.0	6.5		$	3.0
Employee contributions for above stock plans	3.8				4.0
Total stock-based compensation	$	12.2			$	10.5
Recognized tax benefits on stock-based compensation expense	$	3.2			$	2.5

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

(1) Performance Stock Unit Awards

We grant Performance Stock Unit (PSU) awards in the first quarter of each year to selected officers and other key managers. 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.

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,
	2015			2014
Total shares base award	.2			.2
Grant date per share fair value	$	42.22		$	30.45
Risk-free interest rate	1.1		%	.8		%
Expected life in years	3.0			3.0
Expected volatility (over expected life)	19.8		%	25.9		%
Expected dividend yield (over expected life)	2.9		%	3.9		%



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
2011	December 31, 2013	55th percentile	64.2%	.2 million	January 2014
2012	December 31, 2014	30th percentile	157.0%	.4 million	January 2015

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

(2) Profitable Growth Incentive Awards

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 2015 and 2014 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.

Two-Year Performance Cycle

Award Year

Completion Date

Average Payout as a

Percent of the

Base Award

Number of Shares

Distributed

Cash Portion

Distribution Date

2013

December 31, 2014

127.0%

.1 million

3.5

February 2015

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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 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.



	Three Months Ended March 31,
	2015			2014
Accounts receivable	$	3.7		$	—
Inventory	4.9			.3
Property, plant and equipment	1.9			1.5
Goodwill (1)	8.4			5.5
Other intangible assets	14.8			.6
Current liabilities	(11.1		)	(5.9		)
Long-term liabilities	(10.4		)	—
Net cash consideration	$	12.2		$	2.0

(1) Goodwill associated with the 2015 and 2014 acquisitions are expected to provide an income tax benefit.

The following table summarizes acquisitions for the periods presented.

In March 2015 we acquired a 70% interest in a European private-label manufacturer of high-end upholstered furniture for office, commercial and other settings. This business, which will be included in the Work Furniture Group of our Commercial Products segment, is complimentary to our existing North American private-label operation and allows us to support our Work Furniture customers as they expand globally. We will acquire the remaining 30% over the next five years and have recorded a long-term liability of approximately $10.0 for the future payments.

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 2015 and 2014 acquisitions had occurred on January 1 of each year presented are not materially different from the amounts reflected in the accompanying financial statements. Certain of our acquisition agreements provide for additional consideration to be paid in cash at a later date and are recorded as a liability at the acquisition date. At March 31, 2015, there was no substantial remaining consideration payable other than the liability discussed above.

11. EMPLOYEE BENEFIT PLANS

The following table provides interim information as to our domestic and foreign defined benefit pension plans. Expected 2015 employer contributions are not significantly different than the $1.9 previously reported at December 31, 2014.



	Three Months Ended March 31,
	2015			2014
Components of net pension expense
Service cost	$	1.0		$	.8
Interest cost	3.3			3.2
Expected return on plan assets	(4.2		)	(3.9		)
Recognized net actuarial loss	1.5			.8
Net pension expense	$	1.6		$	.9

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

12. STATEMENT OF CHANGES IN EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME



	Three Months Ended March 31, 2015
	Total Equity			Retained Earnings			Common Stock & Additional Contributed Capital			Treasury Stock			Noncontrolling Interest		Accumulated Other Comprehensive Income
Beginning balance, January 1, 2015	$	1,154.9		$	2,061.3		$	504.4		$	(1,416.6	)	$	8.4	$	(2.6	)
Net earnings	72.8			72.8			—			—			—		—
(Earnings) loss attributable to noncontrolling interest, net of tax	—			(1.1		)	—			—			1.1		—
Dividends declared	(42.7		)	(44.0		)	1.3			—			—		—
Treasury stock purchased	(68.9		)	—			—			(68.9		)	—		—
Treasury stock issued	15.9			—			(19.5		)	35.4			—		—
Foreign currency translation adjustments	(37.8		)	—			—			—			—		(37.8		)
Cash flow hedges, net of tax	(1.7		)	—			—			—			—		(1.7		)
Defined benefit pension plans, net of tax	1.3			—			—			—			—		1.3
Stock options and benefit plan transactions, net of tax	22.6			—			22.6			—			—		—
Ending balance, March 31, 2015	$	1,116.4		$	2,089.0		$	508.8		$	(1,450.1	)	$	9.5	$	(40.8	)



	Three Months Ended March 31, 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	53.7			53.7			—			—			—			—
(Earnings) loss attributable to noncontrolling interest, net of tax	—			(.6		)	—			—			.6			—
Dividends declared	(41.5		)	(42.7		)	1.2			—			—			—
Treasury stock purchased	(46.4		)	—			—			(46.4		)	—			—
Treasury stock issued	9.1			—			(17.0		)	26.1			—			—
Foreign currency translation adjustments	(15.1		)	—			—			—			(.2		)	(14.9		)
Cash flow hedges, net of tax	(.1		)	—			—			—			—			(.1		)
Defined benefit pension plans, net of tax	.6			—			—			—			—			.6
Stock options and benefit plan transactions, net of tax	11.4			—			11.4			—			—			—
Ending balance, March 31, 2014	$	1,370.9		$	2,146.8		$	476.7		$	(1,341.0	)	$	8.3		$	80.1

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, 2015	$	86.8		$	(20.1	)	$	(69.3	)	$	(2.6	)
Other comprehensive income (loss) before reclassifications, pretax	(37.8		)	(2.8		)	.4			(40.2		)
Amounts reclassified from accumulated other comprehensive income, pretax:
Net Sales	—			(.2		)	—			(.2		)
Cost of goods sold; selling and administrative expenses	—			—			1.5			1.5
Interest expense	—			1.0			—			1.0
Subtotal of reclassifications, pretax	—			.8			1.5			2.3
Other comprehensive income (loss), pretax	(37.8		)	(2.0		)	1.9			(37.9		)
Income tax effect	—			.3			(.6		)	(.3		)
Attributable to noncontrolling interest	—			—			—			—
Ending balance, March 31, 2015	$	49.0		$	(21.8	)	$	(68.0	)	$	(40.8	)

Beginning balance, January 1, 2014	$	158.3		$	(23.5	)	$	(40.3	)	$	94.5
Other comprehensive income (loss) before reclassifications, pretax	(15.1		)	(1.0		)	.1			(16.0		)
Amounts reclassified from accumulated other comprehensive income, pretax:
Net Sales	—			.1			—			.1
Cost of goods sold; selling and administrative expenses	—			—			.8			.8
Interest expense	—			1.0			—			1.0
Subtotal of reclassifications, pretax	—			1.1			.8			1.9
Other comprehensive income (loss), pretax	(15.1		)	.1			.9			(14.1		)
Income tax effect	—			(.2		)	(.3		)	(.5		)
Attributable to noncontrolling interest	.2			—			—			.2
Ending balance, March 31, 2014	$	143.4		$	(23.6	)	$	(39.7	)	$	80.1

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.

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)



	As of March 31, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Bank time deposits with original maturities of three months or less	$	—	$	107.7	$	—	$	107.7
Derivative assets (Note 14)	—		2.7		—		2.7
Diversified investments associated with the Executive Stock Unit Program (ESUP)* (Note 9)	20.9		—		—		20.9
Total assets	$	20.9	$	110.4	$	—	$	131.3
Liabilities:
Derivative liabilities* (Note 14)	$	—	$	6.0	$	—	$	6.0
Liabilities associated with the ESUP* (Note 9)	20.7		—		—		20.7
Total liabilities	$	20.7	$	6.0	$	—	$	26.7



	As of December 31, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Bank time deposits with original maturities of three months or less	$	—	$	140.7	$	—	$	140.7
Derivative assets (Note 14)	—		2.0		—		2.0
Diversified investments associated with the ESUP* (Note 9)	18.8		—		—		18.8
Total assets	$	18.8	$	142.7	$	—	$	161.5
Liabilities:
Derivative liabilities* (Note 14)	$	—	$	2.7	$	—	$	2.7
Liabilities associated with the ESUP* (Note 9)	18.6		—		—		18.6
Total liabilities	$	18.6	$	2.7	$	—	$	21.3

* - Includes both current and long-term amounts combined.

There were no transfers between Level 1 and Level 2 for any of the periods presented.

The fair value for fixed rate debt (Level 2) was greater than its $950 carrying value by $22 at March 31, 2015 and was not significantly different from its $950 carrying value at December 31, 2014. We value this debt using discounted cash flow and secondary market rates provided by Bloomberg.

Items measured at fair value on a non-recurring basis

The primary areas in which we use fair value measurements of non-financial assets and liabilities are allocating purchase price to the assets and liabilities of acquired companies as discussed in Note 10, and evaluating long-term assets (including goodwill) for potential impairment as discussed in Note 6. Determination of fair values for these items requires significant judgment and are calculated utilizing a variety of methods and models that utilize significant Level 3 inputs.

Long lived assets, acquisitions and the second step of a goodwill impairment test utilize the following methodologies in determining fair value: (i) Buildings and machinery are valued at an estimated replacement cost for an asset of comparable age and condition. Market pricing of comparable assets is used to estimate replacement cost where available. (ii) The most common identified intangible assets are customer relationships and tradenames. Customer relationships are valued using an excess earnings method, using various inputs such as the estimated customer attrition rate, future earnings forecast, the amount of contributory asset charges, and a discount rate. Tradenames are valued using a relief from royalty method, which is based upon comparable market royalty rates for tradenames of similar value. (iii) Inventory is valued at current replacement cost for raw materials, with a step-up for work in process and finished goods items that reflects the amount of ultimate profit earned as of the valuation date. (iv) Other working capital items are generally recorded at face value, unless there are known conditions that would impact the ultimate settlement amount of the particular item.

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

14. RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Strategy & Objectives

We are subject to market and financial risks related to interest rates, foreign currency, and commodities. In the normal course of business, we utilize derivative instruments (individually or in combinations) to manage these risks. We seek to use derivative contracts that qualify for hedge accounting treatment; however, some instruments may not qualify for this treatment. It is our policy not to speculate using derivative instruments.

Cash Flow Hedges

Derivative financial instruments that we use to hedge forecasted transactions and anticipated cash flows are as follows:


•	Interest Rate Cash Flow Hedges - In August 2012, we issued $300 of 10-year notes with a coupon rate of 3.40%. As a part of this transaction, we settled our $200 forward starting interest rate swaps we had entered into during 2010 and recognized a loss of $42.7, which will be amortized out of accumulated other comprehensive income to interest expense over the life of the notes.


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

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

Fair Value Hedges

Our fair value hedges typically manage foreign currency risk associated with subsidiaries’ inter-company assets and liabilities. Hedges designated as fair value hedges recognize gain or loss currently in earnings. Cash flows from settled contracts are presented in the category consistent with the nature of the item being hedged.

Hedge Effectiveness

We have deemed ineffectiveness to be immaterial, and as a result, have not recorded any amounts for ineffectiveness. If a hedge was not highly effective, the portion of the change in fair value considered to be ineffective would be recognized immediately in the consolidated statements of operations.

We have recorded the following assets and liabilities representing the fair value for our most significant derivative financial instruments. The fair values of the derivatives reflect the change in the market value of the derivative from the date of the trade execution, and do not consider the offsetting underlying hedged item.

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)



	Expiring at various dates through:	Total USD Equivalent Notional Amount		As of March 31, 2015
				Assets		Liabilities
				Other Current Assets		Other Current Liabilities		Other Long-Term Liabilities
Derivatives designated as hedging instruments
Cash flow hedges:
Currency Hedges:
-Future USD sales of Canadian, Chinese and Swiss subsidiaries	Dec 2016	$	153.9	$	—	$	3.0	$	1.8
-Future MXN purchases of a USD subsidiary	Dec 2016	4.3		—		.3		.1
-Future USD purchases of Canadian, European, and Korean subsidiaries	Dec 2015	9.9		1.3		.1		—
-Future EUR sales of Chinese and Swiss subsidiaries	Dec 2015	5.6		.8		—		—
-Future JPY sales of Chinese subsidiary	Dec 2015	5.3		.3		—		—
Total cash flow hedges				2.4		3.4		1.9
Fair value hedges:
DKK inter-company note receivable on a USD subsidiary	May 2015	3.0		.2		—		—
USD inter-company note receivable on a CAD subsidiary	Apr 2015	10.0		.1		—		—
USD inter-company note receivable on a Swiss subsidiary	Sep 2015	18.5		—		.7		—
Total fair value hedges				.3		.7		—
				$	2.7	$	4.1	$	1.9

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)



	Expiring at various dates through:	Total USD Equivalent Notional Amount		As of December 31, 2014
				Assets		Liabilities
				Other Current Assets		Other Current Liabilities		Other Long-Term Liabilities
Derivatives designated as hedging instruments
Cash flow hedges:
Currency Hedges:
-Future USD sales of Canadian and Chinese subsidiaries	Dec 2016	$	153.3	$	.3	$	1.0	$	.2
-Future USD purchases of Canadian and European subsidiaries	Dec 2015	10.4		.9		—		—
-Future MXN purchases of a USD subsidiary	Dec 2016	5.3		—		.3		.1
-Future JPY sales of a Chinese subsidiary	Dec 2015	6.9		.5		—		—
-Future EUR sales of a Chinese subsidiary	Dec 2015	6.0		.3		—		—
Total cash flow hedges				2.0		1.3		.3
Fair value hedges:
USD inter-company note receivable on a Swiss subsidiary	Sep 2015	18.5		—		1.1		—
				$	2.0	$	2.4	$	.3

The following table sets forth the pre-tax (gains) losses from continuing operations for our hedging activities for the years presented. This schedule includes reclassifications from accumulated other comprehensive income (see Note 12) as well as derivative settlements recorded directly to income or expense.



	Income Statement Caption	Amount of (Gain) Loss Recorded in Income Three Months Ended March 31
	Income Statement Caption	2015			2014
Derivatives designated as hedging instruments
Interest rate cash flow hedges	Interest expense	$	1.0		$	1.0
Foreign currency cash flow hedges	Net sales	—			.3
Foreign currency cash flow hedges	Cost of goods sold	(.4		)	—
Foreign currency cash flow hedges	Other (income) expense, net	—			.1
Total cash flow hedges		.6			1.4
Fair value hedges	Other (income) expense, net	.7			(.5		)
Derivatives not designated as hedging instruments
Hedge of USD cash-UK and Swiss subsidiaries	Other (income) expense, net	(.1		)	—
Hedge of EUR cash-Swiss subsidiary	Other (income) expense, net	.7			—
Total derivative instruments		$	1.9		$	.9

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

15. CONTINGENCIES

We are a party to various proceedings and matters involving employment, antitrust, intellectual property, environmental, taxation and other laws. When it is probable, in management's judgment, that we may incur monetary damages or other costs resulting from these proceedings or other claims, and we can reasonably estimate the amounts, we record appropriate liabilities in the financial statements and make charges against earnings. For all periods presented, we have recorded no material charges against earnings other than as indicated below.

Foam Antitrust Lawsuits

We deny all allegations in all pending antitrust proceedings. We will vigorously defend ourselves in all proceedings and believe that we have valid bases to contest all claims. However, we have established an accrual for the estimated amount that we believe is necessary to resolve all antitrust matters. We also believe and expect, based on current facts and circumstances, that any reasonably possible losses incremental to the recorded accrual will not have a material impact on our consolidated financial position, results of operations or cash flows. For specific information regarding accruals please see “Accrual for Loss Contingencies” below.

Beginning in August 2010, a series of civil lawsuits was initiated in several U.S. federal courts and in Canada against several defendants alleging that competitors of our carpet underlay business unit and other manufacturers of polyurethane foam products had engaged in price fixing in violation of U.S. and Canadian antitrust laws.

U.S. Direct Purchaser Class Action Cases. We were named as a defendant in three pending direct purchaser class action cases (the first on November 15, 2010) on behalf of a class of all direct purchasers of polyurethane foam products. The direct purchaser class action cases were all filed in or were transferred to the U.S. District Court for the Northern District of Ohio under the name In re: Polyurethane Foam Antitrust Litigation, Case No. 1:10-MD-2196. The plaintiffs, on behalf of themselves and/or a class of direct purchasers, seek three times the amount of damages allegedly suffered as a result of alleged overcharges in the price of polyurethane foam products from at least 1999 to the present. Each plaintiff also seeks attorney fees, pre-judgment and post-judgment interest, court costs, and injunctive relief against future violations. We filed motions to dismiss the U.S. direct purchaser class actions in the consolidated case in Ohio, for failure to state a legally valid claim, which were denied by the Ohio Court. A motion for class certification was filed on behalf of the direct purchasers. A hearing on the motion was held and the Court certified the direct purchaser class. We filed a Petition for Permission to Appeal from Class Certification Order to the United States Court of Appeals for the Sixth Circuit which was denied. The Court ordered all parties to attend non-binding mediation with a mediator of their choosing.

Settlement of U.S. Direct Purchaser Class Action Cases. We reached a tentative settlement in the U.S. direct purchaser class action cases on August 14, 2014, by agreeing to pay an aggregate amount of $39.8, inclusive of plaintiff attorneys' fees and costs. We continue to deny all allegations in the cases, but settled the direct purchaser class cases to avoid the risk, uncertainty, expense and distraction of litigation. The settlement was subject to Court approval. We recorded a $39.8 (pre-tax) accrual for the settlement in the third quarter 2014. In the fourth quarter of 2014, we paid $4 to the Court related to the settlement. Since the accrual is partially attributable to our former Prime Foam Products business, which was sold in the first quarter of 2007, $8.3 of expense was reflected in discontinued operations. The deadline for direct purchasers to exclude themselves from the litigation and settlement classes was January 26, 2015. A final fairness hearing was held on February 3, 2015, and on February 26, 2015, the Court entered a memorandum opinion and order granting the motion for final approval of the class settlement. Subsequently, final judgments of dismissal with prejudice were entered on March 13, 2015. On March 20, 2015, an objector filed a notice of appeal of the order approving the class settlement to the Federal Circuit Court of Appeals. The direct purchaser class plaintiffs filed a motion to dismiss or, in the alternative, transfer the appeal on March 27, 2015. On May 1, 2015, the Federal Circuit Court of Appeals denied the motion to dismiss and transferred the appeal to the United States Court of Appeals for the Sixth Circuit.

U.S. Indirect Purchaser Class Action Cases. We were named as a defendant in an indirect purchaser class consolidated amended complaint filed on March 21, 2011 and were subsequently sued in an indirect purchaser class action case filed on May 23, 2011, in the U.S. District Court for the Northern District of Ohio under the name In re: Polyurethane Foam Antitrust Litigation, Case No. 1:10-MD-2196. The plaintiffs, on behalf of themselves and/or a class of indirect purchasers, bring damages claims under various states’ antitrust and consumer protection statutes, and are seeking three times an amount of damages allegedly suffered as a result of alleged overcharges in the price of polyurethane foam products from at least 1999 to the present. Each plaintiff also seeks attorney fees, pre-judgment and post-judgment interest, court costs, and injunctive relief against future violations. We filed motions to dismiss the indirect

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

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purchaser class action, for failure to state a legally valid claim. The Ohio Court denied the motions to dismiss. Discovery is substantially complete in this case. A motion for class certification was filed on behalf of the indirect purchasers. A

hearing on the motion was held and the Court certified the indirect purchaser class. The deadline for indirect purchasers to exclude themselves from the litigation was March 13, 2015. We filed a Petition for Permission to Appeal from Class Certification Order to the United States Court of Appeals for the Sixth Circuit, which was denied. On November 18, 2014, we filed a Petition for a Writ of Certiorari in the U.S. Supreme Court, which was denied on March 2, 2015. The Ohio Court ordered all parties to attend non-binding mediation with a mediator of their choosing. Trial is tentatively set to begin in mid-October 2015.