XML 99 R20.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

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, 2019, the following common shares were authorized for issuance under the Plan:



	Shares Available for Issuance	Maximum Number of Authorized Shares
Unexercised options	.6	.6
Outstanding stock units—vested	3.5	7.8
Outstanding stock units—unvested	1.1	3.3
Available for grant	5.0	5.0
Authorized for issuance at December 31, 2019	10.2	16.7

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
	2019				2018					2017
	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
Stock-based retirement plans contributions ²	$	3.7	$	.6	$	5.6	$	1.0		$	5.5	$	1.2
Discounts on various stock awards:
Deferred Stock Compensation Program ¹	2.1		—		1.9		—			2.1		—
Stock-based retirement plans ²	1.3		—		1.3		—			1.4		—
Discount Stock Plan ⁶	1.0		—		1.1		—			1.1		—
Performance Stock Unit (PSU) awards: ³
2018 and later PSU - TSR based ^3A	2.8		4.1		1.2		.8			—		—
2018 and later PSU - EBIT CAGR based ^3B	3.8		5.3		2.9		2.5			—		—
2017 and prior PSU awards ^3C	1.8		1.0		3.6		(1.3		)	5.4		(1.4		)
Profitable Growth Incentive (PGI) awards ⁴	—		—		.9		.9			1.4		1.4
Restricted Stock Units (RSU) awards ⁵	2.0		—		2.1		—			2.5		—
Other, primarily non-employee directors restricted stock	1.4		—		.9		—			.9		—
Total stock-related compensation expense	19.9		$	11.0	21.5		$	3.9		20.3		$	1.2
Employee contributions for above stock plans	13.1				14.0					16.3
Total stock-based compensation	$	33.0			$	35.5				$	36.6

Tax benefits on stock-based compensation expense	$	4.7			$	5.1				$	7.3
Tax benefits on stock-based compensation payments (As discussed below, we elected to pay selected awards in cash during 2018.)	5.6				3.9					9.9
Total tax benefits associated with stock-based compensation	$	10.3			$	9.0				$	17.2

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



	2019						2018
	Current		Long-term		Total		Current		Long-term		Total
Assets:
Diversified investments associated with the Executive Stock Unit Program ²	$	2.8	$	38.2	$	41.0	$	2.3	$	30.4	$	32.7

Liabilities:
Executive Stock Unit Program ²	$	2.8	$	37.8	$	40.6	$	2.3	$	31.4	$	33.7
Performance Stock Unit (TSR) award ^3A	1.5		5.0		6.5		.6		.7		1.3
Performance Stock Unit (EBIT) award ^3B	4.1		3.7		7.8		—		2.5		2.5
Profitable Growth Incentive award ⁴	—		—		—		4.3		—		4.3
Other - primarily timing differences between employee withholdings and related employer contributions to be submitted to various plans' trust accounts	6.2		—		6.2		7.4		—		7.4
Total liabilities associated with stock-based compensation	$	14.6	$	46.5	$	61.1	$	14.6	$	34.6	$	49.2

¹ Stock Option Grants

We have granted stock options in conjunction with our Deferred Compensation Program, to senior executives on a discretionary basis, and historically to a broad group of employees.

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 10 years after the effective date of the deferral and installment distributions cannot exceed 10 years.


•	Interest-bearing cash deferrals under this program are reported in "Other long-term liabilities" on the Consolidated Balance Sheets and are disclosed in Note J.



	Options		Units		Cash
Aggregate amount of compensation deferred during 2019	$	.1	$	6.9	$	.6

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 above. We occasionally grant options to senior executives in connection with promotions or retention purposes, and prior to 2013, we granted stock options annually on a discretionary basis to a broad group of employees. Those options have a maximum term of 10 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.

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, 2018	1.6		$	25.43
Granted	.1		36.25
Exercised	(1.1	)	22.40
Outstanding at December 31, 2019	.6		$	33.03	4.7	$	10.4
Vested or expected to vest	.6		$	33.03	4.7	$	10.4
Exercisable (vested) at December 31, 2019	.5		$	32.34	3.8	$	8.9

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



	Year Ended December 31
	2019		2018		2017
Total intrinsic value of stock options exercised	$	23.6	$	8.8	$	11.7
Cash received from stock options exercised	9.3		4.8		2.6
Total fair value of stock options vested	.3		.8		1.2

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



	Year Ended December 31
	2019			2018		2017
Aggregate grant date fair value	$	.5		$ <.1		$ <.1
Weighted-average per share grant date fair value	5.36			6.47		9.21
Risk-free interest rate	2.8		%	2.3	%	2.3	%
Expected life in years	7.8			6.0		6.0
Expected volatility (over expected life)	22.3		%	19.4	%	19.8	%
Expected dividend yield (over expected life)	4.2		%	3.1	%	3.1	%

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

Previous to 2019 we had 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 made matching contributions to both plans. In addition to the automatic 50% match, we would 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, were obtained.

For 2019, the provisions of the ESUP are unchanged. We merged the SBP with the Leggett & Platt, Incorporated 401(k) Plan and Trust Agreement (401(k) Plan) on December 31, 2018 (see Note N). 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.

Participants in the ESUP may contribute up to 10% (depending upon certain qualifications) of their compensation above the threshold. 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 ESUP fully vest upon five years of cumulative service, subject to certain participation requirements. Distributions are triggered by an employee’s retirement, death, disability or separation from Leggett.

For the year ended December 31, employee contributions were $3.7 and employer premium contributions to diversified investment accounts were $.6. See the stock-based compensation table above for information regarding employer contributions.

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

³ PSU Awards

During 2018, we merged our PSU and PGI award programs. The 2018 and later 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 EBIT Compound Annual Growth Rate (CAGR). These components are discussed below.

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

For outstanding 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.

The PSU award program will change in 2020 as discussed below.

^3A2018 and later PSU - TSR based

Most of the 2018 and later 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 and later 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 300 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.

^3B2018 and later PSU - EBIT CAGR based

Most of the 2018 and later PSU awards are based 50% upon our or the 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 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 February 2018, we also granted participants a one-time transition PSU award, based upon EBIT CAGR over a two-year performance period. This award will be paid in the first quarter 2020. Average payout percentage of base award will be 114%, and the number of shares paid will be .1. The cash portion pay out will be $4.1.

^3C2017 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 shares and grant date fair value related to PSU awards for the periods presented:



	Year Ended December 31
	2019			2018			2017
TSR based
Total shares base award	.1			.1			.1
Grant date per share fair value	$	57.86		$	42.60		$	50.75
Risk-free interest rate	2.4		%	2.4		%	1.5		%
Expected life in years	3.0			3.0			3.0
Expected volatility (over expected life)	21.5		%	19.9		%	19.5		%
Expected dividend yield (over expected life)	3.4		%	3.3		%	2.8		%

EBIT CAGR based
Total shares base award	.1			.1
Grant date per share fair value	$	39.98		$	40.92
Vesting period in years	3.0			3.0



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
2015	December 31, 2017	57	61.0%	—	$	6.9	First quarter 2018
2016	December 31, 2018	78	—%	—	$	—	First quarter 2019
2017	December 31, 2019	63	49.0%	.1 million	$	1.6	First quarter 2020

⁴ PGI Awards

In 2017 and prior years certain key management employees participated in a PGI program, which was replaced in 2018 with the PSU-EBIT CAGR award discussed above. The PGI awards vested (0% to 250%) at the end of a two-year performance period 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. We paid the 2017 award half in shares of our common stock and half in cash. We elected to pay the 2016 award (paid in the first quarter of 2018) in cash. Both components were adjusted to fair value at each reporting period. As of the first quarter 2019, all PGI awards have been paid out.



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.

The RSU award program will change in 2020 as discussed below.

Stock Units Summary

As of December 31, 2019, the unrecognized cost of non-vested stock units that is not adjusted to fair value was $11.3 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		Total Units		Weighted Average Grant Date Fair Value per Unit		Aggregate Intrinsic Value
Unvested at December 31, 2018	—		—		.7		.1		.8		$	38.43
Granted based on current service	.2		.2		—		.1		.5		41.48
Granted based on future conditions	—		—		.4		—		.4		24.26
Vested	(.2	)	(.2	)	—		(.1	)	(.5	)	43.97
Forfeited	—		—		(.1	)	—		(.1	)	—
Unvested at December 31, 2019	—		—		1.0		.1		1.1		$	33.30	$	56.4
Fully vested shares available for issuance at December 31, 2019									3.5				$	176.2

*PSU awards are presented at maximum payout (2017 award at 175% and 2018 and later awards at 200%)



	Year Ended December 31
	2019		2018		2017
Total intrinsic value of vested stock units converted to common stock	$	8.0	$	12.1	$	22.7

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 2019 purchase price per share (net of discount)	$	35.62
2019 number of shares purchased by employees	.2
Shares purchased since inception in 1982	23.3
Maximum shares under the plan	27.0

2020 Changes to the PSU and RSU awards

In November 2019, the Compensation Committee approved changes to our PSU and RSU award programs. Changes to the plans for executive officers are as follows:


•	Two-thirds of the target award value will be granted as PSUs based on relative TSR and EBIT CAGR over a three-year performance period.


•	One-third of the target award value will be granted as RSUs vesting in one-third increments over three years.

In addition, the RSU award was amended so that those who retire (1) after age 65 or (2) after the date where the participant’s age plus years of service are greater than or equal to 70 years, will continue to receive shares that will vest after the retirement date. Expense associated with these retirement-eligible employees will be recognized immediately at the RSU grant date. For those employees who become retirement eligible after the grant date, any remaining expense associated with those RSUs will be recognized at the date the employee meets the retirement-eligible criteria.