Stock-Based Compensation

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

We use various forms of share-based compensation which are summarized below. One stock unit is equivalent to one common share for accounting and earnings per share purposes. Shares are issued from treasury for the majority of our stock plans’ activity. All share information is presented in millions.

Stock options and stock units are granted pursuant to our Flexible Stock Plan (the "Plan"). On May 10, 2012, the Plan changed the way awards granted are charged against the number of available shares. Under the 2012 Plan modification, each option counts as one share against the shares available under the Plan, but each share granted for any other awards will count as three shares against the Plan.    

At December 31, 2016, the following common shares were authorized for issuance under the Plan:

	Shares Available for Issuance	Maximum Number of Authorized Shares
Unexercised options	2.3	2.3
Outstanding stock units—vested	3.7	7.2
Outstanding stock units—unvested	1.3	3.7
Available for grant	10.5	10.5
Authorized for issuance at December 31, 2016	17.8	23.7

The following table recaps the impact of stock-based compensation (including discontinued operations) on the results of operations for each of the periods presented:

	Year Ended December 31
	2016				2015				2014
	To Be Settled With Stock		To Be Settled In Cash		To Be Settled With Stock		To Be Settled In Cash		To Be Settled With Stock		To Be Settled In Cash
Options (1):
Amortization of the grant date fair value	$	1.0	$	—	$	.2	$	—	$	.6	$	—
Cash payments in lieu of options	—		1.0		—		1.0		—		.8
Stock-based retirement plans contributions (2)	6.7		1.3		7.0		1.3		6.1		1.4
Discounts on various stock awards:
Deferred Stock Compensation Program (1)	2.0		—		1.9		—		2.2		—
Stock-based retirement plans (2)	1.5		—		1.4		—		1.9		—
Discount Stock Plan (6)	1.0		—		1.0		—		1.0		—
Performance Stock Unit awards (3)	4.8		6.5		8.3		10.6		6.4		13.9
Restricted Stock Units awards (4)	2.8		—		3.5		—		3.4		—
Profitable Growth Incentive awards (5)	1.4		1.0		6.0		5.9		4.4		4.4
Other, primarily non-employee directors restricted stock	1.0		—		1.2		—		1.3		—
Total stock-based compensation expense	22.2		$	9.8	30.5		$	18.8	27.3		$	20.5
Employee contributions for above stock plans	14.9				14.7				14.3
Total stock-based compensation	$	37.1			$	45.2			$	41.6
Tax benefits on stock-based compensation expense	$	8.1			$	11.6			$	10.4
Tax benefits on stock-based compensation payments (See Note A - Accounting Standards Update)	18.2				—				—
Total tax benefits associated with stock-based compensation	$	26.3			$	11.6			$	10.4

The following table recaps the impact of stock-based compensation on assets and liabilities for each of the periods presented:

	2016						2015
	Current		Long-term		Total		Current		Long-term		Total
Assets:
Diversified investments associated with the stock-based retirement plans (2)	$	1.8	$	25.0	$	26.8	$	1.5	$	20.5	$	22.0
Liabilities:
Stock-based retirement plans (2)	$	1.8	$	23.8	$	25.6	$	1.5	$	20.7	$	22.2
Performance Stock Unit award (3)	9.7		5.6		15.3		8.5		8.8		17.3
Profitable Growth Incentive award (5)	1.6		1.8		3.4		13.3		1.4		14.7
Other - primarily timing differences between employee withholdings and related employer contributions to be submitted to various plans' trust accounts	7.7		—		7.7		8.0		—		8.0
Total liabilities associated with stock-based compensation	$	20.8	$	31.2	$	52.0	$	31.3	$	30.9	$	62.2

(1) Stock Option Grants

We have historically granted stock options in the following areas:

• On a discretionary basis to a broad group of employees

• In conjunction with our Deferred Compensation Program

• As compensation of outside directors

Options granted to a broad group of employees on a discretionary basis

Options are now offered only in conjunction with the Deferred Compensation Program discussed below, and for a few key executive awards. Prior to 2013, we granted stock options annually on a discretionary basis to a broad group of employees. Options generally become exercisable in one-third increments at 18 months, 30 months and 42 months after the date of grant. Options have a maximum term of ten years and the exercise prices are equal to Leggett’s closing stock price on the grant date.

Grant date fair values are calculated using the Black-Scholes option pricing model and are amortized by the straight-line method over the options’ total vesting period, except for employees who are retirement eligible. Expense for employees who are retirement eligible is recognized immediately. A person is retirement eligible if the employee is age 65, or age 55 with 20 years of Company service.

Deferred Compensation Program

We offer a Deferred Compensation Program under which key managers and outside directors may elect to receive stock options, stock units or interest-bearing cash deferrals in lieu of cash compensation:

• Stock options under this program are granted on the last business day of the year prior to the year the compensation is earned. The number of options granted equals the deferred compensation times five, divided by the stock’s market price on the date of grant. The option has a 10-year term. It vests as the associated compensation is earned and becomes exercisable beginning 15 months after the grant date. Stock is issued when the option is exercised.

• Deferred stock units (DSU) under this program are acquired every two weeks (when the compensation would have otherwise been paid) at a 20% discount to the market price of our common stock on each acquisition date, and they vest immediately. Expense is recorded as the compensation is earned. Stock units earn dividends at the same rate as cash dividends paid on our common stock. These dividends are used to acquire stock units at a 20% discount. Stock units are converted to common stock and distributed in accordance with the participant’s pre-set election. However, stock units may be settled in cash at our discretion. Participants must begin receiving distributions no later than ten years after the effective date of the deferral and installment distributions cannot exceed ten years.

• Interest-bearing cash deferrals under this program are reported in Other long-term liabilities on the balance sheet and are disclosed in Note H.

	Options		Units		Cash
Aggregate amount of compensation deferred during 2016	$	.2	$	8.3	$	1.1

STOCK OPTIONS SUMMARY

Stock option information for the plans discussed above for the periods presented is as follows:

	Employee Stock Options		Deferred Compensation Options	Other-Primarily Outside Directors' Options**	Total Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Outstanding at December 31, 2015	2.9		.2	—	3.1		$	21.30
Granted	.1		—	—	.1		43.77
Exercised *	(.9	)	—	—	(.9	)	19.80
Outstanding at December 31, 2016	2.1		.2	—	2.3		$	23.13	4.1	$	58.9
Vested or expected to vest					2.3		$	23.13	4.1	$	58.9
Exercisable (vested) at December 31, 2016					2.1		$	21.22	3.6	$	57.8

* Prior to 2005, we granted options with a below market exercise price under the terms of our Deferred Compensation Program. In 2005, we amended the Program to provide only “at market” stock options. During 2016, there were no significant options exercised at a below market exercise price, and less than .1 of these options remain outstanding at December 31, 2016.

** A small amount of options related to this plan (less than .1) were outstanding at December 31, 2016.

Additional information related to stock option activity for the periods presented is as follows:

	Year Ended December 31
	2016		2015		2014
Total intrinsic value of stock options exercised	$	27.7	$	17.1	$	35.2
Cash received from stock options exercised	4.9		8.3		21.8
Total fair value of stock options vested	.1		1.3		2.9

The following table summarizes fair values calculated (and assumptions utilized) using the Black-Scholes option pricing model.

	Year Ended December 31
	2016			2015			2014
Aggregate grant date fair value	$	1.4		$	.9		$	.1
Weighted-average per share grant date fair value	$	10.79		$	10.06		$	7.30
Risk-free interest rate	2.2		%	2.1		%	2.1		%
Expected life in years	7.9			7.5			6.0
Expected volatility (over expected life)	30.0		%	30.5		%	35.1		%
Expected dividend yield (over expected life)	3.0		%	3.0		%	3.9		%

The risk-free rate is determined based on U.S. Treasury yields in effect at the time of grant for maturities equivalent to the expected life of the option. The expected life of the option (estimated average period of time the option will be outstanding) is estimated based on the historical exercise behavior of employees, with executives displaying somewhat longer holding periods than other employees. Expected volatility is based on historical volatility through the grant date, measured daily for a time period equal to the option’s expected life. The expected dividend yield is estimated based on the dividend yield at the time of grant.

(2) Stock-Based Retirement Plans

We have two stock-based retirement plans: the tax-qualified Stock Bonus Plan (SBP) for non-highly compensated employees, and the non-qualified Executive Stock Unit Program (ESUP) for highly compensated employees. We make matching contributions to both plans. In addition to the automatic 50% match, we will make another matching contribution of up to 50% of the employee’s contributions for the year if certain profitability levels, as defined in the SBP and the ESUP, are obtained.

• Participants in the SBP may contribute up to 6% of their compensation above a certain threshold to purchase Leggett stock or other investment alternatives at market prices. Employees are allowed to fully diversify their employee deferral accounts immediately and their employer matching accounts after three years of service. Dividends earned on Company stock held in the SBP are reinvested or paid in cash at the participant’s election.

• Participants in the ESUP may contribute up to 10% (depending upon salary level) of their compensation above the same threshold applicable to the SBP. Participant contributions are credited to a diversified investment account established for the participant, and we make premium contributions to the diversified investment accounts equal to 17.65% of the participant’s contribution. A participant’s diversified investment account balance is adjusted to mirror the investment experience, whether positive or negative, of the diversified investments selected by the participant. Participants may change investment elections in the diversified investment accounts, but cannot purchase Company common stock or stock units. The diversified investment accounts consist of various mutual funds and retirement target funds and are unfunded, unsecured obligations of the Company that will be settled in cash. Both the assets and liabilities associated with this program are presented in the table above and are adjusted to fair value at each reporting period.

Company matching contributions to the ESUP, including dividend equivalents, are used to acquire stock units at 85% of the common stock market price on the acquisition date. Stock units are converted to common stock at a 1-to-1 ratio upon distribution from the program and may be settled in cash at our discretion.

Company matches in the SBP and ESUP fully vest upon three and five years, respectively, of cumulative service, subject to certain participation requirements. Distributions under both plans are triggered by an employee’s retirement, death, disability or separation from Leggett.

Information for the year ended December 31 for these plans was as follows:

	SBP 2016		ESUP 2016
Employee contributions	$	3.2	$	4.3
Less diversified contributions	.8		4.3
Total employee stock contributions	$	2.4	$	—
Employer premium contribution to diversified investment accounts			$	.8
Shares purchased by employees and company match	.1

Details regarding stock unit activity for the ESUP plan are reflected in the stock units summary table below.

(3) Performance Stock Unit Awards

We also 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 TSR 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.

Below is a summary of the number of shares and related grant date fair value of PSU’s for the periods presented:

	Year Ended December 31,
	2016			2015			2014
Total shares base award	.1			.2			.2
Grant date per share fair value	$	40.16		$	42.22		$	30.45
Risk-free interest rate	1.3		%	1.1		%	.8		%
Expected life in years	3.0			3.0			3.0
Expected volatility (over expected life)	19.2		%	19.8		%	25.9		%
Expected dividend yield (over expected life)	3.1		%	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	Cash Portion		Distribution Date
2012	December 31, 2014	30	157.0%	.4 million	$	9.9	January 2015
2013	December 31, 2015	27	165.4%	.4 million	$	8.5	January 2016
2014	December 31, 2016	10	175.0%	.4 million	$	9.8	January 2017

We intend to pay out 65% of awards in shares of our common stock and 35% in cash, although we reserve the right to pay up to 100% in cash. The 35% portion is recorded as a liability and is adjusted to fair value at each reporting period.

(4) Restricted Stock Unit Awards

RSU awards are generally granted as follows:

• Annual awards to selected managers, and

• On a discretionary basis to selected employees

• As compensation for outside directors, who have a choice to receive RSUs or restricted stock

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

(5) Profitable Growth Incentive Awards

The PGI awards are issued to certain key management employees 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 over a two-year performance period. The 2014 base target PGI award was .1 shares, 2015 and 2016 were less than .1 shares. If earned, we intend to pay half in shares of our common stock and half in cash, although we reserve the right to pay up to 100% in cash. Both components are recorded as liabilities and 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	Estimated Number of Shares	Cash Portion		Expected Distribution Date
2013	December 31, 2014	127.0%	.1 million	$	3.5	March 2015
2014	December 31, 2015	224.7%	.2 million	$	6.7	March 2016
2015	December 31, 2016	36.0%	< .1 million	$	.8	March 2017

STOCK UNITS SUMMARY

Stock unit information for the plans discussed above is presented in the table below.

	DSU		ESUP		PSU*		RSU		PGI**		Total Units		Weighted Average Grant Date Fair Value per Unit		Aggregate Intrinsic Value
Non-vested at December 31, 2015	—		—		1.1		.2		.3		1.6		$	21.43
Granted based on current service	.2		.2		—		.1		—		.5		46.61
Granted based on future conditions	—		—		.2		—		.1		.3		19.23
Vested	(.2	)	(.2	)	(.4	)	(.2	)	(.2	)	(1.2	)	34.33
Forfeited	—		—		—		—		—		—		9.68
Total non-vested at December 31, 2016	—		—		.9		.1		.2		1.2		$	20.30	$	60.7
Fully vested shares available for issuance at December 31, 2016											3.7				$	182.4

* PSU awards are presented at 175% (i.e., maximum) payout

** PGI awards are presented at 250% (i.e., maximum) payout

	Year Ended December 31
	2016		2015		2014
Total intrinsic value of vested stock units converted to common stock	$	24.8	$	27.7	$	9.2

STOCK-BASED COMPENSATION COST NOT YET RECOGNIZED

As of December 31, 2016, the unrecognized cost of non-vested stock options and units that are not adjusted to fair value at each reporting period was as follows:

	Options	Units
Unrecognized cost of non-vested stock	$ < .1	$	7.5
Weighted-average remaining contractual life in years	0.6	1.0

(6) Discount Stock Plan

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

Average 2016 purchase price per share (net of discount)	$	40.73
2016 number of shares purchased by employees	.1
Shares purchased since inception in 1982	22.8
Maximum shares under the plan	27.0