Document


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, 2018
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, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
  
 
Accelerated filer
¨
 
 
 
 
 
 
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
 
Smaller reporting company
¨
 
 
 
 
 
 
 
 
  
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   ý
Common stock outstanding as of July 27, 2018: 130,160,438



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LEGGETT & PLATT, INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
June 30,
2018
 
December 31,
2017
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
446.4

 
$
526.1

Trade receivables, net
610.0

 
522.3

Other receivables, net
39.8

 
72.8

Total receivables, net
649.8

 
595.1

Inventories
 
 
 
Finished goods
332.2

 
285.6

Work in process
51.4

 
53.0

Raw materials and supplies
320.3

 
283.4

LIFO reserve
(69.7
)
 
(50.9
)
Total inventories, net
634.2

 
571.1

Prepaid expenses and other current assets
52.4

 
74.2

Total current assets
1,782.8

 
1,766.5

PROPERTY, PLANT AND EQUIPMENT—AT COST
 
 
 
Machinery and equipment
1,256.8

 
1,210.6

Buildings and other
639.9

 
626.0

Land
42.8

 
40.6

Total property, plant and equipment
1,939.5

 
1,877.2

Less accumulated depreciation
1,230.2

 
1,213.3

Net property, plant and equipment
709.3

 
663.9

OTHER ASSETS
 
 
 
Goodwill
839.0

 
822.2

Other intangibles, less accumulated amortization of $156.9 and $151.7 as of June 30, 2018 and December 31, 2017, respectively
182.5

 
169.1

Sundry
130.4

 
129.1

Total other assets
1,151.9

 
1,120.4

TOTAL ASSETS
$
3,644.0

 
$
3,550.8

CURRENT LIABILITIES
 
 
 
Current maturities of long-term debt
$
153.7

 
$
153.8

Accounts payable
450.6

 
430.3

Accrued expenses
254.4

 
303.4

Other current liabilities
78.2

 
88.7

Total current liabilities
936.9

 
976.2

LONG-TERM LIABILITIES
 
 
 
Long-term debt
1,298.0

 
1,097.9

Other long-term liabilities
191.5

 
202.9

Deferred income taxes
89.0

 
83.0

Total long-term liabilities
1,578.5

 
1,383.8

COMMITMENTS AND CONTINGENCIES

 

EQUITY
 
 
 
Common stock
2.0

 
2.0

Additional contributed capital
519.7

 
514.7

Retained earnings
2,572.6

 
2,511.3

Accumulated other comprehensive income (loss)
(48.7
)
 
(9.5
)
Treasury stock
(1,917.4
)
 
(1,828.3
)
Total Leggett & Platt, Inc. equity
1,128.2

 
1,190.2

Noncontrolling interest
.4

 
.6

Total equity
1,128.6

 
1,190.8

TOTAL LIABILITIES AND EQUITY
$
3,644.0

 
$
3,550.8

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)
2018
 
2017
 
2018
 
2017
Net sales
$
2,131.3

 
$
1,949.6

 
$
1,102.5

 
$
989.3

Cost of goods sold
1,682.9

 
1,492.2

 
871.5

 
758.6

Gross profit
448.4

 
457.4

 
231.0

 
230.7

Selling and administrative expenses
212.5

 
210.8

 
107.8

 
104.7

Amortization of intangibles
10.1

 
9.8

 
5.1

 
4.7

Other (income) expense, net
(2.7
)
 
(1.4
)
 
(3.0
)
 
(1.0
)
Earnings from continuing operations before interest and income taxes
228.5

 
238.2

 
121.1

 
122.3

Interest expense
30.4

 
21.0

 
16.0

 
10.4

Interest income
4.8

 
3.5

 
2.4

 
1.5

Earnings from continuing operations before income taxes
202.9

 
220.7

 
107.5

 
113.4

Income taxes
39.9

 
47.0

 
22.4

 
25.8

Earnings from continuing operations
163.0

 
173.7

 
85.1

 
87.6

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

 
—

 
—

 
—

Net earnings
163.0

 
173.7

 
85.1

 
87.6

Earnings attributable to noncontrolling interest, net of tax
(.1
)
 
—

 
(.1
)
 
—

Net earnings attributable to Leggett & Platt, Inc. common shareholders
$
162.9

 
$
173.7

 
$
85.0

 
$
87.6

Earnings per share from continuing operations attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Basic
$
1.21

 
$
1.27

 
$
.63

 
$
.64

Diluted
$
1.20

 
$
1.26

 
$
.63

 
$
.64

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

 
$
—

 
$
—

 
$
—

Diluted
$
—

 
$
—

 
$
—

 
$
—

Net earnings per share attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Basic
$
1.21

 
$
1.27

 
$
.63

 
$
.64

Diluted
$
1.20

 
$
1.26

 
$
.63

 
$
.64

 
 
 
 
 
 
 
 
Cash dividends declared per share
$
.74

 
$
.70

 
$
.38

 
$
.36

 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
Basic
134.7

 
136.4

 
134.1

 
136.0

Diluted
135.7

 
137.8

 
135.0

 
137.4

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)
2018
 
2017
 
2018
 
2017
Net earnings
$
163.0

 
$
173.7

 
$
85.1

 
$
87.6

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments, including acquisition of non-controlling interest
(39.1
)
 
44.1

 
(55.8
)
 
29.8

Cash flow hedges
(1.3
)
 
4.6

 
(3.6
)
 
2.1

Defined benefit pension plans
1.1

 
1.1

 
.7

 
.5

Other comprehensive income
(39.3
)
 
49.8

 
(58.7
)
 
32.4

Comprehensive income
123.7

 
223.5

 
26.4

 
120.0

Less: comprehensive income attributable to noncontrolling interest
—

 
—

 
—

 
—

Comprehensive income attributable to Leggett & Platt, Inc.
$
123.7

 
$
223.5

 
$
26.4

 
$
120.0

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)
2018
 
2017
OPERATING ACTIVITIES
 
 
 
Net earnings
$
163.0

 
$
173.7

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
51.5

 
47.7

Amortization of intangibles and debt issuance costs
15.7

 
14.5

Long-lived asset impairments
.2

 
.1

Provision for losses on accounts and notes receivable
1.4

 
.8

Writedown of inventories
3.1

 
4.0

Net gain from sales of assets and businesses
(1.7
)
 
(.5
)
Deferred income tax expense
1.3

 
5.1

Stock-based compensation
19.2

 
20.2

Other, net
4.3

 
.1

Increases/decreases in, excluding effects from acquisitions and divestitures:
 
 
 
Accounts and other receivables
(86.3
)
 
(72.4
)
Inventories
(53.4
)
 
(51.8
)
Other current assets
(7.7
)
 
(7.2
)
Accounts payable
19.9

 
24.2

Accrued expenses and other current liabilities
(5.9
)
 
(2.4
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
124.6

 
156.1

INVESTING ACTIVITIES
 
 
 
Additions to property, plant and equipment
(81.2
)
 
(79.1
)
Purchases of companies, net of cash acquired
(90.2
)
 
(38.8
)
Proceeds from sales of assets and businesses
1.9

 
1.6

Other, net
(2.9
)
 
(7.8
)
NET CASH USED FOR INVESTING ACTIVITIES
(172.4
)
 
(124.1
)
FINANCING ACTIVITIES
 
 
 
Payments on long-term debt
(1.7
)
 
(5.7
)
Change in commercial paper and short-term debt
191.7

 
220.7

Dividends paid
(94.8
)
 
(90.4
)
Issuances of common stock
.5

 
1.9

Purchases of common stock
(107.8
)
 
(115.2
)
Purchase of remaining interest in noncontrolling interest
—

 
(2.6
)
Additional consideration paid on prior year acquisitions
(8.0
)
 
(1.8
)
Other, net
(.2
)
 
—

NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES
(20.3
)
 
6.9

EFFECT OF EXCHANGE RATE CHANGES ON CASH
(11.6
)
 
14.3

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(79.7
)
 
53.2

CASH AND CASH EQUIVALENTS—January 1,
526.1

 
281.9

CASH AND CASH EQUIVALENTS—June 30,
$
446.4

 
$
335.1

See accompanying notes to consolidated condensed financial statements.

5


LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions, except per share data)
1. INTERIM PRESENTATION
The interim financial statements of Leggett & Platt, Incorporated (“we”, “us” or “our”) included herein have not been audited by an independent registered public accounting firm. The statements include all adjustments, including normal recurring accruals, which management considers necessary for a fair statement of our financial position and operating results for the periods presented. We have prepared the statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of results to be expected for an entire year.
The December 31, 2017 financial position data included herein was derived from the audited consolidated financial statements included in Form 10-K, but does not include all disclosures required by GAAP. For further information, refer to the financial statements and footnotes included in our annual report on Form 10-K for the year ended December 31, 2017.

Reclassifications
Due to required retrospective application, certain reclassifications have been made to the prior period's information in the Consolidated Condensed Statements of Operations to conform to the 2018 presentation of "Cost of goods sold", "Selling and administrative expenses" and "Other (income) expense, net" for new accounting guidance associated with pension costs (see Note 2 - Accounting Standard Updates).

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

Adopted in 2018:
 
•
On January 1, 2018, we adopted ASU 2014-09 "Revenue from Contracts with Customers" (Topic 606) as discussed in Note 3.

•
ASU 2017-07 “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”:  This ASU requires employers to disaggregate the service cost from other components of net periodic benefit costs and to disclose the income statement line item in which each component is included.  This guidance requires service costs to be reported in the same line item as other compensation costs, and the other components of net periodic benefit costs (which include interest costs, expected return on plan assets and actuarial gains and losses) to be reported outside of operating income. We adopted this guidance on January 1, 2018.  Application was required on a retrospective basis and resulted in a reclassification of $1.9 and $.9 of expense from “Cost of goods sold” and “Selling and administrative expenses” into “Other (income) expense, net” for the six months ended and three months ended June 30, 2017, respectively.  Refer to Note 11 for further information.

•
ASU 2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118” (SAB 118):  This ASU allows SEC registrants to record provisional amounts in earnings due to the complexities involved in accounting for the enactment of the Tax Cuts and Jobs Act (TCJA). We recognized the estimated income tax effects of the TCJA in accordance with SAB 118. Refer to Note 15 for further information.


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

•
ASU 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”:  We adopted this guidance on January 1, 2018, and it did not materially impact our financial statements.
 
To be adopted in future years:

•
ASU 2016-02 “Leases” (Topic 842): Requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. We plan to adopt the standard as of the first quarter of 2019. We have assembled a cross-functional implementation team and are assessing all potential impacts of the standard. The implementation team has gathered the data required to account for leases under the new standard, and has selected a third-party lease accounting software.  In addition, we continue to identify and implement the appropriate changes to business processes and controls to support recognition and disclosure under the new standard. We believe our assets and liabilities will increase for the adoption of this standard through the recording of these right-of-use assets and corresponding lease liabilities. We continue to evaluate its impact on our statements of operations and cash flows.
 
•
ASU 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”: This ASU is intended to simplify and clarify the accounting and disclosure requirements for hedging activities by more closely aligning the results of cash flow and fair value hedge accounting with the risk management activities of an entity. The amendments in this ASU are effective January 1, 2019, with early adoption permitted. We are currently evaluating the effect of the ASU on our results of operations, financial condition and cash flows.

•
ASU 2018-02 “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”: This ASU provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income in each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recorded.  The ASU will be effective January 1, 2019. Early adoption is permitted and the provisions of the ASU should be applied in either the period of adoption or retrospectively to each period in which the effect of the change in federal corporate income tax rate in the TCJA is recognized.  We are currently evaluating this guidance.

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

•
ASU 2016-13 “Financial Instruments - Credit Losses” (Topic 326): This ASU is effective January 1, 2020 and amends the impairment model by requiring a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments including trade receivables. We are currently evaluating this guidance. However, we do not expect it to materially impact our future financial statements.

 
3. REVENUE
    
Initial adoption of new ASU

On January 1, 2018, we adopted ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) and all the related amendments using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as a $2.3 reduction to the opening balance of "Retained earnings". The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the new standard to be immaterial to our sales, net earnings, balance sheet and cash flows on an ongoing basis.

Substantially all of our revenue continues to be recognized when products are shipped from our facilities or upon delivery to our customers' facilities. Topic 606 also provided clarity that resulted in reclassifications to or from "Net sales" and "Cost of goods sold".

7


The cumulative effect of applying Topic 606 to our Consolidated Condensed Balance Sheet was as follows:
 
Balance at December 31, 2017 as Previously Reported
 
Topic 606 Adjustments
 
Balance at January 1, 2018
Current assets
$
1,766.5

 
$
—

 
$
1,766.5

Net property, plant and equipment
663.9

 
—

 
663.9

Other assets 1
1,120.4

 
.7

 
1,121.1

Total assets
$
3,550.8

 
$
.7

 
$
3,551.5

 
 
 
 
 
 
Other current liabilities 2
$
88.7

 
$
3.0

 
$
91.7

All other current liabilities
887.5

 
—

 
887.5

Long-term liabilities
1,383.8

 
—

 
1,383.8

Retained earnings
2,511.3

 
(2.3
)
 
2,509.0

Other equity
(1,320.5
)
 
—

 
(1,320.5
)
Total liabilities and equity
$
3,550.8

 
$
.7

 
$
3,551.5


1 This represents the deferred tax impact related to Topic 606.
2 This adjustment is associated with constraint on the amount of variable consideration.

The effect of applying Topic 606 on our Consolidated Condensed Statement of Operations and Balance Sheet was as follows:
 
For the six months ended June 30, 2018
 
For the three months ended June 30, 2018
 
Amounts as Reported
 
Topic 606 Adjustments
 
Amounts Without Adoption of Topic 606
 
Amounts as Reported
 
Topic 606 Adjustments
 
Amounts Without Adoption of Topic 606
Net sales 3
$
2,131.3

 
$
8.2

 
$
2,139.5

 
$
1,102.5

 
$
5.8

 
$
1,108.3

Cost of goods sold 3
1,682.9

 
7.8

 
1,690.7

 
871.5

 
4.8

 
876.3

Gross profit
448.4

 
.4

 
448.8

 
231.0

 
1.0

 
232.0

Selling and administrative expenses
212.5

 
—

 
212.5

 
107.8

 
—

 
107.8

All other
7.4

 
—

 
7.4

 
2.1

 
—

 
2.1

Earnings from continuing operations before interest and income taxes
228.5

 
.4

 
228.9

 
121.1

 
1.0

 
122.1

Net interest expense
25.6

 
—

 
25.6

 
13.6

 
—

 
13.6

Income taxes
39.9

 
.1

 
40.0

 
22.4

 
.2

 
22.6

(Earnings) attributable to noncontrolling interest, net of tax
(.1
)
 
—

 
(.1
)
 
(.1
)
 
—

 
(.1
)
Net earnings
$
162.9

 
$
.3

 
$
163.2

 
$
85.0

 
$
.8

 
$
85.8


3 Primarily associated with a reclassification of customer reimbursements of tooling cost from "Net sales" to "Cost of goods sold" and adjustments for variable consideration.


8


 
June 30, 2018
 
Amounts as Reported
 
Topic 606 Adjustments
 
Amounts Without Adoption of Topic 606
Current assets
$
1,782.8

 
$
—

 
$
1,782.8

Net property, plant and equipment
709.3

 
—

 
709.3

Other assets
1,151.9

 
(.7
)
 
1,151.2

Total assets
$
3,644.0

 
$
(.7
)
 
$
3,643.3

 
 
 
 
 
 
Other current liabilities
$
78.2

 
$
(2.9
)
 
$
75.3

All other current liabilities
858.7

 
—

 
858.7

Long-term liabilities
1,578.5

 
—

 
1,578.5

Retained earnings
2,572.6

 
2.2

 
2,574.8

Other equity
(1,444.0
)
 
—

 
(1,444.0
)
Total liabilities and equity
$
3,644.0

 
$
(.7
)
 
$
3,643.3


Performance Obligations and Shipping and Handling Costs
We recognize revenue when performance obligations under the terms of a contract with our customers are satisfied. For the six and three months ended June 30, 2018, substantially all of our revenue was recognized upon transfer of control of our products to our customers, which was generally upon shipment from our facilities or upon delivery to our customers' facilities and was dependent on the terms of the specific contract. This conclusion considers the point at which our customers have the ability to direct the use of and obtain substantially all of the remaining benefits of the products that were transferred. Substantially all of any unsatisfied performance obligations as of June 30, 2018, will be satisfied within one year or less. Shipping and handling costs are included as a component of "Cost of goods sold".
Sales, value added, and other taxes collected in connection with revenue-producing activities are excluded from revenue.
Sales Allowances and Returns
The amount of consideration we receive and revenue we recognize varies with changes in various sales allowances, discounts and rebates (variable consideration) that we offer to our customers. We reduce revenue by our estimates of variable consideration based on contract terms and historical experience. Changes in estimates of variable consideration for the six and three months ended June 30, 2018 were not material.
Some of our products transferred to customers can be returned, and we recognize the following for this right:
•
An estimated refund liability and a corresponding reduction to revenue based on historical returns experience.
•
An asset and a corresponding reduction to cost of sales for our right to recover products from customers upon settling the refund liability. We reduce the carrying amount of these assets by estimates of costs associated with the recovery and any additional expected reduction in value.

Our refund liability and the corresponding asset associated with our right to recover products from our customers were immaterial at June 30, 2018.
Practical Expedients
We have elected to apply the following practical expedients.
•
The existence of a significant financing component - We expect that at contract inception, the time period between when we transfer a promised good to our customer and our receipt of payment from that customer for that good will be one year or less (our typical trade terms are 30 to 60 days for U.S. customers and up to 90 days for our international customers).
•
Costs of obtaining a contract - We generally expense costs of obtaining a contract because the amortization period would be one year or less.


9


Revenue by Category
We disaggregate revenue by customer group, which is the same as our product lines for each of our segments, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
 
Six Months Ended June 30, 2018
 
Three Months Ended June 30, 2018
 
 
Residential Products
 
 
 
Bedding group
$
442.4

 
$
221.4

Fabric & Flooring Products group 4
361.0

 
199.7

Machinery group
33.5

 
17.7

 
836.9

 
438.8

Industrial Products
 
 
 
Wire group
178.4

 
96.4

 
178.4

 
96.4

Furniture Products
 
 
 
Home Furniture group
200.0

 
99.4

Work Furniture group
145.9

 
74.2

Consumer Products group
226.8

 
117.8

 
572.7

 
291.4

Specialized Products
 
 
 
Automotive group
427.8

 
215.7

Aerospace Products group
76.8

 
37.0

Hydraulic Cylinders group
38.7

 
23.2

 
543.3

 
275.9

 
$
2,131.3

 
$
1,102.5

4 Name changed from Fabric & Carpet Cushion Group as of March 31, 2018

4. SEGMENT INFORMATION
We have four operating segments that supply a wide range of products:

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

Our reportable segments are the same as our operating segments, which also correspond with our management structure. Each reportable segment has an executive vice president that reports to the chief executive officer, who is the chief operating decision maker (CODM). The operating results and financial information reported through the segment structure are regularly

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

reviewed and used by the CODM to evaluate segment performance, allocate overall resources and determine management incentive compensation.
The accounting principles used in the preparation of the segment information are the same as those used for the consolidated financial statements. We evaluate performance based on Earnings Before Interest and Taxes (EBIT). Intersegment sales are made primarily at prices that approximate market-based selling prices. Centrally incurred costs are allocated to the segments based on estimates of services used by the segment. Certain of our general and administrative costs and miscellaneous corporate income and expenses are allocated to the segments based on sales or other appropriate metrics. These allocated corporate costs include depreciation and other costs and income related to assets that are not allocated or otherwise included in the segment assets.
A summary of segment results from continuing operations are shown in the following tables.
 
Trade
Sales
 
Inter-
Segment
Sales
 
Total
Sales
 
EBIT
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
Residential Products
$
438.8

 
$
4.7

 
$
443.5

 
$
40.0

Industrial Products
96.4

 
74.1

 
170.5

 
13.4

Furniture Products
291.4

 
3.6

 
295.0

 
16.3

Specialized Products
275.9

 
.6

 
276.5

 
51.9

Intersegment eliminations and other
 
 
 
 
 
 
(.5
)
 
$
1,102.5

 
$
83.0

 
$
1,185.5

 
$
121.1

Three Months Ended June 30, 2017
 
 
 
 
 
Residential Products
$
407.8

 
$
4.2

 
$
412.0

 
$
50.2

Industrial Products
75.9

 
63.3

 
139.2

 
7.1

Furniture Products
267.2

 
4.4

 
271.6

 
20.3

Specialized Products
238.4

 
1.7

 
240.1

 
44.1

Intersegment eliminations and other
 
 
 
 
 
 
.6

 
$
989.3

 
$
73.6

 
$
1,062.9

 
$
122.3

 
Trade
Sales
 
Inter-
Segment
Sales
 
Total
Sales
 
EBIT
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
Residential Products
$
836.9

 
$
9.3

 
$
846.2

 
$
75.0

Industrial Products
178.4

 
144.5

 
322.9

 
22.4

Furniture Products
572.7

 
6.5

 
579.2

 
34.3

Specialized Products
543.3

 
1.3

 
544.6

 
98.0

Intersegment eliminations and other
 
 
 
 
 
 
(1.2
)
 
$
2,131.3

 
$
161.6

 
$
2,292.9

 
$
228.5

Six Months Ended June 30, 2017
 
 
 
 
 
Residential Products
$
799.1

 
$
9.0

 
$
808.1

 
$
92.7

Industrial Products
145.7

 
128.9

 
274.6

 
15.9

Furniture Products
532.0

 
10.7

 
542.7

 
40.6

Specialized Products
472.8

 
3.6

 
476.4

 
87.1

Intersegment eliminations and other
 
 
 
 
 
 
1.9

 
$
1,949.6

 
$
152.2

 
$
2,101.8

 
$
238.2


11
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. 
 
June 30,
2018
 
December 31,
2017
Residential Products
$
597.8

 
$
554.6

Industrial Products
162.3

 
150.0

Furniture Products
271.5

 
245.7

Specialized Products
335.9

 
271.7

Average current liabilities included in segment numbers above
626.2

 
557.0

Unallocated assets 1
1,570.7

 
1,693.1

Difference between average assets and period-end balance sheet
79.6

 
78.7

Total assets
$
3,644.0

 
$
3,550.8

 
1 Unallocated assets consist primarily of goodwill, other intangibles, cash, businesses sold and deferred tax assets.    

5. DIVESTITURES

We divested our remaining Commercial Vehicle Products operation in the third quarter of 2017. It did not meet discontinued operations criteria, and was part of the Specialized Products Segment. We realized a pretax loss of $3.3 related to the sale of this business and also completed the sale of real estate associated with this operation, realizing a pretax gain of $23.4 in the fourth quarter of 2017. External sales for this business were $12.6 and EBIT was $.1 for the three months ended June 30, 2017. For the six months ended June 30, 2017, external sales for this business were $21.4 and EBIT was ($1.3).
 
6. INVENTORIES
Approximately 50% of our inventories are valued using the Last-In, First-Out (LIFO) cost method and the remainder using the First-In, First-Out (FIFO) cost method. We calculate our LIFO reserve on an annual basis. During interim periods, we estimate the current year annual change in the LIFO reserve (i.e., the annual LIFO expense or benefit) and allocate that change ratably to the four quarters. Because accurately predicting inventory prices for the year is difficult, the change in the LIFO reserve for the full year could be significantly different from the amount currently estimated. In addition, a variation in expected ending inventory levels could also impact total change in the LIFO reserve for the year.
The following table contains the LIFO expense included in continuing operations for each of the periods presented.
 
 
Six Months Ended June 30,
 
Three Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
LIFO expense
$
18.8

 
$
2.5

 
$
12.8

 
$
2.1




12
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:
 
Six Months Ended 
 June 30,
 
Three Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Earnings:
 
 
 
 
 
 
 
Earnings from continuing operations
$
163.0

 
$
173.7

 
$
85.1

 
$
87.6

Earnings attributable to noncontrolling interest, net of tax
(.1
)
 
—

 
(.1
)
 
—

Net earnings from continuing operations attributable to Leggett & Platt, Inc. common shareholders
162.9

 
173.7

 
85.0

 
87.6

Earnings from discontinued operations, net of tax
—

 
—

 
—

 
—

Net earnings attributable to Leggett & Platt, Inc. common shareholders
$
162.9

 
$
173.7

 
$
85.0

 
$
87.6

 
 
 
 
 
 
 
 
Weighted average number of shares (in millions):
 
 
 
 
 
 
 
Weighted average number of common shares used in basic EPS
134.7

 
136.4

 
134.1

 
136.0

Dilutive effect of stock-based compensation
1.0

 
1.4

 
.9

 
1.4

Weighted average number of common shares and dilutive potential common shares used in diluted EPS
135.7

 
137.8

 
135.0

 
137.4

 
 
 
 
 
 
 
 
Basic and Diluted EPS:
 
 
 
 
 
 
 
Basic EPS attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Continuing operations
$
1.21

 
$
1.27

 
$
.63

 
$
.64

Discontinued operations
—

 
—

 
—

 
—

Basic EPS attributable to Leggett & Platt, Inc. common shareholders
$
1.21

 
$
1.27

 
$
.63

 
$
.64

Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
 
 
 
 
 
 
 
Continuing operations
$
1.20

 
$
1.26

 
$
.63

 
$
.64

Discontinued operations
—

 
—

 
—

 
—

Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
$
1.20

 
$
1.26

 
$
.63

 
$
.64

 
 
 
 
 
 
 
 
Other information:
 
 
 
 
 
 
 
Anti-dilutive shares excluded from diluted EPS computation
.1

 
—

 
.1

 
—



13
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, 2018
 
December 31, 2017
 
Current
 
Long-term
 
Current
 
Long-term
Trade accounts receivable
$
614.2

 
$
—

 
$
526.1

 
$
—

Trade notes receivable
1.2

 
1.4

 
1.0

 
1.2

Total trade receivables
615.4

 
1.4

 
527.1

 
1.2

Other notes receivable
—

 
24.7

 
—

 
24.7

Insurance receivables
.9

 
—

 
43.0

 
—

Taxes receivable, including income taxes
26.1

 
—

 
15.0

 
—

Other receivables
12.8

 
—

 
14.8

 
—

Subtotal other receivables
39.8

 
24.7

 
72.8

 
24.7

Total trade and other receivables
655.2

 
26.1

 
599.9

 
25.9

Allowance for doubtful accounts:
 
 
 
 
 
 
 
  Trade accounts receivable
(5.3
)
 
—

 
(4.7
)
 
—

  Trade notes receivable
(.1
)
 
—

 
(.1
)
 
(.1
)
Total trade receivables
(5.4
)
 
—

 
(4.8
)
 
(.1
)
  Other notes receivable
—

 
—

 
—

 
—

Total allowance for doubtful accounts
(5.4
)
 
—

 
(4.8
)
 
(.1
)
Total net receivables
$
649.8

 
$
26.1

 
$
595.1

 
$
25.8

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, 2017
 
Add:
Charges
 
Less:
Net Charge-offs/
(Recoveries)
 
Balance at June 30, 2018
Trade accounts receivable
$
4.7

 
$
1.5

 
$
.9

 
$
5.3

Trade notes receivable
.2

 
(.1
)
 
—

 
.1

Total trade receivables
4.9

 
1.4

 
.9

 
5.4

Other notes receivable
—

 
—

 
—

 
—

Total allowance for doubtful accounts
$
4.9

 
$
1.4

 
$
.9

 
$
5.4



14
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, 2018
 
Six Months Ended 
 June 30, 2017
 
To be settled with stock
 
To be settled in cash
 
To be settled with stock
 
To be settled in cash
Stock-based retirement plans contributions 1
$
4.1

 
$
.5

 
$
3.6

 
$
.7

Discounts on various stock awards:

 
 
 

 
 
Deferred Stock Compensation Program
.9

 
—

 
1.2

 
—

Stock-based retirement plans
.5

 
—

 
.7

 
—

Discount Stock Plan
.6

 
—

 
.6

 
—

Performance Stock Unit (PSU) awards: 2
 
 
 
 
 
 
 
     2018 PSU - TSR based 2A
.6

 
.6

 
—

 
—

     2018 PSU - EBIT CAGR based 2B
1.5

 
1.6

 
—

 
—

     2017 and prior PSU awards 2C
1.9

 
—

 
2.7

 
2.1

Restricted Stock Unit awards
1.0

 
—

 
1.2

 
—

Profitable Growth Incentive (PGI) awards 3
1.2

 
1.2

 
.8

 
.9

Other, primarily non-employee directors restricted stock
.4

 
—

 
.5

 
—

Total stock-based compensation expense
12.7

 
$
3.9

 
11.3

 
$
3.7

Employee contributions for above stock plans
6.5

 
 
 
8.9

 
 
Total stock-based compensation
$
19.2

 
 
 
$
20.2

 
 
 
 
 
 
 
 
 
 
Tax benefits on stock-based compensation expense
$
3.0

 
 
 
$
4.1

 
 
Tax benefits on stock-based compensation payments
.9

 
 
 
10.1

 
 
Total tax benefits associated with stock-based compensation
$
3.9

 
 
 
$
14.2

 
 
 
 
 
 
 
 
 
 

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

 
Three Months Ended
 
Three Months Ended 
 
June 30, 2018
 
June 30, 2017
 
To be settled with stock
 
To be settled in cash
 
To be settled with stock
 
To be settled in cash
Stock-based retirement plans contributions 1
$
2.2

 
$
.3

 
$
2.2

 
$
.3

Discounts on various stock awards:
 
 
 
 
 
 
 
Deferred Stock Compensation Program
.4

 
—

 
.5

 
—

Stock-based retirement plans
.3

 
—

 
.4

 
—

Discount Stock Plan
.3

 
—

 
.3

 
—

Performance Stock Unit (PSU) awards: 2
 
 
 
 
 
 
 
     2018 PSU - TSR based 2A
.3

 
.3

 
—

 
—

     2018 PSU - EBIT CAGR based 2B
.9

 
.9

 
—

 
—

     2017 and prior PSU awards 2C
1.0

 
.1

 
1.4

 
1.9

Restricted Stock Unit awards
.5

 
—

 
.6

 
—

Profitable Growth Incentive (PGI) awards 3
.7

 
.7

 
.4

 
.4

Other, primarily non-employee directors restricted stock
.1

 
—

 
.3

 
—

Total stock-based compensation expense
6.7

 
$
2.3

 
6.1

 
$
2.6

Employee contributions for above stock plans
3.8

 
 
 
3.8

 
 
Total stock-based compensation
$
10.5

 
 
 
$
9.9

 
 
 
 
 
 
 
 
 
 
Tax benefits on stock-based compensation expense
$
1.6

 
 
 
$
2.2

 
 
Tax benefits on stock-based compensation payments
.3

 
 
 
1.3

 
 
Total tax benefits associated with stock-based compensation
$
1.9

 
 
 
$
3.5

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

1 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.

We plan to merge the SBP with the Company's 401(k) plan on December 31, 2018. After the merger, Company stock will be added to the 401(k) plan as an investment option and participants may elect up to 20% of their contributions into Company stock beginning on January 1, 2019. Participants currently may contribute up to 100% of their contributions into Company stock.

2 PSU Awards
In November 2017, the Compensation Committee approved changes to merge the PSU and PGI award programs for the 2018 award. The 2018 PSU awards have a component based on relative Total Shareholder Return (TSR) and another component based on Earnings Before Interest and Taxes (EBIT) Compound Annual Growth Rate (CAGR). These components are discussed below.

For outstanding 2018 awards, we intend to pay 50% in shares of our common stock and 50% in cash; although, we reserve the right to pay up to 100% in cash.

For outstanding 2016 and 2017 awards, we intend to pay 65% in shares of our common stock and 35% in cash; although, we reserve the right to pay up to 100% in cash.

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


Cash settlements are recorded as a liability and adjusted to fair value at each reporting period. We elected to pay the 2015 award (paid in the first quarter 2018) in cash.

 2A 2018 PSU - TSR based
50% of each 2018 PSU award is based upon the Company's TSR compared to a peer group. Grant date fair values are calculated using a Monte Carlo simulation of stock and volatility data for Leggett and each of the peer companies. Grant date fair values are amortized using the straight-line method over the three-year vesting period.
The Relative TSR vesting condition of the 2018 PSU award contains the following conditions:
•
A service requirement—Awards generally “cliff” vest three years following the grant date; and
•
A market condition—Awards are based on our TSR [(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 200% of the base award depending upon how our TSR ranks within the peer group at the end of the three-year performance period.

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

2C 2017 and Prior PSU Awards
The 2017 and prior PSU awards are based solely on relative TSR. Vesting conditions are the same as (2A) above other than a maximum payout of 175% of the base award.

17
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 based on TSR for the periods presented.
 
Six Months Ended June 30,
 
2018
 
2017
Total shares base award
.1

 
.1

Grant date per share fair value
$
42.60

 
$
50.75

Risk-free interest rate
2.4
%
 
1.5
%
Expected life in years
3.0

 
3.0

Expected volatility (over expected life)
19.9
%
 
19.5
%
Expected dividend yield (over expected life)
3.3
%
 
2.8
%
Three-Year Performance Cycle
Award Year
 
Completion Date
 
TSR Performance
Relative to the  Peer Group (1%=Best)
 
Payout as a
Percent of the
Base Award
 
Number of Shares
Distributed
 
Cash Portion
 
Distribution Date
2014
 
December 31, 2016
 
10
 
175.0%
 
.4 million
 
$
9.8

 
First quarter 2017
2015
 
December 31, 2017
 
57
 
61.0%
 
—
 
$
6.9

 
First quarter 2018

Below is a summary of the number of shares and related grant date fair value of PSU’s based on EBIT CAGR for the periods presented.
 
Six Months Ended June 30,
 
2018
Total shares base award
.1

Grant date per share fair value
$
40.92

Vesting period in years
2.5


3 PGI Awards

In 2017 and prior years certain key management employees participated in a PGI program. The PGI awards were issued as growth performance stock units (GPSUs). The GPSUs vest (0% to 250%) at the end of a two-year performance period. Vesting is based on the Company's or applicable profit center's revenue growth (adjusted by a GDP factor when applicable) and EBITDA margin at the end of a two-year performance period. The 2017 base target PGI awards were less than .1 shares. If earned, we intend to pay half in shares of our common stock and half in cash; although, we reserve the right to pay up to 100% in cash. We elected to pay the 2016 award (paid in the first quarter of 2018) 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
2015
 
December 31, 2016
 
36.0%
 
<.1 million
 
$
.8

 
First quarter 2017
2016
 
December 31, 2017
 
44.0%
 
—
 
$
2.0

 
First quarter 2018









18
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. A portion of the goodwill included in the table below is expected to provide an income tax benefit.
 
Six Months Ended June 30,
 
2018
 
2017
Accounts receivable
$
12.9

 
$
7.8

Inventory
16.0

 
5.3

Property, plant and equipment
26.5

 
4.5

Goodwill
26.4

 
13.1

Other intangible assets, primarily customer-related intangibles
26.5

 
17.9

Other current and long-term assets
.8

 
.1

Current liabilities
(10.1
)
 
(3.8
)
Long-term liabilities
(10.2
)
 
(3.5
)
Non-controlling interest
—

 
(.5
)
Fair value of net identifiable assets
88.8

 
40.9

Less: Additional consideration (receivable) payable
(1.4
)
 
2.1

Net cash consideration
$
90.2

 
$
38.8


The following table summarizes acquisitions for the periods presented.
Six Months Ended
 
Number of Acquisitions
 
Segment
 
Product/Service
June 30, 2018
 
2
 
Residential Products; Specialized Products
 
Manufacturer and distributor of silt fence; Global manufacturer of engineered hydraulic cylinders
 
 
 
 
 
 
 
June 30, 2017
 
2
 
Residential Products; Furniture Products
 
Distributor and installer of geosynthetic products; Surface-critical bent tube components
We are finalizing all the information required to complete the purchase price allocations related to certain recent acquisitions and do not anticipate any material modifications.

The results of operations of the above acquired companies have been included in the consolidated condensed financial statements since the dates of acquisition. The unaudited pro forma consolidated net sales, net earnings and earnings per share as though the 2018 and 2017 acquisitions had occurred on January 1 of the comparable prior annual reporting period 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, 2018 and December 31, 2017, our liability for these future payments was $10.7 ($1.5 current and $9.2 long-term) and $16.5 ($8.9 current and $7.6 long-term), respectively.  Components of the liability are based on estimates and future events, and the amounts may fluctuate significantly until the payment dates. Additional consideration, including interest, paid on prior year acquisitions was $8.0 and $1.8 for the six months ended June 30, 2018 and 2017, respectively.

A brief description of our acquisition activity by year for the periods presented is included below.
2018
On May 21, 2018, we acquired a manufacturer and distributor of silt fence, a core product for our Geo Components business unit, for $2.7.

19
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

On January 31, 2018, we acquired Precision Hydraulic Cylinders (PHC), a leading global manufacturer of engineered hydraulic cylinders primarily for the materials handling market. The purchase price was $86.1. PHC serves a market of mainly large Original Equipment Manufacturer (OEM) customers utilizing highly engineered, co-designed components with long product life-cycles, yet representing a small percentage of the end product’s cost. PHC represents a new growth platform and forms a new business group entitled Hydraulic Cylinders within the Specialized Products segment.
2017
We acquired two businesses in the first six months of 2017:
•
A distributor and installer of geosynthetic products, expanding the geographic scope and capabilities of our Geo Components business.
•
A manufacturer of surface-critical bent tube components in support of the private-label finished seating strategy in our Work Furniture business.
These businesses broaden our geographic scope, capabilities, and product offerings, and added $13.1 ($8.1 to Residential Products and $5.0 to Furniture Products) of goodwill. We also acquired the remaining 20% ownership in an Asian joint venture in our Work Furniture business for $2.6.

11. EMPLOYEE BENEFIT PLANS
Employer contributions for 2018 are expected to approximate $21.0. This increase compared to our 2017 employer contributions of $14.9 is due to our current year funding strategy, which incorporates, among other things, Pension Benefit Guaranty Corporation premiums, tax planning, and expectations of future funding requirements.

The following table provides interim information as to our domestic and foreign defined benefit pension plans:
 
 
Six Months Ended 
 June 30,
 
Three Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Components of net pension expense
 
 
 
 
 
 
 
Service cost
$
2.0

 
$
2.5

 
$
1.0

 
$
1.3

Interest cost
4.1

 
5.6

 
2.1

 
2.8

Expected return on plan assets
(5.8
)
 
(6.7
)
 
(2.9
)
 
(3.3
)
Recognized net actuarial loss
1.4

 
2.3

 
.7

 
1.1

Net pension expense
$
1.7

 
$
3.7

 
$
.9

 
$
1.9


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



20
LEGGETT & PLATT, INCORPORATED
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

12. STATEMENT OF CHANGES IN EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 
Six Months Ended June 30, 2018
 
Total
Equity
 
Retained
Earnings
 
Common
Stock &
Additional
Contributed
Capital
 
Treasury
Stock
 
Noncontrolling
Interest
 
Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance, January 1, 2018
$
1,190.8

 
$
2,511.3

 
$
516.7

 
$
(1,828.3
)
 
$
.6

 
$
(9.5
)
Effect of accounting change on prior years (Topic 606-See Note 3)
(2.3
)
 
(2.3
)
 
—

 
—

 
—

 
—

Adjusted beginning balance, January 1, 2018
1,188.5

 
2,509.0

 
516.7

 
(1,828.3
)
 
.6

 
(9.5
)
Net earnings
163.0

 
162.9

 
—

 
—

 
.1

 
—

Dividends declared
(96.7
)
 
(99.3
)
 
2.6

 
—

 
—

 
—

Dividends paid to noncontrolling interest
(.2
)
 
—

 
—

 
—

 
(.2
)
 
—

Treasury stock purchased
(107.8
)
 
—

 
—

 
(107.8
)
 
—

 
—

Treasury stock issued
7.0

 
—

 
(11.7
)
 
18.7

 
—

 
—

Foreign currency translation adjustments
(39.1
)
 
—

 
—

 
—

 
(.1
)
 
(39.0
)
Cash flow hedges, net of tax
(1.3
)
 
—

 
—

 
—

 
—

 
(1.3
)
Defined benefit pension plans, net of tax
1.1

 
—

 
—

 
—

 
—

 
1.1

Stock-based compensation transactions, net of tax
14.1

 
—

 
14.1

 
—

 
—

 
—

Ending balance, June 30, 2018
$
1,128.6

 
$
2,572.6

 
$
521.7

 
$
(1,917.4
)
 
$
.4

 
$
(48.7
)
 
 
Six Months Ended June 30, 2017
 
Total
Equity
 
Retained
Earnings
 
Common
Stock &
Additional
Contributed
Capital
 
Treasury
Stock
 
Noncontrolling
Interest
 
Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance, January 1, 2017
$
1,094.0

 
$
2,410.5

 
$
508.2

 
$
(1,713.5
)
 
$
2.4

 
$
(113.6
)
Effect of accounting change on prior years (Topic 740)
1.2

 
1.2

 
—

 
—

 
—

 
—

Adjusted beginning balance, January 1, 2017
1,095.2

 
2,411.7

 
508.2

 
(1,713.5
)
 
2.4

 
(113.6
)
Net earnings
173.7

 
173.7

 
—

 
—

 
—

 
—

Dividends declared
(92.7
)
 
(95.2
)
 
2.5

 
—

 
—

 
—

Treasury stock purchased
(118.3
)
 
—

 
—

 
(118.3
)
 
—

 
—

Treasury stock issued
12.5

 
—

 
(19.4
)
 
31.9

 
—

 
—

Foreign currency translation adjustments
44.1

 
—

 
—

 
—

 
—

 
44.1

Cash flow hedges, net of tax
4.6

 
—

 
—

 
—

 
—

 
4.6

Defined benefit pension plans, net of tax
1.1

 
—

 
—

 
—

 
—

 
1.1

Stock-based compensation transactions, net of tax
16.0

 
—

 
16.0

 
—

 
—

 
—

Purchase of remaining interest in noncontrolling interest, net of acquisitions
(2.6
)
 
—

 
(.7
)
 
—

 
(1.9
)
 
—

Ending balance, June 30, 2017
$
1,133.6

 
$
2,490.2

 
$
506.6