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Stock-Based Compensation
12 Months Ended
Dec. 31, 2018
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"). 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, 2018, the following common shares were authorized for issuance under the Plan:
 
 
Shares Available for Issuance
 
Maximum Number of Authorized Shares
Unexercised options
1.6

 
1.6

Outstanding stock units—vested
3.6

 
7.9

Outstanding stock units—unvested
.8

 
2.3

Available for grant
7.6

 
7.6

Authorized for issuance at December 31, 2018
13.6

 
19.4



The following table recaps the impact of stock-based compensation on the results of operations for each of the periods presented:
 
Year Ended December 31
 
2018
 
2017
 
2016
 
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

 
$

     Cash payments in lieu of options

 

 

 

 

 
1.0

Stock-based retirement plans contributions 2
5.6

 
1.0

 
5.5

 
1.2

 
6.7

 
1.3

Discounts on various stock awards:
 
 
 
 
 
 
 
 
 
 
 
Deferred Stock Compensation Program 1
1.9

 

 
2.1

 

 
2.0

 

Stock-based retirement plans 2
1.3

 

 
1.4

 

 
1.5

 

Discount Stock Plan 6
1.1

 

 
1.1

 

 
1.0

 

Performance Stock Unit (PSU) awards 3
 
 
 
 
 
 
 
 
 
 
 
     2018 PSU - TSR based 3A
1.2

 
.8

 

 

 

 

     2018 PSU - EBIT CAGR based 3B
2.9

 
2.5

 

 

 

 

     2017 and prior PSU awards 3C
3.6

 
(1.3
)
 
5.4

 
(1.4
)
 
4.8

 
6.5

Profitable Growth Incentive (PGI) awards 4
.9

 
.9

 
1.4

 
1.4

 
1.4

 
1.0

Restricted Stock Units (RSU) awards 5
2.1

 

 
2.5

 

 
2.8

 

Other, primarily non-employee directors restricted stock
.9

 

 
.9

 

 
1.0

 

Total stock-related compensation expense
21.5

 
$
3.9

 
20.3

 
$
1.2

 
22.2

 
$
9.8

Employee contributions for above stock plans
14.0

 
 
 
16.3

 
 
 
14.9

 
 
Total stock-based compensation
$
35.5

 
 
 
$
36.6

 
 
 
$
37.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax benefits on stock-based compensation expense
$
5.1

 
 
 
$
7.3

 
 
 
$
8.1

 
 
Tax benefits on stock-based compensation payments (As discussed below, we elected to pay selected awards in cash during 2018)
3.9

 
 
 
9.9

 
 
 
18.2

 
 
Total tax benefits associated with stock-based compensation
$
9.0

 
 
 
$
17.2

 
 
 
$
26.3

 
 


The following table recaps the impact of stock-based compensation on assets and liabilities for each of the periods presented:
 
2018
 
2017
 
Current
 
Long-term
 
Total
 
Current
 
Long-term
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
Diversified investments associated with the Executive Stock Unit Program 2
$
2.3

 
$
30.4

 
$
32.7

 
$
2.4

 
$
31.6

 
$
34.0

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Executive Stock Unit Program 2
$
2.3

 
$
31.4

 
$
33.7

 
$
2.4

 
$
32.0

 
$
34.4

Performance Stock Unit award 3
.6

 
3.2

 
3.8

 
6.7

 
1.9

 
8.6

Profitable Growth Incentive award 4
4.3

 

 
4.3

 
2.0

 
2.5

 
4.5

Other - primarily timing differences between employee withholdings and related employer contributions to be submitted to various plans' trust accounts
7.4

 

 
7.4

 
7.0

 

 
7.0

Total liabilities associated with stock-based compensation
$
14.6

 
$
34.6

 
$
49.2

 
$
18.1

 
$
36.4

 
$
54.5

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 to outside directors

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

Options are generally offered only in conjunction with the Deferred Compensation Program discussed below. Prior to 2013, we granted stock options annually on a discretionary basis to a broad group of employees, a maximum term of ten years and exercise prices 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 (typically three years), 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 in the last month 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 but only if there is not a sufficient amount of shares reserved for future issuance under the Flexible Stock Plan. 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 J.
 
Options
 
Units
 
Cash
Aggregate amount of compensation deferred during 2018
$
.4

 
$
7.7

 
$
.5




Stock Option Summary
 
Stock option information for the plans discussed above is as follows:
 
Total Stock
Options
 
Weighted
Average
Exercise
Price per
Share
 
Weighted
Average
Remaining
Contractual
Life in Years
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2017
1.9

 
$
24.08

 
 
 
 
Granted

 

 
 
 
 
Exercised
(.3
)
 
17.92

 
 
 
 
Outstanding at December 31, 2018
1.6

 
$
25.43

 
2.9
 
$
17.8

Vested or expected to vest
1.6

 
$
25.43

 
2.9
 
$
17.8

Exercisable (vested) at December 31, 2018
1.5

 
$
25.12

 
2.8
 
$
17.8



Additional information related to stock option activity for the periods presented is as follows:
 
Year Ended December 31
 
2018
 
2017
 
2016
Total intrinsic value of stock options exercised
$
8.8

 
$
11.7

 
$
27.7

Cash received from stock options exercised
4.8

 
2.6

 
4.9

Total fair value of stock options vested
.8

 
1.2

 
.1


 
The following table summarizes fair values calculated (and assumptions utilized) using the Black-Scholes option pricing model.
 
 
Year Ended December 31
 
 
2018
 
2017
 
2016
Aggregate grant date fair value
 
$ <.1
 
$ <.1
 
$
1.4

Weighted-average per share grant date fair value
 
$
6.47

 
$
9.21

 
$
10.79

Risk-free interest rate
 
2.3
%
 
2.3
%
 
2.2
%
Expected life in years
 
6.0

 
6.0

 
7.9

Expected volatility (over expected life)
 
19.4
%
 
19.8
%
 
30.0
%
Expected dividend yield (over expected life)
 
3.1
%
 
3.1
%
 
3.0
%


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 but only if there is not a sufficient amount of shares reserved for future issuance under the Flexible Stock Plan.

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 employee contributions for the year ended December 31 for these plans was as follows. See the stock-based compensation table above for information regarding employer contributions.

 
SBP
2018
 
ESUP
2018
Employee contributions
$
3.2

 
$
3.8

Less diversified contributions
.7

 

Total employee stock contributions
$
2.5

 
$
3.8

Employer premium contribution to diversified investment accounts


 
$
.7

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.

We merged the SBP with our 401(k) plan on December 31, 2018. After the merger, our common stock was added to the 401(k) plan as an investment option and participants may elect up to 20% of their contributions into our common stock beginning on January 1, 2019. Previously participants could contribute up to 100% of their contributions into our common stock.
3 PSU Awards
 
During 2018, we merged our PSU and PGI award programs. The 2018 PSU awards have a component based on relative Total Shareholder Return (TSR = (Change in Stock Price + Dividends) / Beginning Stock Price) 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.

Cash settlements are recorded as a liability and adjusted to fair value at each reporting period. We elected to pay 100% of the 2015 award (paid in the first quarter 2018) in cash.

 3A 2018 PSU - TSR based
Most of the 2018 PSU awards are based 50% upon our TSR compared to a peer group. A small number of PSU awards are based 100% upon relative TSR for certain business unit employees to complement their particular mix of incentive compensation. Grant date fair values are calculated using a Monte Carlo simulation of stock and volatility data for Leggett and each of the peer companies. Grant date fair values are amortized using the straight-line method over the three-year vesting period.
The relative TSR vesting condition of the 2018 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 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.

3B 2018 PSU - EBIT CAGR based
Most of the 2018 PSU awards are based 50% upon our or the applicable segment's EBIT CAGR. 2018's base award was .1 shares with a grant date fair value of $40.92. Grant date fair values are calculated using the grant date stock price discounted for dividends over the vesting period. Expense is adjusted every quarter over the three-year vesting period based on the number of shares expected to vest.
The EBIT CAGR portion of this award contains the following conditions:
A service requirement—Awards generally “cliff” vest three years following the grant date; and
A performance condition—Awards are based on achieving specified EBIT CAGR performance targets for our or the applicable segment's EBIT during the third year of the performance period compared to the EBIT during the fiscal year immediately preceding the performance period. Participants will earn from 0% to 200% of the base award.
In connection with the decision to move a significant portion of the long-term incentive opportunity from a two-year to a three-year performance period by eliminating PGI awards, in January 2018, we also granted participants a one-time transition PSU award, based upon EBIT CAGR over a two-year performance period.

3C 2017 and Prior PSU Awards
The 2017 and prior PSU awards are based solely on relative TSR. Vesting conditions are the same as (3A) above other than a maximum payout of 175% of the base award.
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.
 
 
Year Ended December 31,
 
2018
 
2017
 
2016
Total shares base award
.1

 
.1

 
.1

Grant date per share fair value
$
42.60

 
$
50.75

 
$
40.16

Risk-free interest rate
2.4
%
 
1.5
%
 
1.3
%
Expected life in years
3.0

 
3.0

 
3.0

Expected volatility (over expected life)
19.9
%
 
19.5
%
 
19.2
%
Expected dividend yield (over expected life)
3.3
%
 
2.8
%
 
3.1
%

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
2016
 
December 31, 2018
 
78
 
—%
 
 
$

 
First quarter 2019
4 PGI Awards

In 2017 and prior years certain key management employees participated in a PGI program. The PGI awards were eliminated during 2018, and were replaced with the PSU-EBIT CAGR award discussed above. The PGI awards were issued as growth performance stock units (GPSUs). The GPSUs vested (0% to 250%) at the end of a two-year performance period. Vesting was based on our or the 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 50% in shares of our common stock and 50% in cash; although, we reserve the right to pay up to 100% in cash. We elected to pay 100% of 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
 
Estimated Number of Shares
 
Cash Portion
 
Expected 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
2017
 
December 31, 2018
 
155.0%
 
< .1 million
 
$
2.2

 
First quarter 2019


5 Restricted Stock Unit Awards
 
RSU awards are generally granted as follows:
 
Annual awards to selected managers;
On a discretionary basis to selected employees; and
As compensation for outside directors

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.

Stock Units Summary
 
As of December 31, 2018, the unrecognized cost of non-vested stock units that is not adjusted to fair value was $12.9 with a weighted-average remaining contractual life of one year.
 
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
Unvested at December 31, 2017

 

 
.4

 
.1

 
.1

 
.6

 
$
19.56

 
 
Granted based on current service
.2

 
.2

 

 
.1

 

 
.5

 
42.71

 
 
Granted based on future conditions

 

 
.5

 

 

 
.5

 
27.48

 
 
Vested
(.2
)
 
(.2
)
 

 
(.1
)
 
(.1
)
 
(.6
)
 
42.01

 
 
Difference between maximum and actual payout

 

 
(.2
)
 

 

 
(.2
)
 

 
 
Unvested at December 31, 2018

 

 
.7

 
.1

 

 
.8

 
$
38.43

 
$
28.2

Fully vested shares available for issuance at December 31, 2018
 
 
 
 
 
 
 
 
 
 
3.6

 
 
 
$
131.8


*
PSU awards are presented at maximum payout (2017 award at 175% and 2018 award at 200%)
** PGI awards are presented at maximum payout (2017 award at 250%)
 
Year Ended December 31
 
2018
 
2017
 
2016
Total intrinsic value of vested stock units converted to common stock
$
12.1

 
$
22.7

 
$
24.8

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 2018 purchase price per share (net of discount)
$
35.77

2018 number of shares purchased by employees
.2

Shares purchased since inception in 1982
23.2

Maximum shares under the plan
27.0