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, ~~2017~~2018



¨	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 an 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 ~~20, 2017: 132,285,492~~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, 2017			December 31, 2016			June 30, 2018			December 31, 2017
CURRENT ASSETS
Cash and cash equivalents	$	335.1		$	281.9		$	446.4		$	526.1
Trade receivables, net	547.1			450.8			610.0			522.3
Other receivables, net	30.6			35.8			39.8			72.8
Total receivables, net	577.7			486.6			649.8			595.1
Inventories
Finished goods	284.0			255.7			332.2			285.6
Work in process	50.9			52.6			51.4			53.0
Raw materials and supplies	281.4			245.1			320.3			283.4
LIFO reserve	(36.3		)	(33.8		)	(69.7		)	(50.9		)
Total inventories, net	580.0			519.6			634.2			571.1
Prepaid expenses and other current assets	47.4			36.8			52.4			74.2
Total current assets	1,540.2			1,324.9			1,782.8			1,766.5
PROPERTY, PLANT AND EQUIPMENT—AT COST
Machinery and equipment	1,180.3			1,133.8			1,256.8			1,210.6
Buildings and other	610.1			559.4			639.9			626.0
Land	39.1			37.7			42.8			40.6
Total property, plant and equipment	1,829.5			1,730.9			1,939.5			1,877.2
Less accumulated depreciation	1,213.3			1,165.4			1,230.2			1,213.3
Net property, plant and equipment	616.2			565.5			709.3			663.9
OTHER ASSETS
Goodwill	816.3			791.3			839.0			822.2
Other intangibles, less accumulated amortization of $143.0 and $137.0 as of June 30, 2017 and December 31, 2016, respectively	176.2			164.9
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	132.6			137.5			130.4			129.1
Total other assets	1,125.1			1,093.7			1,151.9			1,120.4
TOTAL ASSETS	$	3,281.5		$	2,984.1		$	3,644.0		$	3,550.8
CURRENT LIABILITIES
Current maturities of long-term debt	$	3.4		$	3.6		$	153.7		$	153.8
Accounts payable	388.3			351.1			450.6			430.3
Accrued expenses	263.7			257.7			254.4			303.4
Other current liabilities	86.3			94.2			78.2			88.7
Total current liabilities	741.7			706.6			936.9			976.2
LONG-TERM LIABILITIES
Long-term debt	1,183.5			956.2			1,298.0			1,097.9
Other long-term liabilities	165.7			173.0			191.5			202.9
Deferred income taxes	57.0			54.3			89.0			83.0
Total long-term liabilities	1,406.2			1,183.5			1,578.5			1,383.8
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock	2.0			2.0			2.0			2.0
Additional contributed capital	504.6			506.2			519.7			514.7
Retained earnings	2,490.2			2,410.5			2,572.6			2,511.3
Accumulated other comprehensive loss	(63.8		)	(113.6		)
Accumulated other comprehensive income (loss)							(48.7		)	(9.5		)
Treasury stock	(1,799.9		)	(1,713.5		)	(1,917.4		)	(1,828.3		)
Total Leggett & Platt, Inc. equity	1,133.1			1,091.6			1,128.2			1,190.2
Noncontrolling interest	.5			2.4			.4			.6
Total equity	1,133.6			1,094.0			1,128.6			1,190.8
TOTAL LIABILITIES AND EQUITY	$	3,281.5		$	2,984.1		$	3,644.0		$	3,550.8

See accompanying notes to consolidated condensed financial statements.

LEGGETT & PLATT, INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


	Six Months Ended						Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						June 30,						June 30,
(Amounts in millions, except per share data)	2017			2016			2017			2016			2018			2017			2018			2017
Net sales	$	1,949.6		$	1,897.3		$	989.3		$	958.9		$	2,131.3		$	1,949.6		$	1,102.5		$	989.3
Cost of goods sold	1,493.5			1,429.7			759.2			724.9			1,682.9			1,492.2			871.5			758.6
Gross profit	456.1			467.6			230.1			234.0			448.4			457.4			231.0			230.7
Selling and administrative expenses	211.4			204.8			105.0			99.7			212.5			210.8			107.8			104.7
Amortization of intangibles	9.8			9.9			4.7			4.8			10.1			9.8			5.1			4.7
Impairments	.1			3.7			.1			3.7
Gain from sale of assets and businesses	(.6		)	(20.7		)	(.4		)	(18.3		)
Other (income) expense, net	(2.8		)	(3.7		)	(1.6		)	(2.4		)	(2.7		)	(1.4		)	(3.0		)	(1.0		)
Earnings from continuing operations before interest and income taxes	238.2			273.6			122.3			146.5			228.5			238.2			121.1			122.3
Interest expense	21.0			19.5			10.4			10.3			30.4			21.0			16.0			10.4
Interest income	3.5			1.8			1.5			1.0			4.8			3.5			2.4			1.5
Earnings from continuing operations before income taxes	220.7			255.9			113.4			137.2			202.9			220.7			107.5			113.4
Income taxes	47.0			65.4			25.8			37.7			39.9			47.0			22.4			25.8
Earnings from continuing operations	173.7			190.5			87.6			99.5			163.0			173.7			85.1			87.6
Earnings from discontinued operations, net of tax	—			20.4			—			20.3
Earnings (loss) from discontinued operations, net of tax													—			—			—			—
Net earnings	173.7			210.9			87.6			119.8			163.0			173.7			85.1			87.6
Earnings attributable to noncontrolling interest, net of tax	—			(.2		)	—			1.4			(.1		)	—			(.1		)	—
Net earnings attributable to Leggett & Platt, Inc. common shareholders	$	173.7		$	210.7		$	87.6		$	121.2		$	162.9		$	173.7		$	85.0		$	87.6
Earnings per share from continuing operations attributable to Leggett & Platt, Inc. common shareholders
Basic	$	1.27		$	1.37		$	.64		$	.73		$	1.21		$	1.27		$	.63		$	.64
Diluted	$	1.26		$	1.35		$	.64		$	.72		$	1.20		$	1.26		$	.63		$	.64
Earnings per share from discontinued operations attributable to Leggett & Platt, Inc. common shareholders
Earnings (loss) per share from discontinued operations attributable to Leggett & Platt, Inc. common shareholders
Basic	$	—		$	.15		$	—		$	.15		$	—		$	—		$	—		$	—
Diluted	$	—		$	.15		$	—		$	.15		$	—		$	—		$	—		$	—
Net earnings per share attributable to Leggett & Platt, Inc. common shareholders
Basic	$	1.27		$	1.52		$	.64		$	.88		$	1.21		$	1.27		$	.63		$	.64
Diluted	$	1.26		$	1.50		$	.64		$	.87		$	1.20		$	1.26		$	.63		$	.64

Cash dividends declared per share	$	.70		$	.66		$	.36		$	.34		$	.74		$	.70		$	.38		$	.36

Average shares outstanding
Weighted average shares outstanding
Basic	136.4			138.4			136.0			137.8			134.7			136.4			134.1			136.0
Diluted	137.8			140.6			137.4			140.1			135.7			137.8			135.0			137.4

See accompanying notes to consolidated condensed financial statements.

LEGGETT & PLATT, INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Six Months Ended				Three Months Ended					Six Months Ended					Three Months Ended
	June 30,				June 30,					June 30,					June 30,
(Amounts in millions)	2017		2016		2017		2016			2018			2017		2018			2017
Net earnings	$	173.7	$	210.9	$	87.6	$	119.8		$	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	44.1		5.5		29.8		(16.9		)	(39.1		)	44.1		(55.8		)	29.8
Cash flow hedges	4.6		6.0		2.1		(.5		)	(1.3		)	4.6		(3.6		)	2.1
Defined benefit pension plans	1.1		1.6		.5		.9			1.1			1.1		.7			.5
Other comprehensive income	49.8		13.1		32.4		(16.5		)	(39.3		)	49.8		(58.7		)	32.4
Comprehensive income	223.5		224.0		120.0		103.3			123.7			223.5		26.4			120.0
Less: comprehensive income attributable to noncontrolling interest	—		.8		—		2.4			—			—		—			—
Comprehensive income attributable to Leggett & Platt, Inc.	$	223.5	$	224.8	$	120.0	$	105.7		$	123.7		$	223.5	$	26.4		$	120.0

See accompanying notes to consolidated condensed financial statements.

LEGGETT & PLATT, INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
(Amounts in millions)	2017			2016			2018			2017
OPERATING ACTIVITIES
Net earnings	$	173.7		$	210.9		$	163.0		$	173.7
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	47.7			43.0			51.5			47.7
Amortization of intangibles and debt issuance costs	14.5			14.2			15.7			14.5
Long-lived asset impairments							.2			.1
Provision for losses on accounts and notes receivable	.8			1.6			1.4			.8
Writedown of inventories	4.0			2.4			3.1			4.0
Goodwill impairment	—			3.7
Long-lived asset impairments	.1			—
Net gain from sales of assets and businesses	(.5		)	(21.3		)	(1.7		)	(.5		)
Deferred income tax expense	5.1			9.0			1.3			5.1
Stock-based compensation	20.2			21.8			19.2			20.2
Other, net	.1			2.3			4.3			.1
Increases/decreases in, excluding effects from acquisitions and divestitures:
Accounts and other receivables	(72.4		)	(26.4		)	(86.3		)	(72.4		)
Inventories	(51.8		)	(24.3		)	(53.4		)	(51.8		)
Other current assets	(7.2		)	(1.7		)	(7.7		)	(7.2		)
Accounts payable	24.2			34.0			19.9			24.2
Accrued expenses and other current liabilities	(2.4		)	(7.1		)	(5.9		)	(2.4		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	156.1			262.1			124.6			156.1
INVESTING ACTIVITIES
Additions to property, plant and equipment	(79.1		)	(57.9		)	(81.2		)	(79.1		)
Purchases of companies, net of cash acquired	(38.8		)	(16.9		)	(90.2		)	(38.8		)
Proceeds from sales of assets and businesses	1.6			54.0			1.9			1.6
Other, net	(7.8		)	(7.4		)	(2.9		)	(7.8		)
NET CASH USED FOR INVESTING ACTIVITIES	(124.1		)	(28.2		)	(172.4		)	(124.1		)
FINANCING ACTIVITIES
Payments on long-term debt	(5.7		)	(1.6		)	(1.7		)	(5.7		)
Change in commercial paper and short-term debt	220.7			90.2			191.7			220.7
Dividends paid	(90.4		)	(86.5		)	(94.8		)	(90.4		)
Issuances of common stock	1.9			2.7			.5			1.9
Purchases of common stock	(115.2		)	(163.5		)	(107.8		)	(115.2		)
Purchase of remaining interest in noncontrolling interest	(2.6		)	(35.2		)	—			(2.6		)
Additional consideration paid on prior year acquisitions							(8.0		)	(1.8		)
Other, net	(1.8		)	(2.8		)	(.2		)	—
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	6.9			(196.7		)
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES							(20.3		)	6.9
EFFECT OF EXCHANGE RATE CHANGES ON CASH	14.3			(5.6		)	(11.6		)	14.3
INCREASE IN CASH AND CASH EQUIVALENTS	53.2			31.6
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS							(79.7		)	53.2
CASH AND CASH EQUIVALENTS—January 1,	281.9			253.2			526.1			281.9
CASH AND CASH EQUIVALENTS—June 30,	$	335.1		$	284.8		$	446.4		$	335.1

See accompanying notes to consolidated condensed financial statements.

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in millions, except per share data)

1. INTERIM PRESENTATION

The interim financial statements of Leggett & Platt, Incorporated (“we”, “us” or “our”) included herein have not been audited by an independent registered public accounting firm. The statements include all adjustments, including normal recurring accruals, which management considers necessary for a fair 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, ~~2016~~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, ~~2016.~~2017.

Reclassifications

~~Certain~~Due to required retrospective application, certain reclassifications have been made to the prior period's information in the ~~Notes to the~~ Consolidated Condensed ~~Financial~~ Statements of Operations to conform to the ~~first quarter 2017 for segment reporting changes in our management structure and all related internal reporting, as well as the~~2018 presentation of ~~LIFO~~"Cost of goods sold", "Selling and administrative expenses" and "Other (income) expense, ~~or benefit within the segments to which they relate (See~~net" for new accounting guidance associated with pension costs (see Note 42 - ~~Segment Information)~~Accounting Standard Updates). ~~These reclassifications did not impact our consolidated earnings or assets of the company, and all prior periods presented have been restated to conform with these changes.~~

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 ~~2017:~~2018:

On January 1, 2018, we adopted ASU ~~2016-16 "Accounting for Income Taxes: Intra-Entity Asset Transfers~~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 ~~Assets Other than Inventory"~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”: ~~Eliminates deferral~~This ASU requires employers to disaggregate the service cost from other components of net periodic benefit costs and to disclose the ~~tax effects of all intra-entity asset sales other than inventory, resulting~~income statement line item in ~~tax expense being recorded on the sale of the asset~~which each component is included. This guidance requires service costs to be reported in the ~~seller's tax jurisdiction when~~same line item as other compensation costs, and the ~~sale occurs, even though the pretax effects~~other components of ~~the transaction are eliminated in consolidation. Any deferred tax asset arising in the buyer's jurisdiction is also recognized at the time~~net periodic benefit costs (which include interest costs, expected return on plan assets and actuarial gains and losses) to be reported outside of ~~sale.~~operating income. We adopted this guidance ~~in the first quarter of 2017. The modified retrospective approach was required, and as a result, we recorded a $1.2 increase to beginning retained earnings~~ on January 1, ~~2017. Adoption~~2018. Application was required on a retrospective basis and resulted in a reclassification of ~~this new guidance did not materially impact our~~$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, ~~Consolidated Condensed Statements of Operations.~~

~~To be adopted in future years:~~respectively. Refer to Note 11 for further information.

ASU ~~2014-09 “Revenue from Contracts with Customers”~~2018-05 “Income Taxes (Topic ~~606)~~740): ~~Supersedes most~~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 ~~existing authoritative literature~~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 revenue recognition and prescribes a five-step model for recognizing revenue from contracts with customers. In July 2015, the FASB deferred the effective date of this ASU by one year, which results in the new standard being effective January 1, 2018. In addition, the FASB issued several amendments to the standard during 2016. The amended standard permits two transition methods, the full retrospective method or the modified retrospective method. The new standard will also require expanded disclosures pertaining to revenues from contracts with customers in the notes to the financial statements.further information.

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 ~~expect to adopt the new revenue standard~~adopted this guidance on January 1, ~~2018. Presented below is the status of the process we have utilized for the adoption of the new standard~~2018, and ~~the significant implementation matters yet to be addressed:~~


◦	~~We established a cross-functional implementation team to assess all potential impacts of this standard.~~


◦	~~We determined key factors from the five step process to recognize revenue as prescribed by the new standard that may be applicable to each of our 17 business units that roll up into our four segments.~~


◦	Significant customers and contracts from each business unit were identified. We have substantially completed the review of these contracts by the filing date of this second quarter 2017 Form 10-Q, and any remaining contracts will be reviewed by the filing date of the third quarter 2017 Form 10-Q.

◦

Evaluation of the provisions of these contracts, and the comparison of historical accounting policies and practices to the requirements of the new standard (including the related qualitative disclosures regarding the potentialit did not materially impact of the effects of the accounting policies we expect to apply and a comparison to our current revenue recognition policies), is in process. We expect to complete this process prior to the filing of, and make disclosures in, the third quarter Form 10-Q.


◦	~~Implementation of any required changes to our systems and processes, including updating our internal controls, is expected to be completed during the remainder of 2017.~~

Our work to date indicates that certain contracts with customers in roughly one-quarter of our 17 business units contain provisions that may require a change in the way revenue and related expense are recognized, including possibly recognizing revenue over time. The timing of revenue and expense recognition for an over-time revenue recognition method may differ from our current practice of recognizing revenue and expense when title and risk of loss pass to our customer.

Certain operations in these business units also have tooling arrangements with customers. The terms of these tooling arrangements vary by customer. Consequently, the revenue recognition treatment of these arrangements will be dependent upon the specific terms of these customer contracts. The review of such contracts has been, and is expected to be completed consistent with the timing noted above.

~~We are currently in the process of determining the expected quantitative impact that the adoption of Topic 606 will have on~~ our financial statements. ~~Once this determination is made, we will update our disclosure.~~

We concluded that we will transition to the new standard using the modified retrospective method. Under the modified retrospective method, there is a cumulative effect adjustment to equity as of the beginning of the period of the adoption for existing contracts. 2017 and earlier years will

To be presented under legacy GAAP. 2018 will be presented under the new standard for existing and new contracts. Footnotes will disclose existing and new contracts under both the new standard and legacy GAAP.

~~In addition, we will elect to apply the following practical expedients:~~


◦	Significant financing component - We believe that for substantially all of our contracts, the transfer of a promised good to a customer and the customer’s payment for that good will be one year or less. Thus, we will not adjust the promised amount of consideration for the effects of a significant financing component.


◦	~~Sales taxes - We will exclude from its transaction price any amounts collected from customers for all sales (and other similar) taxes. This is consistent with our current practice.~~


◦	Shipping and handling - We will elect to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities rather than assessing such activities as performance obligations.

~~We continue to evaluate the remaining available practical expedients.~~adopted in future years:

ASU 2016-02 ~~“ Leases”~~“Leases” (Topic 842): Requires ~~that~~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 ~~lessee recognize a right-of-use asset~~cross-functional implementation team and ~~a lease liability on the balance sheet for most lease arrangements. This ASU will be effective January 1, 2019, and we~~ are assessing all potential impacts of the standard. ~~Currently,~~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 ~~anticipate adopting~~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 ~~January 1, 2019. We believe it will increase our assets~~

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~and liabilities for~~through the ~~addition~~recording of these right-of-use assets and ~~the~~ corresponding lease ~~liabilities on the balance sheet.~~liabilities. We ~~are evaluating~~continue to evaluate its impact on our ~~Consolidated Condensed Statements~~statements of ~~Operations~~operations and ~~Cash Flows.~~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.

~~ASUs~~ASU 2016-13 “Financial Instruments - Credit Losses”~~, 2016-15 “Statement~~ (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 Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)”, and 2017-07 "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost"financial instruments including trade receivables. We are currently ~~being evaluated.~~evaluating this guidance. However, we do not expect ~~these updates~~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".

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

¹This represents the deferred tax impact related to Topic 606.

²This 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

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



	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.

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
	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

⁴Name 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:

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

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

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

¹Unallocated 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 ~~(the excess of FIFO cost over LIFO cost)~~ on an annual basis. During interim periods, we estimate the current year annual change in the LIFO reserve (i.e., the annual LIFO expense or benefit) and allocate that change ratably to the four quarters. Because accurately predicting inventory prices for the year is difficult, the change in the LIFO reserve for the full year could be significantly different from the amount currently estimated. In addition, a variation in expected ending inventory levels could also impact total change in the LIFO reserve for the year.

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,
2017 2016 2017 2016
LIFO expense $ 2.5
$ 7.3
$ 2.1
$ 7.3



	Six Months Ended June 30,				Three Months Ended June 30,
	2018		2017		2018		2017
LIFO expense	$	18.8	$	2.5	$	12.8	$	2.1

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

~~4. SEGMENT INFORMATION~~

Our reportable segments are the same as our operating segments, which also correspond with our management structure. In conjunction with a change in executive officers, our management structure and all related internal reporting changed as of January 1, 2017. As a result, the composition of our four segments also changed to reflect the new structure.

The new structure is largely the same as prior years except the Home Furniture Group moved from Residential Products to Furniture Products (formerly Commercial Products) and the Machinery Group moved from Specialized Products to Residential Products. In addition, the changes in LIFO reserve will now be recognized within the segments to which they relate (primarily Industrial Products). Previously segment EBIT (Earnings Before Interest and Taxes) reflected the FIFO basis of accounting for certain inventories and an adjustment to the LIFO basis for these inventories was made at the consolidated financial statement level. These changes were retrospectively applied to all prior periods presented. The methods and assumptions that we use in estimating our LIFO reserve did not change (See Note 3 - Inventories).

~~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 carpet cushion, 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 bedding, 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 mechanical and pneumatic lumbar support systems, seat suspension systems, motors and actuators, and control cables used by automotive manufacturers. We also produce and distribute titanium and nickel tubing and tube assemblies for the aerospace industry.

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 reviewed and used by the CODM to evaluate segment performance, allocate overall resources and determine management incentive compensation.

Separately, we also utilize a role-based approach (Grow, Core, Fix or Divest) as a supplemental management tool to ensure capital (which is a subset of the overall resources referred to above) is efficiently allocated within the reportable segment structure.

The accounting principles used in the preparation of the segment information are the same as those used for the consolidated financial statements. We evaluate performance based on 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.

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~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, 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
Three Months Ended June 30, 2016
Residential Products $ 408.0
$ 4.2
$ 412.2
$ 52.2
Industrial Products 79.9
70.2
150.1
13.0
Furniture Products 235.6
17.3
252.9
24.6
Specialized Products 235.4
1.8
237.2
54.7
Intersegment eliminations and other 2.0
$ 958.9
$ 93.5
$ 1,052.4
$ 146.5

Trade
Sales

Inter-
Segment
Sales

Total
Sales
EBIT
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
Six Months Ended June 30, 2016
Residential Products $ 798.2
$ 9.1
$ 807.3
$ 85.3
Industrial Products 157.0
150.3
307.3
33.1
Furniture Products 486.9
38.3
525.2
56.1
Specialized Products 455.2
3.5
458.7
98.2
Intersegment eliminations and other .9
$ 1,897.3
$ 201.2
$ 2,098.5
$ 273.6

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

June 30,
2017 December 31,
2016
Residential Products $ 542.4
$ 527.2
Industrial Products 144.2
147.4
Furniture Products 234.5
219.4
Specialized Products 269.7
248.7
Other (1) —
.2
Average current liabilities included in segment numbers above 534.9
495.9
Unallocated assets (2) 1,461.2
1,378.3
Difference between average assets and period-end balance sheet 94.6
(33.0 )
Total assets $ 3,281.5
$ 2,984.1


~~(1)~~	~~Businesses sold or classified as discontinued operations.~~


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

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~5. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE~~

~~Discontinued Operations and Assets Held for Sale~~

As discussed in Note 15, during the second quarter of 2016 we received proceeds from an antitrust litigation settlement of $31.4 ($19.8 after tax) associated with our former Prime Foam Products unit. This unit was sold in March 2007 and was previously part of the Residential Products Segment. We had no other material discontinued operations or items held for sale at June 30, 2017.

~~Other Divestitures~~

~~The following businesses were divested during the periods presented, but did not meet the discontinued operations criteria.~~

Quarter Six Months Ended June 30, Three Months Ended June 30,
Divested 2017 2016 2017 2016
Trade sales:
Residential Products:
Machinery operation Fourth quarter 2016 $ —
$ 1.8
$ —
$ 1.0
Industrial Products:
Wire Products operation Fourth quarter 2016 —
9.0
—
4.4
Wire Products operation Second quarter 2016 —
19.5
—
8.1
Specialized Products:
Commercial Vehicle Products (CVP) operation Second quarter 2016 —
15.3
—
7.8
Total trade sales $ —
$ 45.6
$ —
$ 21.3

EBIT:
Residential Products:
Machinery operation Fourth quarter 2016 $ —
$ —
$ —
$ —
Industrial Products:
Wire Products operation Fourth quarter 2016 —
.2
—
—
Wire Products operation Second quarter 2016 —
1.2
—
.8
Specialized Products:
CVP operation Second quarter 2016 —
2.8
—
1.3
Total EBIT $ —
$ 4.2
$ —
$ 2.1

In 2016 we realized gains of $21.2 related to the sales of the Wire Products operations and $11.2 related to the sale of the CVP operation. No material gains or losses were realized on the sale of other businesses.

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~6. IMPAIRMENT CHARGES~~

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

~~Other long-lived asset impairments are reported in "Other (income) expense, net."~~

Six Months Ended June 30, Three Months Ended June 30,
2017 2016 2017 2016
Goodwill Other Long-Lived Assets Total Goodwill Other Long-Lived Assets Total Goodwill Other Long-Lived Assets Total Goodwill Other Long-Lived Assets Total
Furniture Products $ —
$ .1
$ .1
$ —
$ —
$ —
$ —
$ .1
$ .1
$ —
$ —
$ —
Specialized Products-CVP unit —
—
—
3.7
—
3.7
—
—
—
3.7
—
3.7
Total impairment charges $ —
$ .1
$ .1
$ 3.7
$ —
$ 3.7
$ —
$ .1
$ .1
$ 3.7
$ —
$ 3.7

~~Other Long-Lived Assets~~

We test other long-lived assets for recoverability at year-end and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Fair value and the resulting impairment charges noted above were based primarily upon offers from potential buyers or third party estimates of fair value less selling costs.

~~Goodwill Impairment Reviews~~

We test goodwill for impairment at the reporting unit level (the business groups that are one level below the operating segments) when triggering events occur, or at least annually. We perform our annual goodwill impairment review in the second quarter.

In evaluating goodwill for impairment, we first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after such assessment, with regard to each reporting unit, we conclude that the goodwill of a reporting unit is not impaired, then no further testing is required (commonly referred to as the Step Zero Analysis approach). For those reporting units where potential impairment indicators exist (based on the Step Zero Analysis), recoverability of goodwill is then evaluated using a two-step process. The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the estimated fair value of the reporting unit exceeds its carrying value, no further analysis is needed.

In our Step Zero Analysis, we consider i) the excess in fair value of the reporting unit over its carrying amount from the most recent quantitative analysis, ii) macroeconomic conditions, iii) industry and market trends, and iv) overall financial performance as well as other matters as appropriate.

~~2017~~

~~The 2017 goodwill impairment review indicated no goodwill impairments.~~

We performed a Step Zero Analysis for our annual goodwill review for each of our reporting units, and concluded that it was more likely than not that the fair value of all reporting units, except for two, exceeded their carrying values. Because sales and profits for two reporting units were less than expected, we performed a quantitative analysis for our Work Furniture and Aerospace reporting units under the two-step model. These reporting units were determined to have a fair value in excess of their carrying amounts of at least 75%.

~~2016~~

Because all reporting units had fair values that exceeded carrying value (fair value over carrying value divided by carrying value) by a range of 115% to 600% during the 2015 testing (performed on a quantitative analysis for all reporting units), we performed a Step Zero Analysis. Based on the Step Zero Analysis we concluded that it is more likely than not that the fair value of the reporting units exceeded their carrying amount, except for our CVP reporting unit. With regard to our CVP reporting unit, in the second quarter of 2016 we sold one of our two remaining businesses. Additionally, real estate associated with the

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

remaining CVP business reached held for sale status during the second quarter of 2016. As a result of these two events, the fair value of the CVP reporting unit (consisting of one remaining business) had fallen below its carrying amount, and we fully impaired the remaining $3.7 of goodwill for this reporting unit.

7. EARNINGS PER SHARE

Basic and diluted earnings per share were calculated as follows:


	Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,
	2017		2016			2017		2016		2018			2017		2018			2017
Earnings:
Earnings from continuing operations	$	173.7	$	190.5		$	87.6	$	99.5	$	163.0		$	173.7	$	85.1		$	87.6
Earnings attributable to noncontrolling interest, net of tax	—		(.2		)	—		1.4		(.1		)	—		(.1		)	—
Net earnings from continuing operations attributable to Leggett & Platt, Inc. common shareholders	173.7		190.3			87.6		100.9		162.9			173.7		85.0			87.6
Earnings from discontinued operations, net of tax	—		20.4			—		20.3		—			—		—			—
Net earnings attributable to Leggett & Platt, Inc. common shareholders	$	173.7	$	210.7		$	87.6	$	121.2	$	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	136.4		138.4			136.0		137.8		134.7			136.4		134.1			136.0
Dilutive effect of stock-based compensation	1.4		2.2			1.4		2.3		1.0			1.4		.9			1.4
Weighted average number of common shares and dilutive potential common shares used in diluted EPS	137.8		140.6			137.4		140.1		135.7			137.8		135.0			137.4

Basic and Diluted EPS:
Basic EPS attributable to Leggett & Platt, Inc. common shareholders
Continuing operations	$	1.27	$	1.37		$	.64	$	.73	$	1.21		$	1.27	$	.63		$	.64
Discontinued operations	—		.15			—		.15		—			—		—			—
Basic EPS attributable to Leggett & Platt, Inc. common shareholders	$	1.27	$	1.52		$	.64	$	.88	$	1.21		$	1.27	$	.63		$	.64
Diluted EPS attributable to Leggett & Platt, Inc. common shareholders
Continuing operations	$	1.26	$	1.35		$	.64	$	.72	$	1.20		$	1.26	$	.63		$	.64
Discontinued operations	—		.15			—		.15		—			—		—			—
Diluted EPS attributable to Leggett & Platt, Inc. common shareholders	$	1.26	$	1.50		$	.64	$	.87	$	1.20		$	1.26	$	.63		$	.64

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

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, 2017						December 31, 2016						June 30, 2018					December 31, 2017
	Current			Long-term			Current			Long-term			Current			Long-term		Current			Long-term
Trade accounts receivable	$	554.1		$	—		$	456.5		$	—		$	614.2		$	—	$	526.1		$	—
Trade notes receivable	.5			.5			1.5			.7			1.2			1.4		1.0			1.2
Total trade receivables	554.6			.5			458.0			.7			615.4			1.4		527.1			1.2
Other notes receivable	—			24.6			—			24.6			—			24.7		—			24.7
Income tax receivables	4.6			—			9.1			—
Insurance receivables													.9			—		43.0			—
Taxes receivable, including income taxes													26.1			—		15.0			—
Other receivables	26.0			—			26.7			—			12.8			—		14.8			—
Subtotal other receivables	30.6			24.6			35.8			24.6			39.8			24.7		72.8			24.7
Total trade and other receivables	585.2			25.1			493.8			25.3			655.2			26.1		599.9			25.9
Allowance for doubtful accounts:
Trade accounts receivable	(7.3		)	—			(7.1		)	—			(5.3		)	—		(4.7		)	—
Trade notes receivable	(.2		)	(.1		)	(.1		)	(.2		)	(.1		)	—		(.1		)	(.1		)
Total trade receivables	(7.5		)	(.1		)	(7.2		)	(.2		)	(5.4		)	—		(4.8		)	(.1		)
Other notes receivable	—			—			—			—			—			—		—			—
Total allowance for doubtful accounts	(7.5		)	(.1		)	(7.2		)	(.2		)	(5.4		)	—		(4.8		)	(.1		)
Total net receivables	$	577.7		$	25.0		$	486.6		$	25.1		$	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, 2016		2017 Charges		2017 Charge- offs, Net of Recoveries		Balance at June 30, 2017		Balance at December 31, 2017		Add: Charges			Less: Net Charge-offs/ (Recoveries)		Balance at June 30, 2018
Trade accounts receivable	$	7.1	$	.8	$	.6	$	7.3	$	4.7	$	1.5		$	.9	$	5.3
Trade notes receivable	.3		—		—		.3		.2		(.1		)	—		.1
Total trade receivables	7.4		.8		.6		7.6		4.9		1.4			.9		5.4
Other notes receivable	—		—		—		—		—		—			—		—
Total allowance for doubtful accounts	$	7.4	$	.8	$	.6	$	7.6	$	4.9	$	1.4		$	.9	$	5.4

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, 2017				Six Months Ended June 30, 2016				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		To be settled with stock		To be settled in cash		To be settled with stock		To be settled in cash
Options:
Amortization of the grant date fair value	$	—	$	—	$	1.0	$	—
Cash payments in lieu of options	—		—		—		1.0
Stock-based retirement plans contributions	3.6		.7		3.5		.7
Stock-based retirement plans contributions ¹									$	4.1	$	.5	$	3.6	$	.7
Discounts on various stock awards:
Deferred Stock Compensation Program	1.2		—		1.1		—		.9		—		1.2		—
Stock-based retirement plans	.7		—		.7		—		.5		—		.7		—
Discount Stock Plan	.6		—		.5		—		.6		—		.6		—
Performance Stock Unit awards (1)	2.7		2.1		2.5		4.4
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	1.2		—		1.4		—		1.0		—		1.2		—
Profitable Growth Incentive awards (2)	.8		.9		2.5		2.0
Profitable Growth Incentive (PGI) awards ³									1.2		1.2		.8		.9
Other, primarily non-employee directors restricted stock	.5		—		.7		—		.4		—		.5		—
Total stock-related compensation expense	11.3		$	3.7	13.9		$	8.1
Total stock-based compensation expense									12.7		$	3.9	11.3		$	3.7
Employee contributions for above stock plans	8.9				7.9				6.5				8.9
Total stock-based compensation	$	20.2			$	21.8			$	19.2			$	20.2

Tax benefits on stock-based compensation expense	$	4.1			$	5.1			$	3.0			$	4.1
Tax benefits on stock-based compensation payments	10.1				8.3				.9				10.1
Total tax benefits associated with stock-based compensation	$	14.2			$	13.4			$	3.9			$	14.2

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)


	Three Months Ended				Three Months Ended					Three Months Ended				Three Months Ended
	June 30, 2017				June 30, 2016					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			To be settled with stock		To be settled in cash		To be settled with stock		To be settled in cash
Options:
Amortization of the grant date fair value	$	—	$	—	$	.1	$	—
Cash payments in lieu of options	—		—		—		(.1		)
Stock-based retirement plans contributions	2.2		.3		1.7		.3
Stock-based retirement plans contributions ¹										$	2.2	$	.3	$	2.2	$	.3
Discounts on various stock awards:
Deferred Stock Compensation Program	.5		—		.5		—			.4		—		.5		—
Stock-based retirement plans	.4		—		.3		—			.3		—		.4		—
Discount Stock Plan	.3		—		.2		—			.3		—		.3		—
Performance Stock Unit awards (1)	1.4		1.9		1.3		2.2
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	.6		—		.7		—			.5		—		.6		—
Profitable Growth Incentive awards (2)	.4		.4		.9		.8
Profitable Growth Incentive (PGI) awards ³										.7		.7		.4		.4
Other, primarily non-employee directors restricted stock	.3		—		.3		—			.1		—		.3		—
Total stock-related compensation expense	6.1		$	2.6	6.0		$	3.2
Total stock-based compensation expense										6.7		$	2.3	6.1		$	2.6
Employee contributions for above stock plans	3.8				3.4					3.8				3.8
Total stock-based compensation	$	9.9			$	9.4				$	10.5			$	9.9

Tax benefits on stock-based compensation expense	$	2.2			$	2.2				$	1.6			$	2.2
Tax benefits on stock-based compensation payments	1.3				2.5					.3				1.3
Total tax benefits associated with stock-based compensation	$	3.5			$	4.7				$	1.9			$	3.5

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

~~(1) Performance~~¹Stock-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 ~~Awards~~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 ~~grant Performance Stock Unit (PSU)~~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.

²PSU 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.

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.

^2A2018 PSU - TSR based

50% of each ~~year~~2018 PSU award is based upon the Company's TSR compared to ~~selected officers~~a peer group. Grant date fair values are calculated using a Monte Carlo simulation of stock and ~~other key managers. Expense is recognized~~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. ~~These awards contain~~

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 ~~Total Shareholder Return [TSR = (Change~~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%~~200% of the base award depending upon how our ~~Total Shareholder Return~~TSR ranks within the peer group at the end of the 3~~-year~~three-year performance period.

^2B2018 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 ~~a Monte Carlo simulation~~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 ~~stock~~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 ~~volatility data~~

A performance condition—Awards are based on achieving specified EBIT CAGR performance targets for ~~Leggett and each~~the Company's or applicable segment's EBIT during the third year of the ~~peer companies.~~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.

^2C2017 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.

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,						Six Months Ended June 30,
	2017			2016			2018			2017
Total shares base award	.1			.1			.1			.1
Grant date per share fair value	$	50.75		$	40.16		$	42.60		$	50.75
Risk-free interest rate	1.5		%	1.3		%	2.4		%	1.5		%
Expected life in years	3.0			3.0			3.0			3.0
Expected volatility (over expected life)	19.5		%	19.2		%	19.9		%	19.5		%
Expected dividend yield (over expected life)	2.8		%	3.1		%	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	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
2013	December 31, 2015	27th percentile	165.4%	.4 million	$	8.5	January 2016
2014	December 31, 2016	10th percentile	175.0%	.4 million	$	9.8	January 2017	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

~~For outstanding awards, we intend to pay 65% in shares of our common stock, although we reserve the right to pay up to~~ ³~~100%~~ ~~in cash. The additional amount that represents~~ ~~35%~~ ~~of the award will be settled in cash, and is recorded as a liability and adjusted to fair value at each reporting period.~~PGI Awards

~~(2) Profitable Growth Incentive Awards~~

~~Certain~~In 2017 and prior years certain key management employees ~~participate~~participated in a ~~Profitable Growth Incentive (PGI)~~PGI program. The PGI awards ~~are~~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 ~~and 2016~~ 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,~~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	Completion Date	Average Payout as a Percent of the Base Award	Number of Shares Distributed	Cash Portion		Distribution Date
2014	December 31, 2015	224.7%	.2 million	$	6.7	March 2016
2015	December 31, 2016	36.0%	<.1 million	$	.8	March 2017	December 31, 2016	36.0%	<.1 million	$	.8	First quarter 2017
2016							December 31, 2017	44.0%	—	$	2.0	First quarter 2018

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. ~~The majority~~A portion of the goodwill included in the table below is expected to provide an income tax benefit.


	Six Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2018			2017
Accounts receivable	$	7.8		$	1.1		$	12.9		$	7.8
Inventory	5.3			4.0			16.0			5.3
Property, plant and equipment	4.5			2.5			26.5			4.5
Goodwill	13.1			3.8			26.4			13.1
Other intangible assets, primarily customer-related intangibles	17.9			7.5			26.5			17.9
Other current and long-term assets	.1			—			.8			.1
Current liabilities	(3.8		)	(2.0		)	(10.1		)	(3.8		)
Long-term liabilities	(3.5		)	—			(10.2		)	(3.5		)
Non-controlling interest	(.5		)	—			—			(.5		)
Fair value of net identifiable assets	40.9			16.9			88.8			40.9
Additional consideration payable	(2.1		)	(.4		)
Additional consideration for prior years’ acquisitions	—			.4
Less: Additional consideration (receivable) payable							(1.4		)	2.1
Net cash consideration	$	38.8		$	16.9		$	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
~~June 30, 2016~~	1	~~Specialized Products~~	~~Fabricated tubing and pipe assemblies~~

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 ~~2017~~2018 and ~~2016~~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, ~~2017~~2018 and December 31, ~~2016,~~2017, our liability for these future payments was ~~$16.6~~$10.7 ($~~9.2~~1.5 current and ~~$7.4~~$9.2 long-term) and ~~$14.5~~$16.5 ($~~2.4~~8.9 current and ~~$12.1~~$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.

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 ~~quarter~~six months of ~~2017 for $40.9. The first, a~~2017:

A distributor and installer of geosynthetic products, ~~expands~~expanding the geographic scope and capabilities of our Geo Components business. ~~The second manufactures~~

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.

~~2016~~

We expanded our Aerospace Products business unit with the acquisition of a U.S. fabricated tubing business. This operation expands our tube forming and fabrication capabilities, and adds precision machining to our aerospace platform.

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

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. Employer contributions for 2017 are expected to approximate~~ ~~$5.8~~.plans:


	Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Components of net pension expense
Service cost	$	2.5		$	2.3		$	1.3		$	1.1		$	2.0		$	2.5		$	1.0		$	1.3
Interest cost	5.6			5.9			2.8			3.0			4.1			5.6			2.1			2.8
Expected return on plan assets	(6.7		)	(6.5		)	(3.3		)	(3.2		)	(5.8		)	(6.7		)	(2.9		)	(3.3		)
Recognized net actuarial loss	2.3			2.4			1.1			1.2			1.4			2.3			.7			1.1
Net pension expense	$	3.7		$	4.1		$	1.9		$	2.1		$	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.

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, 2017																		Six Months Ended June 30, 2018
	Total Equity			Retained Earnings			Common Stock & Additional Contributed Capital			Treasury Stock			Noncontrolling Interest			Accumulated Other Comprehensive Income (Loss)			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 (See Note 2)	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		)
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	173.7			173.7			—			—			—			—			163.0			162.9			—			—			.1			—
(Earnings) loss attributable to noncontrolling interest, net of tax	—			—			—			—			—			—
Dividends declared	(92.7		)	(95.2		)	2.5			—			—			—			(96.7		)	(99.3		)	2.6			—			—			—
Dividends paid to noncontrolling interest																			(.2		)	—			—			—			(.2		)	—
Treasury stock purchased	(118.3		)	—			—			(118.3		)	—			—			(107.8		)	—			—			(107.8		)	—			—
Treasury stock issued	12.5			—			(19.4		)	31.9			—			—			7.0			—			(11.7		)	18.7			—			—
Foreign currency translation adjustments	44.1			—			—			—			—			44.1			(39.1		)	—			—			—			(.1		)	(39.0		)
Cash flow hedges, net of tax	4.6			—			—			—			—			4.6			(1.3		)	—			—			—			—			(1.3		)
Defined benefit pension plans, net of tax	1.1			—			—			—			—			1.1			1.1			—			—			—			—			1.1
Stock-based compensation transactions, net of tax	16.0			—			16.0			—			—			—			14.1			—			14.1			—			—			—
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		$	(1,799.9	)	$	.5		$	(63.8	)
Ending balance, June 30, 2018																			$	1,128.6		$	2,572.6		$	521.7		$	(1,917.4	)	$	.4		$	(48.7	)

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~



	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		$	(1,799.9	)	$	.5		$	(63.8	)

Six Months Ended June 30, 2016

Total
Equity

Retained
Earnings

Common
Stock &
Additional
Contributed
Capital

Treasury
Stock

Noncontrolling
Interest

Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance, January 1, 2016 $ 1,097.7
$ 2,209.2
$ 531.5
$ (1,564.0 ) $ 12.1
$ (91.1 )
Net earnings 210.9
210.9
—
—
—
—
(Earnings) loss attributable to noncontrolling interest, net of tax —
(.2 ) —
—
.2
—
Dividends declared (88.4 ) (90.9 ) 2.5
—
—
—
Dividends paid to noncontrolling interest (1.7 ) —
—
—
(1.7 ) —
Treasury stock purchased (167.7 ) —
—
(167.7 ) —
—
Treasury stock issued 20.5
—
(15.8 ) 36.3
—
—
Foreign currency translation adjustments 5.5
—
—
—
—
5.5
Cash flow hedges, net of tax 6.0
—
—
—
—
6.0
Defined benefit pension plans, net of tax 1.6
—
—
—
—
1.6
Stock-based compensation transactions, net of tax 16.4
—
16.4
—
—
—
Acquisition of noncontrolling interest (35.2 ) —
(27.9 ) —
(8.3 ) 1.0
Ending balance, June 30, 2016 $ 1,065.6
$ 2,329.0
$ 506.7
$ (1,695.4 ) $ 2.3
$ (77.0 )

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following tables set forth the components of and changes in each component of accumulated other comprehensive income (loss) for each of the periods presented:

Foreign
Currency
Translation
Adjustments

Cash
Flow
Hedges

Defined
Benefit
Pension
Plans

Accumulated
Other
Comprehensive
Income (Loss)
Balance, January 1, 2017 $ (38.6 ) $ (17.8 ) $ (57.2 ) $ (113.6 )
Other comprehensive income (loss) 44.1
1.9
(.5 ) 45.5
Reclassifications, pretax (1) —
4.2
2.3
6.5
Income tax effect —
(1.5 ) (.7 ) (2.2 )
Attributable to noncontrolling interest —
—
—
—
Balance, June 30, 2017 $ 5.5
$ (13.2 ) $ (56.1 ) $ (63.8 )

Balance, January 1, 2016 $ (4.8 ) $ (28.2 ) $ (58.1 ) $ (91.1 )
Other comprehensive income (loss) 7.2
.1
.1
7.4
Reclassifications, pretax (2) (1.7 ) 8.2
2.4
8.9
Income tax effect —
(2.3 ) (.9 ) (3.2 )
Attributable to noncontrolling interest 1.0
—
—
1.0
Balance, June 30, 2016 $ 1.7
$ (22.2 ) $ (56.5 ) $ (77.0 )

(1) 2017 pretax reclassifications are comprised of:
Net sales $ —
$ 1.8
$ —
$ 1.8
Cost of goods sold; selling and administrative expenses —
.3
2.3
2.6
Interest expense —
2.1
—
2.1
Other income (expense), net —
—
—
—
Total reclassifications, pretax $ —
$ 4.2
$ 2.3
$ 6.5

(2) 2016 pretax reclassifications are comprised of:
Net sales $ —
$ 5.9
$ —
$ 5.9
Cost of goods sold; selling and administrative expenses —
.2
2.4
2.6
Interest expense —
2.1
—
2.1
Other income (expense), net (1.7 ) —
—
(1.7 )
Total reclassifications, pretax $ (1.7 ) $ 8.2
$ 2.4
$ 8.9



			Foreign Currency Translation Adjustments			Cash Flow Hedges			Defined Benefit Pension Plans			Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2018			$	40.5		$	(11.5	)	$	(38.5	)	$	(9.5	)
Other comprehensive income (loss)			(39.1		)	(2.4		)	.1			(41.4		)
Reclassifications, pretax ¹			—			.8			1.4			2.2
Income tax effect			—			.3			(.4		)	(.1		)
Attributable to noncontrolling interest			.1			—			—			.1
Balance, June 30, 2018			$	1.5		$	(12.8	)	$	(37.4	)	$	(48.7	)

Balance, January 1, 2017			$	(38.6	)	$	(17.8	)	$	(57.2	)	$	(113.6	)
Other comprehensive income (loss)			44.1			1.9			(.5		)	45.5
Reclassifications, pretax ²			—			4.2			2.3			6.5
Income tax effect			—			(1.5		)	(.7		)	(2.2		)
Balance, June 30, 2017			$	5.5		$	(13.2	)	$	(56.1	)	$	(63.8	)

	¹	2018 pretax reclassifications are comprised of:
		Net sales	$	—		$	(1.9	)	$	—		$	(1.9	)
		Cost of goods sold; selling and administrative expenses	—			.5			—			.5
		Interest expense	—			2.2			—			2.2
		Other income (expense), net	—			—			1.4			1.4
		Total reclassifications, pretax	$	—		$	.8		$	1.4		$	2.2

	²	2017 pretax reclassifications are comprised of:
		Net sales	$	—		$	1.8		$	—		$	1.8
		Cost of goods sold; selling and administrative expenses	—			.3			—			.3
		Interest expense	—			2.1			—			2.1
		Other income (expense), net	—			—			2.3			2.3
		Total reclassifications, pretax	$	—		$	4.2		$	2.3		$	6.5

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

13. FAIR VALUE

We utilize fair value measures for both financial and non-financial assets and liabilities.

Items measured at fair value on a recurring basis

Fair value measurements are established using a three level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following categories:

Level 1: Quoted prices for identical assets or liabilities in active markets.

Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. Short-term investments in this category are valued using discounted cash flow techniques with all significant inputs derived from or corroborated by observable market data. Derivative assets and liabilities in this category are valued using models that consider various assumptions and information from market-corroborated sources. The models used are primarily industry-standard models that consider items such as quoted prices, market interest rate curves applicable to the instruments being valued as of the end of each period, discounted cash flows, volatility factors, current market and contractual prices for the underlying instruments, as well as other relevant

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Level 3: Unobservable inputs that are not corroborated by market data.

The areas in which we utilize fair value measures of financial assets and liabilities are presented in the table below.


	As of June 30, 2017								As of June 30, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Bank time deposits with original maturities of three months or less	$	—	$	178.3	$	—	$	178.3	$	—	$	269.9	$	—	$	269.9
Derivative assets (Note 14)	—		2.4		—		2.4		—		1.0		—		1.0
Diversified investments associated with the Executive Stock Unit Program (ESUP)*	31.1		—		—		31.1
Diversified investments associated with the Executive Stock Unit Program (ESUP) ¹									35.4		—		—		35.4
Total assets	$	31.1	$	180.7	$	—	$	211.8	$	35.4	$	270.9	$	—	$	306.3
Liabilities:
Derivative liabilities* (Note 14)	$	—	$	1.0	$	—	$	1.0
Liabilities associated with the ESUP*	30.9		—		—		30.9
Derivative liabilities ¹ (Note 14)									$	—	$	4.2	$	—	$	4.2
Liabilities associated with the ESUP ¹									35.6		—		—		35.6
Total liabilities	$	30.9	$	1.0	$	—	$	31.9	$	35.6	$	4.2	$	—	$	39.8


	As of December 31, 2016								As of December 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Bank time deposits with original maturities of three months or less	$	—	$	145.8	$	—	$	145.8	$	—	$	236.4	$	—	$	236.4
Derivative assets (Note 14)	—		.8		—		.8
Diversified investments associated with the ESUP*	26.8		—		—		26.8
Derivative assets ¹ (Note 14)									—		3.9		—		3.9
Diversified investments associated with the ESUP ¹									34.0		—		—		34.0
Total assets	$	26.8	$	146.6	$	—	$	173.4	$	34.0	$	240.3	$	—	$	274.3
Liabilities:
Derivative liabilities* (Note 14)	$	—	$	4.1	$	—	$	4.1
Liabilities associated with the ESUP*	25.6		—		—		25.6
Derivative liabilities ¹ (Note 14)									$	—	$	1.9	$	—	$	1.9
Liabilities associated with the ESUP ¹									34.4		—		—		34.4
Total liabilities	$	25.6	$	4.1	$	—	$	29.7	$	34.4	$	1.9	$	—	$	36.3

* ¹Includes both current and long-term ~~amounts combined.~~amounts.

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

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The fair value for fixed rate debt (Level 2) was ~~greater than~~not materially different from its~~$750~~ ~~carrying value by approximately $24 and $25 at~~ June 30, ~~2017,~~2018 and December 31, ~~2016, respectively. We value this debt using discounted cash flow and secondary market rates provided by Bloomberg.~~2017 $1,250.0 carrying value.

Items measured at fair value on a non-recurring basis

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

Long lived assets, acquisitions and the second step of a goodwill impairment test utilize the following methodologies in determining fair value: (i) Buildings and machinery are valued at an estimated replacement cost for an asset of comparable age and condition. Market pricing of comparable assets is used to estimate replacement cost where available. (ii) The most common identified intangible assets are customer relationships and tradenames. Customer relationships are valued using an excess earnings method, using various inputs such as the estimated customer attrition rate, future earnings forecast, the amount of contributory asset charges, and a discount rate. Tradenames are valued using a relief from royalty method, which is based upon comparable market royalty rates for tradenames of similar value. (iii) Inventory is valued at current replacement cost for raw

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

materials, with a step-up for work in process and finished goods items that reflects the amount of ultimate profit earned as of the valuation date. (iv) Other working capital items are generally recorded at face value, unless there are known conditions that would impact the ultimate settlement amount of the particular item.

Goodwill Impairment Reviews

For the 2018 testing, we elected to test goodwill for all reporting units for impairment using a quantitative approach. The fair values of our reporting units in relation to their respective carrying values and significant assumptions used are presented in the table below:



Fair Value over Carrying Value divided by Carrying Value	June 30, 2018 Goodwill Value		10-year Compound Annual Growth Rate Range for Sales	Terminal Values Long-term Growth Rate for Debt-Free Cash Flow		Discount Rate Ranges
Less than 100% ¹	$	181.3	4.7% - 5.2%	3	%	9.0% - 9.5%
101% - 300%	504.6		1.8% - 5.0%	3	%	8.5% - 10.0%
301% - 600%	153.1		5.7% - 12.4%	3	%	9.0% - 10.0%
	$	839.0	1.8% - 12.4%	3	%	8.5% - 10.0%

¹All reporting units in this category exceeded 90%, except for the Hydraulic Cylinders reporting unit (acquired in the first quarter of 2018), to which carrying value approximates fair value.

14. DERIVATIVE FINANCIAL INSTRUMENTS

Cash Flow Hedges

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

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

Interest Rate Cash Flow Hedges—We have also occasionally used interest rate cash flow hedges to manage interest rate risks.

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

Fair Value Hedges and Derivatives not Designated as Hedging Instruments

These derivatives typically manage foreign currency risk associated with subsidiaries’ assets and liabilities, and gains or losses are recognized currently in earnings. Cash flows from settled contracts are presented in the category consistent with the nature of the item being hedged.

Hedge Effectiveness

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

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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


	Expiring at various dates through:	Total USD Equivalent Notional Amount		As of June 30, 2017				Expiring at various dates through:	Total USD Equivalent Notional Amount		As of June 30, 2018
				Assets		Liabilities					Assets				Liabilities
					Other Current Assets	Other Current Liabilities						Other Current Assets	Sundry		Other Current Liabilities		Other Long-Term Liabilities
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments							Derivatives designated as hedging instruments
Cash flow hedges:
Currency hedges:
Future USD sales of Canadian, Chinese, European and Swiss subsidiaries	Jun 2018	$	91.8	$	1.3	$	—
Future USD sales/purchases of Canadian, Chinese, European, South Korean and Swiss subsidiaries								Dec 2019	$	145.2	$	.2	$	.1	$	1.4	$	.4
Future DKK sales of Polish subsidiary	Dec 2017	4.7		.3		—		Mar 2020	26.3		—		—		.5		.2
Future USD purchases of Canadian, European and South Korean subsidiaries	Dec 2017	5.9		—		.1
Future EUR sales of UK, Chinese and Swiss subsidiaries	Dec 2017	20.3		—		.4		Dec 2019	41.0		.3		—		—		.1
Future MXN purchases of a USD subsidiary	Dec 2017	2.9		—		.1		Jun 2019	6.3		—		—		.3		—
Future JPY sales of Chinese subsidiary	Jun 2018	4.0		.1		—
Total cash flow hedges				1.7		.6					.5		.1		2.2		.7
Fair value hedges:
USD inter-company note receivables on a CAD subsidiary	Aug 2017	7.0		.1		—
ZAR inter-company note receivable on a USD subsidiary	Dec 2017	2.3		—		.4
USD inter-company note receivable on a Swiss subsidiary	Aug 2017	5.5		.3		—
Total fair value hedges				.4		.4
Intercompany and third party receivables and payables exposed to multiple currencies (DKK, EUR, USD and ZAR) in various countries (CAD, CHF, GBP, PLN and USD)								Dec 2018	48.0		.3		—		.4		—
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments							Derivatives not designated as hedging instruments
USD receivable on a CAD subsidiary	Jul 2017	8.0		.2		—
Hedge of USD Cash on EUR subsidiary	Jul 2017	5.0		.1		—
Non-deliverable hedges (EUR, JPY and USD) exposed to the CNY								Jun 2019	23.5		.1		—		.2		—
Hedge of USD Cash on CHF subsidiary								Aug 2018	25.4		—		—		.7		—
Total derivatives not designated as hedging instruments				.3		—					.1		—		.9		—
				$	2.4	$	1.0				$	.9	$	.1	$	3.5	$	.7

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Expiring at various dates through:
Total USD
Equivalent
Notional
Amount
As of December 31, 2016
Assets Liabilities
Other Current
Assets

Other Current
Liabilities
Derivatives designated as hedging instruments
Cash flow hedges:
Currency hedges:
Future USD sales of Canadian, Chinese and Swiss subsidiaries Dec 2017 $ 80.4
$ —
$ 2.4
Future USD purchases of European subsidiaries Dec 2017 3.8
.1
—
Future MXN purchases of a USD subsidiary Dec 2017 5.8
—
.9
Future JPY sales of a Chinese subsidiary Dec 2017 3.5
.3
—
Future DKK sales of a Polish subsidiary Mar 2017 10.1
.1
—
Future EUR sales of Chinese, Swiss and UK subsidiaries Dec 2017 6.4
—
.2
Total cash flow hedges .5
3.5
Fair value hedges:
USD inter-company note receivable on a CAD subsidiary Jan 2017 24.0
.2
.1
PLN inter-company note receivable on GBP subsidiary Jun 2017 2.3
.1
—
ZAR inter-company note receivable on a USD subsidiary Dec 2017 2.3
—
.1
Total fair value hedges .3
.2
Derivatives not designated as hedging instruments
Non-deliverable hedge on USD exposure to CNY Dec 2017 19.0
—
.3
Hedge of EUR Cash on USD subsidiary Jan 2017 5.9
—
.1
Total derivatives not designated as hedging instruments —
.4
$ .8
$ 4.1

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~



	Expiring at various dates through:	Total USD Equivalent Notional Amount		As of December 31, 2017
				Assets				Liabilities
				Other Current Assets		Sundry		Other Current Liabilities		Other Long-Term Liabilities
Derivatives designated as hedging instruments
Cash flow hedges:
Currency hedges:
Future USD sales/purchases of Canadian, Chinese, European, South Korean and Swiss subsidiaries	Mar 2019	$	158.1	$	2.2	$	.2	$	.5	$	—
Future MXN purchases of a USD subsidiary	Mar 2019	6.6		—		—		.5		—
Future JPY sales of a Chinese subsidiary	Dec 2018	11.2		.1		—		—		—
Future DKK sales of a Polish subsidiary	Dec 2018	16.0		.6		—		—		—
Future EUR sales of Chinese, Swiss and UK subsidiaries	Mar 2019	38.8		—		—		.3		.1
Total cash flow hedges				2.9		.2		1.3		.1
Fair value hedges:
Intercompany and third party receivables and payables exposed to multiple currencies (DKK, EUR, USD and ZAR) in various countries (CAD, CHF, EUR and USD)	Dec 2018	35.9		.2		—		.5		—
Derivatives not designated as hedging instruments
Non-deliverable hedges (EUR, JPY and USD) exposed to the CNY	Nov 2018	17.0		.3		—		—		—
USD receivable on a CAD subsidiary	Jan 2018	19.0		.3		—		—		—
Total derivatives not designated as hedging instruments				.6		—		—		—
				$	3.7	$	.2	$	1.8	$	.1

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


	Caption in Statement of Operations	Amount of (Gain) Loss Recorded in Income Six Months Ended June 30,						Amount of (Gain) Loss Recorded in Income Three Months Ended June 30,						Caption in Consolidated Condensed Statements of Operations	Amount of (Gain) Loss Recorded in Income Six Months Ended June 30,						Amount of (Gain) Loss Recorded in Income Three Months Ended June 30,
		2017			2016			2017			2016				2018			2017			2018			2017
Derivatives designated as hedging instruments
Interest rate cash flow hedges	Interest expense	$	2.1		$	2.1		$	1.0		$	1.1		Interest expense	$	2.2		$	2.1		$	1.1		$	1.0
Currency cash flow hedges	Net sales	1.4			5.2			.1			2.1			Net sales	(2.9		)	1.4			(1.4		)	.1
Currency cash flow hedges	Cost of goods sold	.1			.4			—			.3			Cost of goods sold	.4			.1			.2			—
Total cash flow hedges		3.6			7.7			1.1			3.5				(.3		)	3.6			(.1		)	1.1
Fair value hedges	Other (income) expense, net	(.4		)	(1.8		)	(.5		)	(.5		)	Other (income) expense, net	.3			(.4		)	(.3		)	(.5		)

Derivatives not designated as hedging instruments	Other (income) expense, net	(.7		)	(.2		)	(.7		)	.2			Other (income) expense, net	.2			(.7		)	1.0			(.7		)
Total derivative instruments		$	2.5		$	5.7		$	(.1	)	$	3.2			$	.2		$	2.5		$	.6		$	(.1	)

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

15. INCOME TAXES

~~15.~~The U.S. statutory federal income tax rate was significantly impacted by the enactment of TCJA in the fourth quarter of 2017, which reduced our U.S. federal corporate income tax rate from 35% in 2017 to 21% in 2018. Our income tax expense from continuing operations, as a percentage of earnings before income taxes, differs from these statutory federal income tax rates as follows:



	Six Months Ended June 30,				Three Months Ended June 30,
	2018		2017		2018		2017
Statutory federal income tax rate	21.0	%	35.0	%	21.0	%	35.0	%
Increases (decreases) in rate resulting from:
Tax effect of foreign operations	(1.0	)	(7.0	)	(1.0	)	(7.0	)
Foreign withholding taxes	2.0		—		2.0		—
Stock-based compensation	(1.0	)	(4.0	)	—		(1.0	)
Tax on global intangible low-taxed income (GILTI)	1.0		—		—		—
Domestic production activities deduction	—		(1.0	)	—		(1.0	)
Change in valuation allowance	(2.0	)	(1.0	)	—		(2.0	)
Other, net	—		(1.0	)	(1.0	)	(1.0	)
Effective Tax Rate	20.0	%	21.0	%	21.0	%	23.0	%

Due to changes in our GILTI assumptions and the corresponding revisions to our calculations, the impact of GILTI on our annual effective income tax rate was reduced. We continue to treat GILTI as a period cost in our estimated annual effective tax rate until such time that we establish our accounting policy, which we will do no later than the fourth quarter of 2018.

At December 31, 2017, we recorded certain estimated amounts related to TCJA in accordance with SAB 118. We refined this estimate in the first quarter and recorded a $3.9 measurement period adjustment related to certain state deferred tax assets as a discrete tax benefit. This item decreased our effective tax rate by 2% for the six months ended June 30, 2018. No SAB 118 adjustments have been identified or recorded for the three months ended June 30, 2018, based on provisional estimates as of July 18, 2018. However, our accounting for these items is also not yet final, but will be completed no later than the fourth quarter of 2018 in accordance with SAB 118 (see Note 2).

16. CONTINGENCIES

We are a party to various proceedings and matters involving employment, ~~antitrust,~~ intellectual property, environmental, taxation, vehicle-related personal injury and other laws. When it is probable, in management's judgment, that we may incur monetary damages or other costs resulting from these proceedings or other claims, and we can reasonably estimate the amounts, we record appropriate accruals in the financial statements and make charges against earnings. For all periods presented, we have recorded no material charges against ~~earnings other than as indicated below.~~earnings. Also, when it is reasonably possible that we may incur additional loss in excess of recorded accruals and we can reasonably estimate the additional losses or range of losses, we disclose such additional reasonably possible losses in these notes.

~~Foam Antitrust Lawsuits~~

~~Beginning~~ Reference is made to Footnote S "Contingencies" in ~~August 2010, a series of civil lawsuits were initiated~~our Form 10-K filed February 22, 2018 and Note 16 “Contingencies” in several U.S. federal courts and in Canada against several defendants alleging that Leggett & Platt and certain other manufacturers of polyurethane foam products had engaged in price fixing in violation of U.S. and Canadian antitrust laws. We were party to several antitrust proceedings regarding polyurethane foam products. The majority of these proceedings were fully resolved in 2015. The ultimate amount of settlement payments in these cases was not materially different than the amounts originally accrued. The remaining antitrust proceeding is disclosed below.

We deny all allegations in the pending antitrust proceeding. We will vigorously defend ourselves in this proceeding and believe that we have valid bases to contest all claims. However, we have established an accrualour Form 10-Q filed May 8, 2018 for ~~the estimated amount that we believe is necessary to resolve the pending antitrust matter. We also believe, based on current facts, it is reasonably possible that we may incur a loss in excess~~prior disclosure of the ~~recorded accrual associated with the pending antitrust proceeding.~~ below contingencies.

For specific information regarding accruals, cash payments to settle litigation contingencies, and reasonably possible losses in excess of accruals, please see “Accruals and Reasonably Possible Losses in Excess of Accruals” below.

~~Kansas Restraint~~

Vehicle-Related Personal Injury Claim

In July 2016, a Company driver was involved in a traffic accident that resulted in two deaths and injury to other vehicle occupants. In the third quarter of ~~Trade Act Case.~~ ~~We have been named~~2016, the Company accrued a liability that it believed to be probable in an immaterial, estimated amount based upon known facts, opinion of counsel, as ~~a defendant~~well as comparative settlements of the Company and other companies in anindividual case alleging direct and indirect purchaser claims under the Kansas Restraint of Trade Act, filed on November 29, 2012 in the United States District Court of Kansas under the name LaCrosse Furniture Company v. Future Foam, Inc., et al., Case No. 12-cv-2748 KHV/JPO. This case was previously transferred to the U.S. District Court for the Northern District of Ohio under the name ~~In re: Polyurethane Foam Antitrust Litigation, Case No. 1:10-MD-2196.~~similar proceedings. The plaintiffs in those consolidated proceedings generally brought claims seeking damages allegedly suffered as a result of alleged overcharges in the price of polyurethane foam products (from at least 1999 to the present). The claims and allegations of this plaintiff are generally the same as those in the previously resolved proceedings, with the exception that the plaintiff seeks full consideration damages (its total purchase amounts for the allegedly price-fixed polyurethane foam products). On May 15, 2015, the U.S. Judicial Panel on Multi-district Litigation remanded the case back to the U.S. District Court for the District of Kansas. We have denied all allegations.accrual did not take into account applicable insurance coverage.

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The Company received information regarding the events surrounding the accident and preliminary expert reports from one family's attorney at the end of November 2017. No legal proceedings had been filed, no discovery had been taken, and investigation of the facts of the accident remained in its early stages. The Company and its insurance carriers attended a pre-litigation mediation conference regarding this matter on January 8, 2018, with a subsequent meeting on February 14, 2018, in Chicago, Illinois. At the mediation conference, the attorneys representing these claimants alleged the Company's driver was at fault and made a demand for monetary damages. Until the initial mediation session, no demand had been made against the Company.

Based on facts received from the investigation and mediation processes, the Company, through cooperation and consent of its insurance carriers, reached a settlement with these claimants on February 14, 2018. The settlement required the Company to pay a $5.0 self-insured retention amount and the remainder of the $48.0 settlement was the responsibility of the insurance carriers.

In the fourth quarter of 2017, the Company recorded a $43.0 receivable from the insurance carriers and a $43.0 liability related to this matter, that is included in current assets and current liabilities, respectively, in the Consolidated Condensed Balance Sheets as of December 31, 2017. The amount of self-insured retention to be paid by the Company had previously been accrued in the third quarter of 2016, and, therefore, the settlement had no impact on the Company's 2017 and 2018 earnings.

The settlement was subject to approval by the Cook County, Illinois, Circuit Court, and the Probate Division of the Circuit Court. The Circuit Court approved the reasonableness of the settlement amount on April 17, 2018 and the Probate Division approved the settlement on May 15, 2018. The Company paid the self-insured retention amount in the second quarter. The settlement did not have a material effect on the Company’s financial condition, cash flows or results of operations. This claim has been fully resolved. Other claimants have filed lawsuits related to the traffic accident but these lawsuits are not expected to have a material effect on the Company's financial condition, cash flows or results of operations.

~~The plaintiff in the~~ ~~LaCrosse~~ case alleges full consideration damages and prejudgment interest through 2013 in the collective amount of $22.2, of which LaCrosse argues the full consideration portion should be trebled. LaCrosse also seeks an additional three years of prejudgment interest at a statutory rate of 10% and attorneys' fees. On January 13, 2017, LaCrosse filed a motion for partial judgment on the pleadings seeking the allowance of full consideration damages. We filed a motion for partial summary judgment on January 24, 2017, on several key issues of the case, including arguments that LaCrosse is not entitled to full consideration damages or prejudgment interest and that full consideration damages are not trebled. These motions remain pending. While trial was previously scheduled to begin on August 7, 2017, the Court has rescheduled trial to begin on November 9, 2017.

Brazilian Value-Added Tax Matters

All dollar amounts (in millions) presented in this section have been updated since our last filing to reflect the U.S. Dollar (USD) equivalent of Brazilian Real (BRL).

We deny all allegations in the below Brazilian actions. We believe that we have valid bases to contest such actions and will vigorously defend ourselves. However, these contingencies are subject to uncertainties, and based on current facts, we believe that it is reasonably possible (but not probable) that we may incur losses of ~~approximately $21~~$18.4 including interest and attorney fees with respect to these assessments. Therefore, because it is not probable we will incur a loss, no accrual has been recorded for Brazilian VAT matters. For specific information regarding accruals, and reasonably possible losses in excess of accruals, please see "Accruals and Reasonably Possible Losses in Excess of Accruals" below.

We have ~~$12.3~~$10.6 on deposit with the Brazilian government to partially mitigate interest and penalties that may accrue while we work through these matters. If we are successful in our defense of these assessments, the deposits are refundable with interest. These deposits are recorded as a long-term asset on our balance sheet.

Brazilian Federal Cases.On December 22 and December 29, 2011, and December 17, 2012, the Brazilian Finance Ministry, Federal Revenue Office issued a notice of violation against our wholly-owned subsidiary, Leggett & Platt do Brasil Ltda. (“L&P Brazil”) in the amount of ~~$2.3, under Case No. 10855.724660/2011-43.~~$1.9, $.1 and $3.4, respectively. The ~~Brazilian~~Federal Revenue Office claimed that for the ~~period~~periods beginning November 2006 and continuing through ~~December 2007,~~2011, L&P Brazil used an incorrect tariff code for the collection and payment of value-added tax primarily on the sale of mattress innerspring units in Brazil. L&P Brazil has denied the ~~violation. The Federal Revenue Office upheld the assessment at the first administrative level. L&P Brazil has filed an appeal.~~

On December 29, 2011, L&P Brazil received another assessment in the amount of $.1, under case No. 10855.724509/2011-13 on the same subject matter in connection to certain import transactions carried out between 2007 and 2011. L&P Brazil has filed its defense.

On December 17, 2012, the Brazilian Revenue Office issued an additional notice of violation in the amount of $4.0, under MPF Case No. 10855.725260/2012-36 covering the period from January 2008 through December 2010 on the same subject matter. L&P Brazil denied the violation. The Brazilian Revenue Office upheld the assessment at all administrative levels. L&P Brazil appealed this decision but the appeal was denied by the second administrative level on January 27, 2015.violations. On December 4, 2015, we filed an Annulment Action ~~Case No. 009658-07.2015.4.03.6110, at~~related to the ~~judicial level~~$3.4 assessment (for which a $4.0 cash bond was posted, accounting for updated interest), in Camanducaia Judicial District Court seeking to ~~obtain an injunction to allow~~annul the transfer of the cash deposit in the amount of $4.8 for the administrative case to a judicial escrow account to cover the updated liability amount of $5.1. The preliminary injunction was granted on December 10, 2015, and weentire assessment. We are awaiting the ~~federal attorney's response.~~first level decision with regard to the $3.4 assessment. On June 20, 2018, the Administrative Court of Appeals held a hearing related to the $1.9 assessment and announced their decision to maintain the assessment against L&P Brazil. The written decision was formalized on July 18, 2018. We are awaiting the formal notification to determine our appeal options.

In addition, L&P Brazil received assessments on December 22, 2011, and June 26, July 2 and November 5, 2012, and September 13, 2013, from the Brazilian Federal Revenue Office where the Federal Revenue Office challenged L&P Brazil’s use of tax credits in years 2005 through 2010. Such credits are generated based upon the tariff classification and rate used by L&P Brazil for value-added tax on the sale of mattress innersprings. On September 4, 2014, the ~~tax authorities~~Federal Revenue Office issued five additional assessments regarding this same issue (use of credits), covering certain periods of 2011 and 2012. L&P Brazil filed its defense denying these assessments. Combined with the prior assessments, L&P Brazil has received assessments and penalties totaling ~~$2.7~~$2.3 on the same or similar denial of tax credit matters. L&P Brazil has denied the violations. On September 11, 2017,

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

L&P Brazil received an "isolated penalty" from the Federal Revenue Office in the amount of $.2 regarding the use of certain of these credits.

On February 1, 2013, the Brazilian Finance Ministry filed a Tax Collection action against L&P Brazil in the Camanducaia Judicial District Court, ~~Case No. 0002222-35.2013.8.13.0878,~~ alleging the untimely payment of $.1 of social contributions (social security and social assistance payments) for the period September to October 2010. L&P Brazil argued the payments were not required to be made because of the application of ~~certain~~ tax credits that were generated by L&P Brazil's use of a correct tariff code for the classification of value-added tax on the sale of mattress innersprings (i.e., the same underlying issue at stake in the other Brazilian matters). On June 26, 2014, the Brazilian Revenue Office issued a new notice of violation against

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

L&P Brazil in the amount of ~~$.8, under Case No. 10660.721523/2014-87,~~$.6 covering the period from 2011 through 2012 on the same subject matter. L&P Brazil has filed its defense denying the assessments.

On July 1, 2014, the Brazilian Finance Ministry rendered a preliminary decision to reject certain offsetting requests presented by L&P ~~Brazil, which originated with Administrative Proceeding No. 10660.720850/2014-11.~~Brazil. The Brazilian Finance Ministry alleges that L&P Brazil improperly offset $.1 of social contributions otherwise due in 2011. L&P Brazil filed its response denying the allegations. L&P Brazil is defending on the basis that the social contribution debts were correctly offset with tax credits generated by L&P Brazil's use of a correct tariff code classification for value-added tax on the sale of mattress innersprings (i.e., the same underlying issue at stake in the other Federal Brazilian matters). On December 15, 2015, the Brazilian Federal Revenue issued an assessment against L&P Brazil in the amount of $.1 ~~under Case No. 10600.720142/2015-76~~ for the period of August 2010 through May 2011, as a penalty for L&P Brazil's requests to offset tax credits. We filed our defense denying the ~~assessment on January 8, 2016.~~assessment.

State of São Paulo, Brazil Cases. The State of São Paulo, Brazil, on April 16, 2009, issued a Notice of Tax Assessment and Imposition of Fine to L&P Brazil originally seeking ~~$1.8~~$1.5 for the tax years 2006 and ~~2007, under Case No. 3.111.006 (DRT n°.04-256.169/2009).~~2007. The State of São Paulo argued that L&P Brazil was using an incorrect tariff code for the collection and payment of value-added tax on sales of mattress innerspring units in the State of São Paulo. L&P Brazil denied the allegations. On April 17, 2014, the Court of Tax and Fees ruled in the State's favor upholding the original assessment of ~~$1.8.~~$1.5. On July 31, 2014, L&P Brazil filed an annulment action ~~Case No. 101712346.2014.8260602~~ in the Sorocaba State Court, seeking to have the Court of Tax and Fees ruling annulled for an updated assessment amount of ~~$3.6~~$3.1 (which included interest from the original assessment date). ~~On September 8, 2016,~~The Court issued a ruling in our favor on October 27, 2017, nullifying the ~~Court's expert issued an opinion that supports~~$3.1 in assessments against L&P ~~Brazil's defense, that it used~~Brazil. On April 4, 2018, the ~~correct tariff code classification. We are awaiting~~State appealed the ~~Court's~~ruling to the second judicial level. On July 24, 2018, the Sao Paulo State Court of Appeals held a hearing related to the $3.1 assessment and announced their decision to uphold the favorable ruling nullifying the assessment against L&P Brazil. The decision will now be formalized in writing. The State will likely appeal this ruling.

On October 4, 2012, the State of São Paulo issued a Tax Assessment ~~under Procedure Number 4.003.484~~ against L&P Brazil in the amount of ~~$1.9~~$1.2 for the tax years 2009 through 2011. Similar to the 2009 assessment (referenced above), the State of São Paulo argues that L&P Brazil was using an incorrect tax rate for the collection and payment of value-added tax on sales of mattress innerspring units in the State of São Paulo. On June 21, 2013, the State of São Paulo converted the Tax Assessment to a tax collection action against L&P Brazil in the amount of $~~2.5, under~~2.1 in Sorocaba Judicial District ~~Court, Case No. 3005528-50.2013.8.26.0602.~~Court. L&P Brazil has denied all allegations.

L&P Brazil also received a Notice of Tax Assessment and Imposition of a Fine from the State of São Paulo dated March 27, 2014, ~~under Procedure Number 4.038.746-0 against L&P Brazil~~ in the amount of $.8 (currently secured with a $.9 bond to update for ~~the~~interest) for tax years January 2011 through August 2012 regarding the same subject matter (i.e., the correct tax rate for the collection and payment of value-added tax on mattress innerspring units). L&P Brazil filed its response denying the ~~allegations. After~~allegations, but the ~~first and second~~tax assessment was maintained at the administrative ~~levels denied L&P Brazil's defenses, L&P Brazil filed an appeal to the third administrative level on August 6, 2015.~~level. On June 9, 2016, L&P Brazil filed an annulment action ~~Case No. 1019825-91.2016.8.26.0602,~~ in ~~the~~ Sorocaba State Court to ~~allow transfer of the previously deposited cash amount of $1.0 to a judicial account, and to~~ annul the entire ~~$1.2 assessment (updated with interest through the close of the administrative procedures). On February 7, 2017 the~~$.8 assessment. The Court ruled against L&P Brazil on the assessment, but lowered the interest amount. ~~On February 21, 2017, we~~We filed a motion for clarification. The Court upheld its ruling, ~~on April 24, 2017,~~ and we filed an appeal to the Court of Appeals on May 15, 2017. The ~~case is now proceeding at~~Court of Appeals upheld the ~~second judicial level.~~unfavorable Sorocaba State Court ruling, and we filed a Special and Extraordinary appeal to the High Court on October 10, 2017, and this final appeal remains pending.

State of Minas Gerais, Brazil Cases. On December 18, 2012, the State of Minas Gerais, Brazil issued a tax assessment to L&P Brazil relating to L&P Brazil's classifications of innersprings for the collection and payment of value-added tax on the sale of mattress innersprings in Minas Gerais from March 2008 through August 2012 in the amount of ~~$.5, under PTA Case No. 01.000.182756-62.~~$.4. L&P Brazil filed its response denying any violation. ~~After the first and second administrative levels~~The Minas Gerais Taxpayer's Council ruled against us, and on June 5, 2014, L&P Brazil filed a Motion to Stay the ~~case is now proceeding judicially under Case No. 0003673-61.2014.8.13.0878~~Execution of the Judgment in Camanducaia Judicial District Court alleging the same tax assessment in the amount of ~~$.6. L&P Brazil filed its response denying the assessments on June 5, 2014.~~$.5. The motion remains pending.

LEGGETT & PLATT, INCORPORATED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Accruals and Reasonably Possible Losses in Excess of Accruals

Accruals for Probable Losses

Although the Company denies liability in all currently threatened or pending litigation proceedings in which it is or may be a party and believes that it has valid bases to contest all claims threatened or made against it, we have recorded a litigation contingency accrual for our reasonable estimate of probable loss for pending and threatened litigation proceedings, in aggregate, in millions, as follows:

~~LEGGETT & PLATT, INCORPORATED~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~


	Six Months Ended June 30,					Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended June 30,
	2017		2016			2017		2016			2018			2017		2018			2017
Litigation contingency accrual - Beginning of period	$	3.2	$	8.1		$	3.2	$	4.1		$	.4		$	3.2	$	—		$	3.2
Adjustment to accruals - expense (income)	.2		5.0			.2		5.0			(.1		)	.2		(.1		)	.2
Cash payments	—		(9.0		)	—		(5.0		)
Cash (payments) receipts											(.3		)	—		.1			—
Litigation contingency accrual - End of period	$	3.4	$	4.1		$	3.4	$	4.1		$	—		$	3.4	$	—		$	3.4

The above litigation contingency ~~accrual does~~accruals do not include accrued expenses related to workers compensation, ~~automobile,~~vehicle-related personal injury, product and general liability claims, taxation issues and environmental matters, some of which may contain a portion of litigation expense. However, any litigation expense associated with these categories is not anticipated to have a material effect on our financial condition, results of operations or cash flows. For more information regarding accrued expenses, see ~~Footnote~~Note H - Supplemental Balance Sheet Information under "Accrued expenses" on page 9290 of the Company's Form 10-K filed February 22, ~~2017.~~2018.

We have relied on several facts and circumstances to conclude that some loss is probable with respect to certain proceedings and matters, and to arrive at a reasonable estimate of loss or range of loss and record the accruals, including: the maturation of the pending proceedings and matters; our experience in settlement negotiations and mediation; comparative settlements of other companies in similar proceedings; discovery becoming or being substantially complete in certain proceedings; certain quantitative metrics used to value probable loss contingencies; and our willingness to settle certain proceedings to forgo the cost and risk of litigation and distraction to our senior executives.

Reasonably Possible Losses in Excess of Accruals

Although there are a number of uncertainties and potential outcomes associated with all of our pending or threatened litigation proceedings, we believe, based on current known facts, that additional losses, if any, are not expected to materially affect our consolidated financial position, results of operations or cash flows. However, based upon current known facts, as of June 30, ~~2017,~~2018, aggregate reasonably possible (but not probable, and therefore not ~~recorded)~~accrued) losses in excess of the accruals noted above are estimated to be ~~approximately $25,~~$21.0, including ~~approximately $21~~$18.4 for Brazilian VAT matters disclosed above and $4$2.6 for other matters. If our assumptions or analyses regarding these contingencies are incorrect, or if facts change, we could realize loss in excess of the recorded accruals, and even greater than our estimate of reasonably possible losses in excess of recorded accruals.

~~Leggett Settles Claims as Plaintiff~~

On April 5, 2016, we reached a settlement of our antitrust claims against The Dow Chemical Company, by agreeing to release our claims regarding this matter for a net cash payment to the Company of approximately $38 (pre-tax, after deducting expenses). We received payment of the settlement amount on May 4, 2016. In the second quarter of 2016, we recorded after-tax income of approximately $25 related to this matter. Because the settlement is largely attributable to our former Prime Foam Products business, which was sold in the first quarter of 2007, approximately $20 of this after-tax amount was reflected in discontinued operations. As such, this matter is fully resolved.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

What We Do

Leggett & Platt is a diversified manufacturer, and member of the S&P 500 index, that conceives, designs, and produces a wide range of engineered components and products found in many homes, offices, and automobiles. We make components that are often hidden within, but integral to, our customers’ products.

We are the leading U.S. manufacturer of: a) bedding components; b) automotive seat support and lumbar systems; c) components for home furniture and work furniture; d) ~~carpet cushion;~~flooring underlayment; e) adjustable beds; f) high-carbon drawn steel wire; and g) bedding industry machinery.

Our Segments

Our operations are comprised of 1714 business units in four segments, with approximately ~~21,000~~22,500 employees, and ~~130~~120 production facilities located in 1918 countries around the world. ~~The composition of our four segments changed effective January 1, 2017. The table below outlines the new segment structure.~~



~~Residential Products~~	~~Industrial Products~~	~~Furniture Products~~	~~Specialized Products~~

~~Bedding Group~~	~~Wire Group~~	~~Home Furniture Group~~	~~Automotive Group~~
~~Fabric & Carpet Cushion Group~~		~~Work Furniture Group~~	~~Aerospace Products Group~~
~~Machinery Group~~		~~Consumer Products Group~~	~~CVP Group~~

The new structure is largely the same as in prior years except the Home Furniture Group moved from Residential Products to Furniture Products (formerly Commercial Products), and the Machinery Group moved from Specialized Products to Residential Products. The Industrial Products segment had no changes. This segment change was retrospectively applied to all prior periods presented. Our segments are described below.

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 ~~carpet cushion,~~flooring underlayment, fabric, and geo components. This segment generated ~~38%~~37% of our total sales during the first six months of ~~2017.~~2018.

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 ~~bedding,~~ mechanical springs and many other end products. This segment generated ~~13%~~14% of our total sales during the first ~~half~~six months of ~~2017.~~2018.

Specialized Products: From this segment we supply ~~mechanical and pneumatic~~ lumbar support systems, seat suspension systems, motors and actuators, and control cables used by automotive manufacturers. We also produce and distribute ~~titanium and nickel~~ tubing and tube assemblies for the aerospace ~~industry.~~industry and engineered hydraulic cylinders used in the material-handling and construction industries. This segment contributed ~~23%~~24% of our total sales in the first ~~half~~six months of ~~2017.~~2018.

Total Shareholder Return

Total Shareholder Return (TSR), relative to peer companies, is the key financial measure that we use to assess long-term performance. TSR = (Change in Stock Price + Dividends) / Beginning Stock Price. Our goal is to achieve TSR in the top third of the S&P 500 companies over the ~~long-term~~long term through an approach that employs four TSR sources: revenue growth, margin expansion, dividends, and share repurchases.

We monitor our TSR performance ~~(relative~~relative to the S&P ~~500)~~500 on a rolling three-year basis. ~~At June 30, for the three-year measurement period that~~While our recent performance has not met our top-third target, we continue to strongly believe our disciplined growth strategy and use of capital will ~~end on December 31, 2017, we have so far generated TSR~~support achievement of ~~12% per year on average. That performance places us in the top 36% of the S&P 500.~~our goal over time.

Senior executives participate in ~~a TSR-based~~an incentive program ~~(based~~with a three-year performance period based on two equal measures: (i) our TSR performance compared to the performance of a group of approximately 320 ~~peers). Business unit performance bonuses emphasize~~peers, and (ii) the ~~achievement of higher returns on the assets under the unit’s direct control.~~company or segment's EBIT CAGR.

Customers

We serve a broad suite of customers, with our largest customer representing approximately 7%5% of our sales in ~~2016.~~2017. Many are companies whose names are widely recognized. They include ~~most producers of~~ residential furniture and bedding producers, automotive and office seating manufacturers, and a variety of other companies.

Major Factors That Impact Our Business

Many factors impact our business, but those that generally have the greatest impact are market demand, raw material cost trends, and competition.

Market Demand

Market demand (including product mix) ~~for the majority of our products~~ is ~~most heavily influenced~~impacted by ~~consumer confidence. Other broad~~several economic factors, ~~that impact our market demand~~with consumer confidence being the most significant. Other important factors include disposable income levels, employment levels, housing turnover, and interest rates. All of these factors influence consumer spending on durable goods, and ~~drive~~therefore affect demand for our components and products. Some of these factors also influence business spending on facilities and equipment, which impacts approximately ~~one-quarter~~one quarter of our sales.

Raw Material ~~Cost Trends~~Costs

In many of our businesses, we enjoy a cost advantage from being vertically integrated into steel wire and rod. This is a benefit that our competitors do not have. We also experience favorable purchasing leverage from buying large quantities of raw materials. Still, our costs can vary significantly as market prices for raw materials (many of which are commodities) fluctuate.

We typically have short-term commitments from our suppliers; accordingly, our raw material costs generally move with the market. Our ability to recover higher costs (through selling price increases) is crucial. When we experience significant increases in raw material costs, we typically implement price increases to recover the higher costs. Conversely, when costs decrease significantly, we generally pass those lower costs through to our customers. The timing of our price increases or decreases is important; we typically experience a lag (normally 90 days) in recovering higher costs, and we also realize a lag as costs decline.

Steel is our principal raw material. At various times in past years we have experienced significant cost fluctuations in this commodity. In most cases, the major changes (both increases and decreases) were passed through to customers with selling price adjustments. Steel costs ~~began~~inflated throughout 2017, and have continued to ~~inflate late~~increase in ~~2016,~~the first half of 2018. Depending on the type of steel input, we have seen varying degrees of inflation in the U.S. Long product, the steel industry term for rod and ~~continued through early~~wire, is up significantly since the end of 2017. ~~Price~~Flat product, hot or cold rolled sheet steel, which we purchase for use in several of our businesses, but most heavily in Home Furniture, is also up significantly since the end of 2017. We are implementing price increases ~~went into effect during~~to recover most of the higher costs, but with the normal lag in realizing selling price increases, the cost inflation led to margin pressure in the second ~~quarter~~half of 2017 ~~to recover higher~~and in the first half of 2018. In certain instances when our foreign competitors purchase steel ~~costs, but we~~in markets that have not ~~fully worked~~experienced significant inflation, particularly flat product in China, it is more difficult for us to pass through U.S.-based steel price increases to our ~~typical 90-day pricing lag.~~customers.

As a producer of steel rod, we are also impacted by changes in metal margins (the difference in the cost of steel scrap and the market price for steel rod). Metal margins within the steel industry were moderately compressed in late 2016, began to increase modestly in the second half of 2017 and further expanded in the first half of 2018. Although steel rod prices continued to increase in the second quarter of 2018, steel scrap prices have ~~been volatile~~remained relatively flat in ~~past years.~~the second quarter. If these wider metal margins are sustained, our steel rod mill should continue to experience enhanced profitability.

Our other raw materials include woven and non-woven fabrics, foam scrap, and chemicals. We have experienced changes in the cost of these materials in past years and generally have been able to pass them through to our customers.

Competition

~~We operate in~~Many of our markets ~~that~~ are highly competitive, with the number of competitors varying by product line. In general, our competitors tend to be smaller, private companies. ~~We believe that most~~Many of our competitors, both domestic and foreign, compete primarily on the basis of ~~price, but depending upon the particular product, we experience competition based on quality and performance.~~price. Our success has stemmed from the ability to remain price competitive, while delivering ~~superior~~innovation, better product quality, ~~innovation,~~ and customer service.

We continue to face ~~ongoing~~ pressure from foreign competitors as some of our customers source a portion of their components and finished products ~~from Asia and Europe.~~offshore. In addition to lower labor ~~and tax~~ rates, foreign competitors often benefit ~~(at times)~~ from lower raw material costs. They may also benefit from currency factors and more lenient regulatory climates. We typically remain price competitive in most of our business units, even versus many foreign manufacturers, as a result of our highly efficient operations, low labor content, vertical integration in steel and wire, logistics and distribution efficiencies, and large scale purchasing of raw materials and commodities. However, we have reacted to foreign competition in certain cases by selectively adjusting prices, ~~and by~~ developing new proprietary products that help our customers reduce total costs and shifting production offshore to take advantage of lower input costs.

Since 2009, there have been antidumping duty orders on innerspring imports from China, South Africa and Vietnam, ranging from 116% to 234%. In ~~March~~ 2014, the Department of Commerce (DOC) and the International Trade Commission (ITC) determined that the ~~duties~~orders should be ~~continued.~~extended for five years. In ~~April 2014,~~March 2019, we expect the DOC ~~published its final order continuing~~and the ~~duties through February 2019 (for China)~~ITC to conduct a second sunset review to determine whether to extend the orders for an additional five years. If it is determined that the revocation of the orders would likely lead to the continuation or recurrence of dumping of innersprings (determined by the DOC) and ~~December 2018 (for South Africa~~material injury to the U.S. innerspring industry (determined by the ITC), the orders will be extended. We believe that, without the extension, it is likely that dumping will recur and ~~Vietnam).~~ the U.S. innerspring industry will be materially injured. As a result, we plan to actively participate in the DOC and ITC sunset reviews.

~~An antidumping~~Antidumping and countervailing duty ~~case~~cases filed ~~in January 2014~~ by major U.S. steel wire rod producers ~~was concluded~~ in ~~December~~ 2014 ~~resulting~~and 2017 have resulted in the imposition of ~~duties on imports of Chinese steel wire rod. The~~ antidumping ~~duties range from 106% to 110% and the countervailing duties range from 178% to 193%. Both remain in effect through December 2019.~~

Also, on March 28, 2017, certain U.S. steel wire rod producers filed antidumping and countervailing duty petitions on imports of steel wire rod from Belarus, Italy, Korea, Russia, South Africa, Spain, Turkey, Ukraine, United Arab Emirates, and the United Kingdom. If the DOC determines that dumping and/or subsidies are present in these countries and the ITC makes a final determination that the domestic industry has been materially injured by dumped or subsidized imports, the U.S. government will impose duties on imports of steel wire rod from ~~these countries~~China (106% to 110%), Belarus (280%), Italy (12% to 19%), Korea (41%), Russia (437% to 757%), South Africa (135% to 142%), Spain (11% to 33%), Turkey (5% to 8%), Ukraine (35% to 44%), United Arab Emirates (84%), and the United Kingdom (148%), and countervailing duties on imports of steel wire rod from China (178% to 193%), Italy (4% to 44%) and Turkey (4%). These duties will continue through December 2019 (for China) and through December 2022 for the other countries; at ~~the rates determined by the DOC. We expect~~which times, respectively, the DOC and the ITC will conduct sunset reviews to ~~make final determinations by late 2017 or early 2018.~~

~~Because of~~determine whether to extend the ~~documented evasion of antidumping~~ orders by certain importers, typically shipping goods through third countries and falsely identifying the countries of origin, Leggett & Platt, along with several other U.S. manufacturers have formed a coalition to seek stronger enforcement of existing antidumping and/or countervailing duty orders. As a result of these efforts, the U.S. Congress has passed the Enforcing Orders and Reducing Customs Evasion (ENFORCE) Act. The ENFORCE Act requires U.S. Customs and Border Protection to implement a transparent, time-limited process to investigate allegations of duty evasion and to assess duties where appropriate.for an additional five years.

~~Contingencies~~

~~Accrual for Litigation Contingencies and Reasonably Possible Losses in Excess of Accruals~~

We are exposed to litigation contingencies that, if realized, could have a material negative impact on our financial condition, results of operations and cash flows. Although we deny liability in all currently threatened or pending litigation proceedings and believe that we have valid bases to contest all claims made against us, we have, at June 30, 2017, an aggregate litigation contingency accrual of $3 million. There was no material change from the prior year corresponding quarter. Based on current facts, aggregate reasonably possible (but not probable and therefore not recorded) losses in excess of accruals for litigation contingencies (which include Brazilian VAT and other matters) are estimated to be $25 million. If our assumptions or analysis regarding these contingencies are incorrect, or if facts and circumstances change, we could realize loss in excess of the recorded accruals (and in excess of the $25 million referenced above) which could have a material negative impact on our financial condition, results of operations and cash flows. For more information regarding our litigation contingencies, see Note 15 “Contingencies” on page 27 of the Notes to Consolidated Condensed Financial Statements.

~~Potential Gain Associated with the Sale of Real Estate~~

In the second quarter of 2016, we sold one of our CVP operations and relocated the one remaining operation. At that time, the real estate formerly used by the relocated business reached held for sale status. We believe that it is reasonably likely that we will sell this real estate in the third quarter this year. If the sale is completed, we expect to realize a gain of approximately $20 million. However, this sale is subject to significant conditions that may change the timing of the sale, the amount of realized gain, and/or whether the sale is completed at all.

RESULTS OF OPERATIONS

Discussion of Consolidated Results (Continuing Operations)

Second Quarter:

Sales were ~~$989~~$1,102 million ~~a 3%~~in the current quarter, an 11% increase versus the same quarter last year. Same location sales increased ~~by 4%~~10%, ~~largely due to growth in Automotive and Adjustable Bed,~~with volume up 6% and raw material-related price ~~inflation.~~inflation and currency impact contributing 4%. Acquisitions ~~also~~ added 1%3% to sales ~~growth. These increases~~growth but were partially offset by ~~prior year~~ divestitures, which reduced sales by 2% in the quarter.

Earnings per share (EPS) from continuing operations were $.63, versus $.64 ~~$.08 lower than~~in the ~~same quarter last year. Last year's~~ second quarter ~~EPS included $.06 due to a litigation gain and a divestiture gain~~of 2017. The benefit from sales growth was more than offset ~~by a goodwill impairment. Second quarter 2017 was effected~~ by higher raw material ~~costs and several smaller factors partially offset by a benefit from sales growth and a lower effective tax rate.~~costs.

Earnings Before Interest and Taxes (EBIT) decreased 1%, to ~~$122 million. EBIT margin declined to 12.4%, primarily~~$121 million, with the benefit from ~~2016 litigation and divestiture gains~~sales growth more than offset by ~~a goodwill impairment, which did not repeat in 2017. 2017 EBIT was also affected by~~higher steel costs (including LIFO expense) and the pricing lag we typically experience in passing along commodity inflation.

LIFO/FIFO and the Effect of Changing Prices

Approximately 50% of our inventories are valued on the last-in, first-out (LIFO) method. These are primarily our domestic, steel-related inventories.

For the full year ~~2017,~~2018, we estimate $5$37.5 million of LIFO expense. This estimate incorporates certain assumptions about year-end steel prices and inventory levels. Therefore, the LIFO calculation for the full year could be significantly different from that currently estimated.

The following table contains the LIFO expense included for each of the periods presented:

Six Months Ended
June 30, Three Months Ended
June 30,
2017 2016 2017 2016
LIFO expense $ 2.5
$ 7.3
$ 2.1
$ 7.3



	Six Months Ended June 30,				Three Months Ended June 30,
	2018		2017		2018		2017
LIFO expense	$	18.8	$	2.5	$	12.8	$	2.1

Interest Expense and Income Taxes

~~Second quarter 2017~~2018 interest expense was ~~not materially different from~~higher by $9 million and $6 million than the ~~second~~six and three months ended June 30, 2017, respectively, primarily due to the issuance of new debt in the fourth quarter ~~of 2016.~~2017, higher rates on commercial paper, and activity associated with additional consideration to be paid for a prior year acquisition.

Our worldwide effective income tax rate ~~is determined by a combination of items, some recurring~~on continuing operations was 20% and ~~some discrete. Recurring items include things like net income earned~~21% for the six and three months ended June 30, 2018, respectively, while the rates for the similar periods in ~~various tax jurisdictions,~~2017 were 21% and differences in tax rates in those jurisdictions. These items tend to be relatively stable from year to year. Conversely, discrete items are things such as prior year tax adjustments that may not be as consistent from year to year.

~~While the~~23%, respectively. The U.S. statutory federal income tax rate was significantly impacted by the enactment of Tax Cuts and Jobs Act (TCJA) in the fourth quarter of 2017, which reduced our U.S. federal corporate income tax rate from 35% in ~~both years, our worldwide~~2017 to 21% in 2018. Our income tax expense from continuing operations, as a percentage of earnings before income taxes, differs from these statutory federal income tax rates as follows:



	Six Months Ended June 30,				Three Months Ended June 30,
	2018		2017		2018		2017
Statutory federal income tax rate	21.0	%	35.0	%	21.0	%	35.0	%
Increases (decreases) in rate resulting from:
Tax effect of foreign operations	(1.0	)	(7.0	)	(1.0	)	(7.0	)
Foreign withholding taxes	2.0		—		2.0		—
Stock-based compensation	(1.0	)	(4.0	)	—		(1.0	)
Tax on global intangible low-taxed income	1.0		—		—		—
Domestic production activities deduction	—		(1.0	)	—		(1.0	)
Change in valuation allowance	(2.0	)	(1.0	)	—		(2.0	)
Other, net	—		(1.0	)	(1.0	)	(1.0	)
Effective Tax Rate	20.0	%	21.0	%	21.0	%	23.0	%

Our effective tax rate ~~on continuing operations was 23%~~ for the ~~second~~six months ended June 30, 2018, includes a 2% tax benefit due to a first quarter ~~of 2017, compared to 28%~~change in the estimated amount we recorded for the ~~same~~TCJA impact on our deferred tax assets at December 31, 2017. No similar adjustments have been identified or recorded for the three months ended June 30, 2018, based on provisional estimates as of July 18, 2018. Further adjustments to our 2017 provisional amount may be required in subsequent quarters until such time our accounting is finalized, which will be completed no later than the fourth quarter ~~last year. In both years our tax rate benefited from earnings~~ in non-U.S. jurisdictions, which reduced our effective tax rate by 7% in 2017 and 5% in 2016. Likewise, both years benefited (by 2% in 2017 and 3% in 2016) from U.S. tax incentives for domestic manufacturing and equity compensation. In 2017,accordance with Staff Accounting Bulletin (SAB) 118 (see Note 2 to the quarterly tax rate was reduced an additional 2% by improved prospects of utilizing prior year foreign tax credits. Finally, several less significant items (including state taxes and prior year tax adjustments) provided a net decrease of 1% in 2017, and a net increase of 1% in 2016.Consolidated Condensed Financial Statements on page 6).

~~For the full year, we~~We anticipate an effective tax rate ~~on continuing operations~~for 2018 of approximately ~~24%~~21%, ~~excluding any~~which includes anticipated tax ~~effect from future~~effects associated with TCJA and certain other expected items, including stock compensation payments, ~~but including certain other expected discrete items. The tax impact of stock compensation fluctuates~~which can fluctuate based on stock price and other ~~factors, but is not~~factors. Any changes to our 2017 provisional and 2018 expected TCJA amounts could also add some volatility to ~~have a significant impact on 2017's remaining quarters. Our~~our anticipated tax rate ~~is also contingent upon~~during the year. Other factors such as our overall profitability, the mix of earnings among tax jurisdictions, the type of income earned, business acquisitions and dispositions, the impact of tax audits, ~~and other discrete items, and~~ the effect of other tax law changes, and prudent tax planning ~~strategies.~~

strategies can also influence our rate.

Discussion of Segment Results

Second Quarter Discussion

A description of the products included in each segment, along with segment financial data, appear in Note 4 to the Consolidated Condensed Financial Statements on page ~~9. All segment data has been retrospectively adjusted to reflect the change in segment structure discussed on page 31.~~10. A summary of segment results is shown in the following tables.


Sales (Dollar amounts in millions)	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Change in Sales					% Change in Same Location Sales(1)		Three Months Ended June 30, 2018			Three Months Ended June 30, 2017			Change in Sales					% Change in Same Location
Sales (Dollar amounts in millions)	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			$			%		% Change in Same Location Sales(1)		Three Months Ended June 30, 2018			Three Months Ended June 30, 2017			$			%		Sales ¹
Residential Products	$	412.0		$	412.2		$	(.2	)	—	%	(3.0	)%	$	443.5		$	412.0		$	31.5		7.6	%	6.5	%
Industrial Products	139.2			150.1			(10.9		)	(7.3	)	.7		170.5			139.2			31.3			22.5		22.5
Furniture Products	271.6			252.9			18.7			7.4		5.9		295.0			271.6			23.4			8.6		8.6
Specialized Products	240.1			237.2			2.9			1.2		4.7		276.5			240.1			36.4			15.2		11.3
Total	1,062.9			1,052.4			10.5			1.0				1,185.5			1,062.9			122.6			11.5
Intersegment sales	(73.6		)	(93.5		)	19.9							(83.0		)	(73.6		)	(9.4		)
Trade sales	$	989.3		$	958.9		$	30.4		3.2	%	3.7	%	$	1,102.5		$	989.3		$	113.2		11.4	%	10.0	%


	Three Months Ended June 30, 2017		Three Months Ended June 30, 2016		Change in EBIT					EBIT Margins(2)				Three Months Ended June 30, 2018			Three Months Ended June 30, 2017		Change in EBIT					EBIT Margins ²
EBIT (Dollar amounts in millions)	Three Months Ended June 30, 2017		Three Months Ended June 30, 2016		$			%		Three Months Ended June 30, 2017		Three Months Ended June 30, 2016		Three Months Ended June 30, 2018			Three Months Ended June 30, 2017		$			%		Three Months Ended June 30, 2018		Three Months Ended June 30, 2017
Residential Products	$	50.2	$	52.2	$	(2.0	)	(3.8	)%	12.2	%	12.7	%	$	40.0		$	50.2	$	(10.2	)	(20.3	)%	9.0	%	12.2	%
Industrial Products	7.1		13.0		(5.9		)	(45.4	)	5.1		8.7		13.4			7.1		6.3			88.7		7.9		5.1
Furniture Products	20.3		24.6		(4.3		)	(17.5	)	7.5		9.7		16.3			20.3		(4.0		)	(19.7	)	5.5		7.5
Specialized Products	44.1		54.7		(10.6		)	(19.4	)	18.4		23.1		51.9			44.1		7.8			17.7		18.8		18.4
Intersegment eliminations & other	.6		2.0		(1.4		)							(.5		)	.6		(1.1		)
Total	$	122.3	$	146.5	$	(24.2	)	(16.5	)%	12.4	%	15.3	%	$	121.1		$	122.3	$	(1.2	)	(1.0	)%	11.0	%	12.4	%


~~(1)~~ ¹	The change in same location sales excludes the effect of acquisitions or divestitures. These are sales that come from the same plants and facilities that we owned one year earlier.


~~(2)~~ ²	Segment margins are calculated on total sales. Overall company margin is calculated on trade sales.

Residential Products

Total sales ~~were flat. Same~~increased $32 million, or 8%, with same location sales ~~were down 3%~~up 7%. Sales volume ~~declined 5%~~increased 4%, ~~primarily from lower pass-through sales of adjustable beds, which reduced sales by 4%. Raw~~and raw material inflation ~~contributed 2%~~and currency impact added 3% to sales ~~growth. Acquisitions offset~~in the ~~decrease in same location sales.~~quarter. Prior year acquisitions added 1%.

EBIT decreased ~~$2 million. 2016 included a litigation gain of $7~~$10 million ~~that did not repeat in 2017. Second quarter 2017 EBIT benefited~~with the benefit from ~~the ability to pass-through~~sales growth more than offset by higher raw ~~materials~~material costs ~~and a favorable sales mix.~~(including LIFO expense).

Industrial Products

Total sales ~~decreased $11~~increased $31 million, or 7%23%, ~~due to divestitures completed in 2016. Same location sales increased 1% primarily from steel related~~reflecting steel-related price increases ~~offsetting lower volume.~~of 16% and volume growth of 7%.

The segment’s EBIT ~~decreased~~increased $6 million, ~~due to the lag in recovering~~with improved metal margins at our steel rod mill partially offset by higher ~~steel costs.~~LIFO expense.

Furniture Products

Total sales increased ~~$19 million. Growth~~$23 million, or 9%, with same location sales up 9%. Sales volume increased 6% with strong growth in Adjustable Bed and Work Furniture ~~and~~partially offset by declines in Home Furniture ~~was offset by lower~~and Fashion Bed. Raw material-related price increases and currency benefit added 3% to sales ~~in Fashion Bed.~~

growth.

Segment EBIT decreased $4 million, ~~due to an unfavorable~~with the benefit from sales ~~mix and~~growth more than offset by higher ~~raw material costs.~~

steel costs (including LIFO expense).

Specialized Products

Total sales increased $3$36 million, or ~~1%. Same~~15%, with same location sales ~~increased 5%, with~~up 11%. Sales grew primarily from higher volume ~~gains~~ in Automotive and Aerospace and a favorable currency impact. The Precision Hydraulic Cylinders acquisition increased sales by 9%, partially offset (5%) by ~~currency impact and a decline in CVP.~~the CVP divestiture.

EBIT ~~decreased $11 million. Second quarter 2016 EBIT included an~~increased $8 million ~~net positive impact to EBIT related to a divestiture gain offset by a goodwill impairment. The remaining decrease in second quarter 2017 EBIT was attributable to growth-related costs,~~primarily from higher ~~raw material costs, and other items offset by the benefit from stronger sales volumes.~~volume.

~~Discontinued Operations~~

There was no material discontinued operations activity during the second quarter of 2017. In the second quarter of 2016, discontinued operations activity primarily resulted from the benefit of a litigation settlement attributable to our former Prime Foam business. The settlement amount was $20 million (after-tax). For further information about discontinued operations, see Note 5 to the Consolidated Condensed Financial Statements on page 12.

Six Month Discussion

Sales (Dollar amounts in millions) Six Months Ended
June 30, 2017 Six Months Ended
June 30, 2016 Change in Sales
% Change in
Same Location
Sales(1)
$ %
Residential Products $ 808.1
$ 807.3
$ 0.8
.1 % (2.4 )%
Industrial Products 274.6
307.3
(32.7 ) (10.6 ) (1.7 )
Furniture Products 542.7
525.2
17.5
3.3
2.6
Specialized Products 476.4
458.7
17.7
3.9
6.9
Total 2,101.8
2,098.5
3.3
.2

Intersegment sales (152.2 ) (201.2 ) 49.0

Trade sales $ 1,949.6
$ 1,897.3
$ 52.3
2.8 % 3.8 %


	Six Months Ended June 30, 2017		Six Months Ended June 30, 2016		Change in EBIT					EBIT Margins(2)
EBIT (Dollar amounts in millions)	Six Months Ended June 30, 2017		Six Months Ended June 30, 2016		$			%		Six Months Ended June 30, 2017		Six Months Ended June 30, 2016
Sales (Dollar amounts in millions)														Six Months Ended June 30, 2018			Six Months Ended June 30, 2017			Change in Sales					% Change in Same Location Sales ¹
Sales (Dollar amounts in millions)														Six Months Ended June 30, 2018			Six Months Ended June 30, 2017			$			%		% Change in Same Location Sales ¹
Residential Products	$	92.7	$	85.3	$	7.4		8.7	%	11.5	%	10.6	%	$	846.2		$	808.1		$	38.1		4.7	%	3.7	%
Industrial Products	15.9		33.1		(17.2		)	(52.0	)	5.8		10.8		322.9			274.6			48.3			17.6		17.6
Furniture Products	40.6		56.1		(15.5		)	(27.6	)	7.5		10.7		579.2			542.7			36.5			6.7		6.0
Specialized Products	87.1		98.2		(11.1		)	(11.3	)	18.3		21.4		544.6			476.4			68.2			14.3		11.2
Intersegment eliminations & other	1.9		.9		1.0
Total	$	238.2	$	273.6	$	(35.4	)	(12.9	)%	12.2	%	14.4	%	2,292.9			2,101.8			191.1			9.1
Intersegment sales														(161.6		)	(152.2		)	(9.4		)
Trade sales														$	2,131.3		$	1,949.6		$	181.7		9.3	%	7.9	%



	Six Months Ended June 30, 2018			Six Months Ended June 30, 2017		Change in EBIT					EBIT Margins ²
EBIT (Dollar amounts in millions)	Six Months Ended June 30, 2018			Six Months Ended June 30, 2017		$			%		Six Months Ended June 30, 2018		Six Months Ended June 30, 2017
Residential Products	$	75.0		$	92.7	$	(17.7	)	(19.1	)%	8.9	%	11.5	%
Industrial Products	22.4			15.9		6.5			40.9		6.9		5.8
Furniture Products	34.3			40.6		(6.3		)	(15.5	)	5.9		7.5
Specialized Products	98.0			87.1		10.9			12.5		18.0		18.3
Intersegment eliminations & other	(1.2		)	1.9		(3.1		)
Total	$	228.5		$	238.2	$	(9.7	)	(4.1	)%	10.7	%	12.2	%


~~(1)~~ ¹	The change in same location sales excludes the effect of acquisitions or divestitures. These are sales that come from the same plants and facilities that we owned one year earlier.


~~(2)~~ ²	Segment margins are calculated on total sales. Overall company margin is calculated on trade sales.

Residential Products

Total sales increased ~~$1 million. Same~~$38 million, or 5%, with same location sales ~~were down 2%, primarily from~~up 4%. Sales volume increased slightly, with lower pass-through sales of adjustable beds ~~which reduced~~reducing sales by ~~4%. Acquisitions offset~~1% in the ~~decrease in same location sales.~~first half of 2018. This was augmented by growth from raw material inflation and currency impact (3%) and prior year acquisition (1%).

EBIT ~~increased $7~~decreased $18 million ~~over the first six months of 2016. 2016 EBIT included a $7 million litigation gain that did not repeat this year. 2017 EBIT improved~~primarily from ~~a more favorable sales mix and the ability to pass through~~ higher raw material ~~costs.~~

costs (including LIFO expense).

Industrial Products

Total sales ~~decreased $33~~increased $48 million, or ~~11%~~18%, ~~largely due~~with steel-related price increases contributing 14% to ~~divestitures completed in 2016. Same location~~ sales ~~decreased 2% primarily from lower~~growth and volume up 4%.

EBIT increased $7 million, with improved metal margins at our steel rod mill partially offset by ~~steel related price increases.~~higher LIFO expense and other costs.

~~The segment’s EBIT decreased $17 million, due to the lag in recovering higher steel costs coupled with reduced volumes.~~

Furniture Products

Total sales increased ~~$18 million. Growth~~$37 million, or 7%, with same location sales up 6%. Volume was up 3% with growth in Adjustable Bed and Work Furniture ~~and~~partially offset by declines in Home Furniture ~~was offset by lower sales in~~and Fashion Bed. ~~Acquisitions made~~Raw material-related price increases and currency benefit added 3% to sales. A small Work Furniture acquisition in 2017 added ~~$4 million in~~1% to the segment's sales.

Segment EBIT decreased ~~$16~~$6 million, ~~due to raw material~~with the benefit from sales growth more than offset by higher steel costs ~~and an unfavorable sales mix. 2016 also included a $2 million gain from a building sale that occurred in the first quarter.~~(including LIFO expense).

Specialized Products

Total sales increased ~~$18~~$68 million, or ~~4%. Same~~14%, with same location sales up 11%. Sales grew from a favorable currency impact (6%) and higher volume (5%). The Precision Hydraulic Cylinders acquisition increased 7%sales by 8%, ~~with volume gains in Automotive and Aerospace~~ partially offset (5%) by ~~currency impact and a decline in CVP. Divestitures, net of acquisitions, reduced sales by 3%.~~the CVP divestiture.

~~The segment’s~~ EBIT ~~decreased~~increased $11 ~~million; however 2016 included a net $8~~ million ~~benefit (divestiture gain offset by a goodwill impairment charge). The EBIT benefit~~primarily from higher sales ~~was more than offset by growth-related~~

~~costs in Automotive, higher raw material costs, and other small items.~~volume.

~~Discontinued Operations~~

There was no material discontinued operations activity during the first six months of 2017. In the six months ended June 30, 2016, discontinued operations activity primarily resulted from the benefit of a litigation settlement attributable to our former Prime Foam business. The settlement amount was $20 million (after-tax). For further information about discontinued operations, see Note 5 to the Consolidated Condensed Financial Statements on page 12.

LIQUIDITY AND CAPITALIZATION

Cash from Operations

Cash from operations is our primary source of funds. Earnings and changes in working capital levels are the two ~~broad~~ factors that generally have the greatest impact on our cash from operations. Cash from operations for the six months ended June 30, ~~2017~~2018 was ~~$156~~$125 million, down from ~~$262~~$156 million for the same period last year, ~~primarily due to~~reflecting increased working ~~capital. This increase resulted primarily from higher inventory~~capital investment to support ~~sales growth and new programs, and inflation impact on both inventory and accounts receivable.~~higher sales. For ~~2017,~~2018, we expect cash from operations to approximate ~~$450~~$425 million.

We closely monitor our working capital levels, and ended the quarter with adjusted working capital at ~~11.8%~~12.6% of annualized sales. The table below explains this non-GAAP calculation. We eliminate cash and current debt maturities from working capital to monitor our operating efficiency and performance related to trade receivables, ~~total~~ inventories and accounts payable. We believe this provides a more useful measurement to investors since cash and current maturities can fluctuate significantly from period to period. As discussed on page ~~43,~~42, a substantial amount of our cash is held by international operations and may not be immediately available to reduce debt on a dollar-for-dollar basis.



(Amounts in millions)	June 30, 2018			December 31, 2017
Current assets	$	1,783		$	1,767
Current liabilities	937			976
Working capital	846			791
Cash and cash equivalents	446			526
Current debt maturities	154			154
Adjusted working capital	$	554		$	419
Annualized sales ¹	$	4,408		$	3,936
Working capital as a percent of annualized sales	19.2		%	20.1		%
Adjusted working capital as a percent of annualized sales	12.6		%	10.6		%

(Amounts in millions) June 30, 2017
December 31,
2016
Current assets $ 1,540
$ 1,325
Current liabilities (742 ) (707 )
Working capital 798
618
Cash and cash equivalents (335 ) (282 )
Current debt maturities 3
4
Adjusted working capital $ 466
$ 340
Annualized sales (1) $ 3,956
$ 3,616
Working capital as a percent of annualized sales 20.2 % 17.1 %
Adjusted working capital as a percent of annualized sales 11.8 % 9.4 %

~~(1)~~ ¹Annualized sales equal 2nd quarter ~~2017~~2018 sales of ~~$989~~$1,102 million and 4th quarter ~~2016~~2017 sales of ~~$904~~$984 million multiplied by 4. We believe measuring our working capital against this sales metric is more useful, since efficient management of working capital includes adjusting those net asset levels to reflect current business volume.

Three Primary Components of our Working Capital


	Amount (in millions)					Days		Amount (in millions)							Days
						Six Months Ended	Twelve Months Ended								Three Months Ended	Twelve Months Ended	Three Months Ended
	June 30, 2017		December 31, 2016			June 30, 2017	December 31, 2016	June 30, 2018		December 31, 2017		June 30, 2017			June 30, 2018	December 31, 2017	June 30, 2017
Trade Receivables	$	547.1	$	450.8	DSO¹	50	44	$	610.0	$	522.3	$	547.1	DSO ¹	50	45	50

Inventories	$	580.0	$	519.6	DIO²	69	66	$	634.2	$	571.1	$	580.0	DIO ^{2, 4}	66	65	70

Accounts Payable	$	388.3	$	351.1	DPO³	47	42	$	450.6	$	430.3	$	388.3	DPO ^{3, 4}	47	47	47


¹	Days sales outstanding

~~Calculation~~a. Quarterly: end of period trade receivables ÷ (quarterly net trade sales ÷ number of days ~~are as follows:~~in the period).

b. Annually: ((beginning of year trade receivables + end of period trade receivables)÷2) ÷ (net trade sales ÷ number of days in the period).


1. ²	Days ~~sales outstanding: ((beginning of year trade receivables + end of period trade receivables)÷2) ÷ (net trade sales ÷ number of days in the period).~~inventory on hand

a. Quarterly: end of period inventory ÷ (quarterly cost of goods sold ÷ number of days in the period).

b. Annually: ((beginning of year inventory + end of period inventory)÷2) ÷ (cost of goods sold ÷ number of days in the period).


2. ³	Days ~~inventory on hand: ((beginning of year inventory + end of period inventory)÷2) ÷ (cost of goods sold ÷ number of days in the period).~~payables outstanding

a. Quarterly: end of period accounts payable ÷ (quarterly cost of goods sold ÷ number of days in the period).

b. Annually: ((beginning of year accounts payable + end of period accounts payable)÷2) ÷ (cost of goods sold ÷ number of days in the period).

⁴

~~Days payables outstanding: ((beginning~~2017 ratios have been retrospectively adjusted to reflect the adoption of ~~year accounts payable + end of period accounts payable)÷2) ÷ (cost~~ASU 2017-07 that resulted in reclassifications between "Cost of goods ~~sold ÷ number of days in~~sold" and "Selling and administrative expenses" into "Other (income) expense, net". See Note 2 to the ~~period).~~Consolidated Condensed Financial Statements on page 6.

Trade Receivables - Our ~~net~~ trade receivables and our days sales outstanding at June 30, ~~2017~~2018 increased primarily due to increased sales, acquisitions, and ~~acquisitions.~~timing of payments. Our sales to international customers, which are predominantly in the Specialized Products segment, continue to increase and typically have longer payment terms. We do not believe that the increase in days sales outstanding is indicative of a deterioration of the creditworthiness of our customers, or is reasonably likely to materially impact our liquidity position. Rather, we believe the increase ~~compared to~~is within a reasonable range of change caused by differences in the ~~prior year does not indicate a greater risk~~timing of ~~loss,~~sales and we have established adequate reserves on our riskier customer accounts. We obtain credit applications, credit reports, bank and trade references, and periodic financial statements from our customers to establish credit limits and terms. In cases where a customer’s payment performance or financial condition begins to deteriorate, we tighten our credit limits and terms and make appropriate reserves based upon the specific circumstances. Our provision for losses on accounts receivable has averaged $3 million annually for the last three years. Our allowance for bad debt as a percentage of our net receivables has averaged 2% for the last three years.cash receipts. We continue to look for ways to improve speed of customer payments, including third party programs with early payment incentives in certain circumstances.

Our provision for losses on accounts receivable has averaged $2 million, and our allowance for bad debt as a percentage of our net receivables has averaged 2% for the last three years. We monitor all accounts for possible loss, and we have experienced favorable trends in write-offs over the last few years. We obtain credit applications, credit reports, bank and trade references, and periodic financial statements from our customers to establish credit limits and terms as appropriate. In cases where a customer’s payment performance or financial condition begins to deteriorate, we make appropriate reserves when deemed necessary.

Inventories - The increase in inventories at June 30, ~~2017~~2018 compared to year-end is primarily ~~reflects~~due to inflation, ~~and~~ higher levels necessary to support sales growth and new ~~programs.~~programs and acquisitions. Days inventory on hand onat June 30, ~~2017~~2018 is within a reasonable historical ~~range, and we believe the increase compared to the prior year does not indicate a greater risk of inventory obsolescence.~~range. We believe we have established adequate reserves for any ~~slower moving~~slow-moving or obsolete inventories. We continuously monitor our ~~slow moving~~slow-moving and potentially obsolete inventory through reports on inventory quantities compared to

usage within the previous 120 days. We also utilize cycle counting programs and complete physical counts of our inventory. When potential inventory obsolescence is indicated by these controls, we will take charges for write-downs to maintain an adequate level of reserves. We have averaged inventory obsolescence charges of ~~$10~~$8 million annually for the last three years. Our reserve balances (not including our LIFO reserves) as a percentage of our period-end inventory were ~~6% on~~approximately 5% at June 30, ~~2017,~~2018, which is consistent with our historical average.

Accounts Payable - The increase in accounts ~~payables~~payable at June 30, ~~2017~~2018 compared to year-end is primarily due to increased inventory ~~to support sales growth, increased steel prices,~~costs and acquisitions. ~~Steel is our principal raw material.~~ Our payment terms did not change meaningfully since year-end. We continue to optimize payment terms through our significant purchasing power and also utilize third party services that allow flexible payment ~~options.~~options to enhance our DPO.

Uses of Cash

Finance Capital Requirements

Cash is readily available to fund growth.

In certain of our businesses and product lines we have minimal excess production capacity, and we are therefore investing to support continued growth. In Automotive, we are expanding capacity to support new programs that will begin production over the next few years. In Bedding, we are investing in equipment to support ongoing growth in ComfortCore^® innersprings and ~~new~~newer product ~~introductions.~~features such as Quantum

^® Edge. We are also investing to support rapid growth in Adjustable Bed.

We will continue to make investments to support expansion in businesses and product lines where sales are profitably growing, and for efficiency improvement and maintenance. ~~We expect~~Due to recently awarded business in Bedding and Adjustable Bed we have increased our full year estimate for capital expenditures by $25 million and expect to ~~approximate $160~~spend approximately $185 million in ~~2017.~~2018. Our employee incentive plans emphasize returns on capital, which include net fixed assets and working capital. This emphasis focuses our management on asset utilization and helps ensure that we are investing additional capital dollars where attractive return potential exists.

In some of our businesses, we have capacity to accommodate additional volume. For each $10 million of sales from incremental unit volume produced utilizing spare capacity, we expect to generate approximately $2.5 million to $3.5 million of additional ~~pre-tax earnings (which equates to a 25-35% incremental margin).~~pretax earnings. The earnings and margin improvement that we have realized over the past ~~few~~several years reflects, in part, higher utilization in our businesses from market share gains and higher market demand.

Our long-term, 6-9% annual revenue growth objective envisions periodic acquisitions. We are seeking strategic acquisitions primarily ~~within~~in our Grow business units, and we are looking for opportunities to enter new growth markets (carefully screened for sustainable competitive advantage). ~~If we find these opportunities, we may use existing cash or borrow to finance~~

In the ~~acquisitions. We completed two acquisitions in the first~~second quarter of 2017. The first is a distributor and installer of geosynthetic products purchased for $23 million, which further expands the geographic scope and capabilities of our Geo Components business. The second is a manufacturer of surface-critical bent tube components purchased for $17 million, which supports the private-label finished seating strategy in our Work Furniture business. We also acquired the remaining 20% ownership in an Asian joint venture in our Work Furniture business for $3 million. In the first quarter of 2016,2018 we acquired a ~~manufacturer~~small producer of ~~aerospace tube assemblies~~geo components for a purchase price of ~~$16~~$2.7 million. ~~This business expanded our tube forming and fabrication capabilities, and also added precision machining to our aerospace platform.~~ Additional details about acquisitions are discussed in Note 10 on page 19 to the Consolidated Condensed Financial Statements.

Pay Dividends

Dividends are one of the primary means by which we return cash to shareholders. The cash requirement for dividends in ~~2017~~2018 should approximate ~~$185~~$195 million.

In May, we declared a quarterly dividend of ~~$.36~~$.38 per share, which represented a $.02, or ~~5.9%~~5.6%, increase versus ~~first~~second quarter of 2017. This year marks our ~~46th~~47th consecutive annual dividend increase. Our targeted dividend payout ratio is approximately 50-60% of continuing operations adjusted EPS (which ~~would~~ exclude special items such as significant tax law impacts, divestiture gains, impairment charges, litigation accruals and settlement proceeds). We expect future dividend growth to approximate earnings growth. Payout for 2018 is expected to be near the midpoint of the target range.

Repurchase Stock

Share repurchases are the other means by which we return cash to shareholders. During the ~~first six months~~second quarter of ~~2017,~~2018, we repurchased ~~2.4~~1.3 million shares of our stock (at an average price of ~~$49.21~~$41.02 per share) and issued ~~1.2~~0.1 million shares primarily through

employee benefit plans and option exercises. At quarter-end, the number of shares outstanding decreased to ~~132.3~~130.1 million. For the full year, we ~~currently~~ expect to repurchase ~~a total of~~ approximately 2.5 to 3 million shares and issue approximately ~~1.5~~1 million shares for employee benefit plans and option exercises.

Our top priorities for use of cash ~~are~~remain organic growth (via capital expenditures), dividends, and strategic acquisitions. After funding those priorities, to the extent there is remaining cash available, we generally intend to repurchase ~~stock rather than repay debt early or stockpile cash.~~stock. We have been authorized by the Board to repurchase up to 10 million shares each year, but we have established no specific repurchase commitment or timetable.

Capitalization

The following table presents Leggett’s key debt and capitalization statistics:


(Dollar amounts in millions)	June 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Long-term debt outstanding:
Scheduled maturities	$	757		$	760		$	1,098		$	1,098
Average interest rates (1)	3.7		%	3.7		%
Average maturities in years (1)	5.3			5.8
Revolving credit/commercial paper (2)	427			196
Average interest rate on balances as of the dates presented	1.3		%	1.0		%
Average interest rates ¹							3.7		%	3.6		%
Average maturities in years ¹							6.5			6.9
Revolving credit/commercial paper ²							200			—
Average interest rate on period-end balance							2.4		%	—		%
Average interest rate during the period							2.3		%	1.4		%
Total long-term debt	1,184			956			1,298			1,098
Deferred income taxes and other liabilities	223			227			281			286
Shareholders’ equity and noncontrolling interest	1,134			1,094			1,129			1,191
Total capitalization	$	2,541		$	2,277		$	2,708		$	2,575
Unused committed credit:
Long-term	$	323		$	554		$	600		$	800
Short-term	—			—			—			—
Total unused committed credit (2)	$	323		$	554
Total unused committed credit ²							$	600		$	800
Current maturities of long-term debt	$	3		$	4		$	154		$	154
Cash and cash equivalents	$	335		$	282		$	446		$	526
Ratio of earnings to fixed charges (3)	8.2x			9.6 x
Ratio of earnings to fixed charges ³							6.1 x			8.1 x



~~(1)~~ ¹	These rates include current maturities, but exclude commercial paper to reflect the averages of outstanding debt with scheduled maturities. The rates also include amortization of interest rate swaps.
~~(2)~~ ²	The unused credit amount is based on our revolving credit facility and commercial paper program which, at year end 2017 and the end of the second quarter of ~~2017,~~2018, had ~~$750~~$800 million of borrowing capacity.
~~(3)~~ ³	As presented in Exhibit 12, fixed charges include interest expense, capitalized interest, plus implied interest included in operating leases. Earnings consist principally of income from continuing operations before income taxes, plus fixed charges.

The next table shows the percentage of long-term debt to total capitalization, calculated in two ways:

Long-term debt to total capitalization as reported in the previous table.

Long-term debt to total capitalization each reduced by total cash and increased by current maturities of long-term debt.

We believe that adjusting this measure for cash and current maturities allows a more useful comparison to periods during which cash fluctuates significantly. We use these adjusted (non-GAAP) measures as supplemental information to track leverage trends across time periods with variable levels of cash. Our long-term target is to have net debt as a percentage of net capital in the 30%-40% range. As discussed on page ~~43,~~42, a substantial amount of cash is held atby our international operations. Therefore, we may not be able to use all of our cash to reduce our debt on a dollar-for-dollar basis, as reflected in the net debt to net capital ratio.


(Amounts in millions)	June 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Debt to total capitalization:
Long-term debt	$	1,184		$	956		$	1,298		$	1,098
Current debt maturities	3			4			154			154
Cash and cash equivalents	(335		)	(282		)	(446		)	(526		)
Net debt	$	852		$	678		$	1,006		$	726

Total capitalization	$	2,541		$	2,277		$	2,708		$	2,575
Current debt maturities	3			4			154			154
Cash and cash equivalents	(335		)	(282		)	(446		)	(526		)
Net capitalization	$	2,209		$	1,999		$	2,416		$	2,203

Long-term debt to total capitalization	46.6		%	42.0		%	47.9		%	42.6		%

Net debt to net capitalization	38.6		%	33.9		%	41.6		%	33.0		%

Total debt (which includes long-term debt and current debt maturities) grew ~~$227~~$200 million versus year-end ~~2016~~2017 levels due to an increase in commercial paper borrowing. We retired $150 million of 4.4% notes due July 1, 2018 at maturity.

Short Term Borrowings

We can raise cash by issuing ~~up to $750 million in~~ commercial paper through a program that is backed by ~~a $750 million~~our revolving credit facility with a syndicate of 14 lenders. ~~This~~In November 2017, we increased the borrowing capacity under the facility ~~expires in~~from $750 million to $800 million and extended the term from May ~~2021.~~2021 to November 2022. The credit facility allows us to issue letters of credit totaling up to $250 million. When we issue letters of credit under the facility, we reduce our available credit and commercial paper capacity by a corresponding amount. Amounts outstanding related to our commercial paper program were:


(Amounts in millions)	June 30, 2017			December 31, 2016			June 30, 2018		December 31, 2017
Total program authorized	$	750		$	750		$	800	$	800
Commercial paper outstanding (classified as long-term debt)	(427		)	(196		)	200		—
Letters of credit issued under the credit agreement	—			—			—		—
Total program usage	(427		)	(196		)	200		—
Total program available	$	323		$	554		$	600	$	800

The average and maximum amounts of commercial paper outstanding during the second quarter of ~~2017~~2018 were ~~$499~~$164 million and ~~$553~~$200 million, respectively. At quarter-end, we had no letters of credit outstanding under the credit facility, but we had issued ~~$53~~$51 million of stand-by letters of credit under other bank agreements to take advantage of better pricing. Over the long term, and subject to our capital needs, market conditions and alternative capital market opportunities, we expect to maintain the indebtedness under the program by continuously repaying and reissuing the commercial paper notes until such time as the outstanding notes are replaced with long-term debt. We view the notes as a source of long-term funds and have classified the borrowings under the commercial paper program as long-term borrowings on our balance sheet. We have the

intent to roll over such obligations on a long-term basis and have the ability to refinance these borrowings on a long-term basis as evidenced by our revolving credit agreement discussed above. However, we expect that our commercial paper balances may increase or decrease in the short term due to acquisition or divestiture activity and our working capital needs. We filed a Form 8-K on April 21, 2017, reporting an increase of commercial paper indebtedness to $499 million. This increase was due to ordinary working capital needs, share repurchases, small acquisitions, and other general corporate purposes.

We have $150 million of 4.4% Notes due July 1, 2018. We are evaluating financing alternatives for the retirement of these notes, reducing commercial paper borrowings, and funding growth opportunities. These alternatives may include accessing the capital markets. We believe thatWith cash on hand, operating cash flow, ~~cash on hand,~~ our commercial paper program, and our ability to access the capital markets ~~will provide~~we believe we have sufficient funds available to repay maturing debt, as well as support our ongoing operations, pay dividends, fund future growth (both internally and externally), and repurchase stock.

Our revolving credit facility and certain other long-term debt obligations contain restrictive ~~covenants, with which~~covenants. Based on our planned use of cash, we ~~were comfortably~~could utilize the full $800 million of commercial paper, and we would expect to remain in compliance aswith all of ~~June 30, 2017.~~the covenants. The covenants ~~limit, among other things:~~currently limit: a) our total amount of indebtedness to 65% of our total capitalization (each as defined in the revolving credit facility), b) the amount of total secured debt to 15% of our total consolidated assets, and c) ~~the amount~~our ability to sell, lease, transfer, or dispose of ~~assets sold, transferred~~all or ~~disposed of in any trailing four quarter period to 40%~~substantially all of total consolidated assets. For more information about long-term debt, see Note I of the Notes to the Consolidated Financial Statements in our Form 10-K filed February 22, ~~2017.~~2018.

Accessibility of Cash

At June 30, ~~2017~~2018 we had cash and cash equivalents of ~~$335~~$446 million primarily invested in interest-bearing bank accounts and in bank time deposits with original maturities of three months or less. ~~Nearly all~~The majority of these funds are held in the international accounts of our foreign operations. ~~We do not rely~~

TCJA enacted at the end of 2017 imposed a one-time U.S. tax on ~~this~~the earnings that produced our foreign cash. This deemed repatriation tax totaled $56 million and is being paid on a graduated scale over the next eight years. In the second quarter, we repatriated $123 million of foreign cash ~~as a source~~and currently expect to repatriate approximately $300 million of ~~funds~~cash for the full year. The exact timing and amounts of these cash repatriations are difficult to ~~support our ongoing U.S. liquidity needs.~~ predict, and are, among other things, subject to local governmental requirements.

If we were to bring all ~~this~~our foreign cash back immediately to the U.S. in the form of dividends, we would ~~incur incremental tax expense~~pay foreign withholding taxes of ~~up to $60~~approximately $25 million. We repatriated $123 million based on our average historic foreign tax rate. However, due to capital requirements in various jurisdictions, approximately $30 million of this cash is currently inaccessible for repatriation. We did not permanently repatriate any cash during the second quarter of 2017, and ~~repatriated $5~~$116 million at little to no added tax cost for the second quarter 2018 and the full year ~~2016.~~2017, respectively.

Customer accounts receivable

Bankruptcy, financial difficulties or insolvency can occur with some of our customers relatively quickly and could impact their ability to pay their debts to us. We have extended trade credit to some of these customers in a material amount, particularly in our Consumer Products and Bedding Groups. Our bad debt reserve contains uncertainties because it requires management to estimate the amount of uncollectible receivables based upon the financial health and payment history of the customer, industry and macroeconomic considerations, and historical loss experience.

Some retailers that carry our products or our customers’ products may undergo restructurings or reorganizations because of financial difficulty. Also, certain of our customers have from time to time experienced bankruptcy, insolvency and/or an inability to pay their debts to us as they come due. If our customers suffer significant financial difficulty, they may be unable to pay their debts to us, they may reject their contractual obligations to us under bankruptcy laws or otherwise, or we may have to negotiate significant discounts and/or extend financing terms with these customers. Any of these risks, if realized, could adversely affect our revenues and increase our operating expenses by requiring larger provisions for bad debt, which could have a material adverse effect on our financial condition, results of operations or cash flows.

Cybersecurity Risks

Although the Company has not experienced any material cybersecurity incident, we have enhanced our cybersecurity protection efforts over the last few years. However, even with this expanded protection, technology failures or cybersecurity

breaches could still create system disruptions or unauthorized disclosure of confidential information. We cannot be certain that advances in attacker’s capabilities will not compromise our technology protecting information systems. If these systems are interrupted or damaged by any incident or fail for any extended period of time, then our results of operations could be adversely affected. We may incur remediation costs, increased cybersecurity protection costs, lost revenues resulting from unauthorized use of proprietary information, litigation and legal costs, reputational damage, damage to our competitiveness and negative impact on stock price and long-term shareholder value.

Contingencies

Accrual for Litigation Contingencies and Reasonably Possible Losses in Excess of Accruals

We are exposed to litigation contingencies that, if realized, could have a material negative impact on our financial condition, results of operations and cash flows. We deny liability in all currently threatened or pending litigation proceedings and believe we have valid bases to contest all claims made against us. We had, at June 30, 2018, no aggregate litigation contingency accrual (which does not include accrued expenses related to workers compensation, vehicle-related personal injury, product and general liability claims, taxation issues and environmental matters). Based on current known facts, aggregate reasonably possible (but not probable, and therefore not recorded) losses in excess of accruals for litigation contingencies are estimated to be $21 million, including $18 million for Brazilian VAT matters and $3 million for other matters. If our assumptions or analyses regarding these contingencies are incorrect, or if facts change, we could realize loss in excess of the recorded accruals (and in excess of the $21 million referenced above) which could have a material negative impact on our financial condition, results of operations and cash flows. For more information regarding our litigation contingencies, see Note 16 “Contingencies” on page 27 of the Notes to Consolidated Condensed Financial Statements.

ACCOUNTING STANDARD UPDATES

As discussed in Note 2 to the Consolidated Condensed Financial Statements on page 6, the FASB has issued accounting standard updates effective for the current and future periods. ~~We are currently evaluating these items and~~Please refer to Note 2 to the ~~impact~~Consolidated Condensed Financial Statements on ~~our future financial statements.~~page 6 for more information.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate

Substantially all of our debt is denominated in United States dollars. The fair value for fixed rate debt was not materially greater than its ~~$750 million carrying value by $24 million at June 30, 2017 and was $25 million greater than its $750~~$1,250 million carrying value at both June 30, 2018 and December 31, ~~2016. The decrease in the fair value of the Company's debt is primarily due to increased interest rates at June 30, 2017 as compared to December 31, 2016.~~2017. The fair value of fixed rate debt was calculated using a Bloomberg secondary market rate, as of June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, for similar remaining maturities, plus an estimated "spread" over such Treasury securities representing the Company's interest costs for its ~~medium-term~~ notes. The fair value of variable rate debt is not significantly different from its recorded amount.

Investment in Foreign Subsidiaries

We view our investment in foreign subsidiaries as a long-term commitment, and do not hedge translation exposures. This investment may take the form of either permanent capital or notes. Our net investment (i.e., total assets less total liabilities subject to translation exposure) in foreign operations with functional currencies other than the U.S. dollar was $1$1.027 billion at June 30, ~~2017,~~2018, compared to ~~$845 million~~$1.085 billion at December 31, ~~2016.~~2017.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and our other public disclosures, whether written or oral, may contain “forward-looking” statements including, but not limited to: projections of revenue, income, earnings, capital expenditures, dividends, capital structure, cash flows, tax impacts or other financial items; possible plans, goals, objectives, prospects, strategies or trends concerning future operations; statements concerning future economic ~~performance;~~performance, possible goodwill or other asset impairment; and the underlying assumptions relating to the forward-looking statements. These statements are identified either by the context in which they appear or by use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” or the like. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by the cautionary statements described in this provision.

Any forward-looking statement reflects only the beliefs of the Company or its management at the time the statement is made. Because all forward-looking statements deal with the future, they are subject to risks, uncertainties and developments which might cause actual events or results to differ materially from those envisioned or reflected in any forward-looking statement. Moreover, we do not have, and do not undertake, any duty to update or revise any forward-looking statement to

reflect events or circumstances after the date on which the statement was made. For all of these reasons, forward-looking statements should not be relied upon as a prediction of actual future events, objectives, strategies, trends or results.

Readers should review Item 1A Risk Factors in our Form 10-K, filed February 22, ~~2017~~2018 and in this Form 10-Q for a description of important factors that could cause actual events or results to differ materially from forward-looking statements. It is not possible to anticipate and list all risks, uncertainties and developments which may affect the future operations or performance of the Company, or which otherwise may cause actual events or results to differ materially from forward-looking statements. However, the known, material risks and uncertainties include the following:

factors that could affect the industries or markets in which we participate, such as growth rates and opportunities in those industries;

~~adverse changes in inflation, currency, political risk, and U.S. or foreign laws or regulations (including tax law changes);~~

adverse changes in consumer confidence, housing turnover, employment levels, interest rates, trends in capital spending and the like;

factors that could impact raw materials and other costs, including the availability and pricing of steel scrap and rod and other raw materials, the availability of labor, wage rates and energy costs;

our ability to pass along raw material cost increases through increased selling prices;

price and product competition from foreign (particularly Asian and European) and domestic competitors;

our ability to maintain profit margins if our customers change the quantity and mix of our components in their finished goods;

our ability to realize 25-35% contribution margin on incremental unit volume produced utilizing spare capacity;

our ability to achieve expected levels of cash flow;

our ability to identify and consummate strategically-screened acquisitions;

our ability to maintain and grow the profitability of acquired companies;

adverse changes in foreign currency, customs, shipping rates, political risk, and U.S. or foreign laws, regulations or legal systems (including the Tax Cuts and Jobs Act and other tax laws);

tariffs imposed by the U.S. government that result in increased costs of imported raw materials and products that we purchase;

our ability to maintain the proper functioning of our internal business processes and information systems through technology failures or otherwise;

our ability to avoid modification or interruption of our information systems through ~~cyber-security~~cybersecurity breaches;

a decline in the long-term outlook for any of our reporting units that could result in asset impairment;

the amount and timing of share repurchases;

the loss of one or more of our significant customers;

bankruptcy, financial difficulties or insolvency of our customers; and

litigation accruals related to various contingencies including antitrust, intellectual property, product liability and warranty, taxation, environmental and workers’ compensation expense.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See the “Quantitative and Qualitative Disclosures About Market Risk” section under Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4. CONTROLS AND PROCEDURES

Effectiveness of the Company's Disclosure Controls and Procedures

An evaluation as of June 30, ~~2017~~2018 was carried out by the Company’s management, with participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are effective, as of June 30, ~~2017,~~2018, to provide assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in the Company's Internal Control Over Financial Reporting

There were no changes during the quarter ended June 30, ~~2017~~2018 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

During the first quarter of 2017, we transitioned certain corporate-level shared service systems for general ledger, cash application, purchasing and accounts payable disbursements to a new platform. The new platform further automates and enhances a number of existing processes and activities primarily related to our domestic U.S. operations. The total capital outlay for this activity approximated $20 million, most of which was recorded in 2015 and 2016.

These improvements were system process enhancements and were not made in response to any control deficiency or weakness. Our internal control over financial reporting has been, and we expect will continue to be, effective. Implementation risk has been controlled through an on-going process of monitoring and evaluation to mitigate potential risk. The system deployments included fully evaluating and updating our internal control over financial reporting, as well as significant testing and training.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information in Note 1516 beginning on page 27 of our Notes to Consolidated Condensed Financial Statements is incorporated into this section by reference.

~~Environmental Matters Involving Potential Monetary Sanctions of $100,000 or More~~

On March 27, 2013, Region 5 of the U.S. Environmental Protection Agency (EPA) issued a Notice of Violation/Finding of Violation ("NOV/FOV") alleging that our subsidiary, Sterling Steel Company (Sterling), violated the Clean Air Act and the Illinois State Implementation Plan currently in place. Sterling operates a steel rod mill in Sterling, Illinois. The NOV/FOV alleges that Sterling, since 2008, has exceeded the allowable annual particulate matter and manganese emission limits for its arc furnace. Sterling requested a conference with the EPA to discuss the alleged violations. The conference was held on May 20, 2013.

On July 23, 2013, the EPA issued a Finding of Violation alleging that Sterling violated the opacity limitations of its air permit and Federal and state regulations. A conference to discuss the Finding of Violation occurred in the third quarter of 2013.

There had been no material updates with respect to these matters until mid-July 2015 when the Company learned from counsel for the EPA that the matters had been referred to the U.S. Department of Justice (DOJ). The Company met with representatives of the EPA and the DOJ on February 2, May 25 and June 15, 2016. At the meetings, the government focused on Sterling's compliance with capture and control efficiency and fugitive emissions with its electric arc furnace. On September 26, 2016, the EPA directed Sterling to perform a ventilation study.

Sterling submitted its proposed ventilation study protocol to the EPA on November 15, 2016. On December 28, 2016, the EPA conditionally approved the proposed study. On June 15, 2017, the EPA withdrew the ventilation study directive. On June 22, 2017, the Company was informed that neither the EPA nor DOJ plan to proceed with an enforcement action against Sterling. As such, we believe that the above matters have been resolved and do not expect to pay any monetary sanctions regarding these matters.

ITEM 1A. RISK FACTORS

Our ~~2016~~2017 Annual Report on Form 10-K filed February 22, ~~2017~~2018 includes a detailed discussion of our risk factors in Item 1A “Risk Factors.” The information presented below updates and should be read in conjunction with the risk factors and information disclosed in that Form 10-K.

Investing in our securities involves risk. Set forth below and elsewhere in this report are risk factors that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. We may amend or supplement these risk factors from time to time by other reports we file with the SEC.

Interruption in our customers’ business due to bankruptcy, financial difficulties or insolvency could result in their inability to pay their debts to us, and could adversely affect our financial condition, results of operations or cash flows.

Bankruptcy, financial difficulties or insolvency can occur with some of our customers relatively quickly and could impact their ability to pay their debts to us. We ~~are exposed~~have extended trade credit to ~~litigation contingencies~~some of these customers in a material amount, particularly in our Consumer Products and Bedding Groups. Our bad debt reserve contains uncertainties because it requires management to estimate the amount of uncollectible receivables based upon the financial health and payment history of the customer, industry and macroeconomic considerations, and historical loss experience.

Some retailers that carry our products or our customers’ products may undergo restructurings or reorganizations because of financial difficulty. Also, certain of our customers have from time to time experienced bankruptcy, insolvency and/or an inability to pay their debts to us as they come due. If our customers suffer significant financial difficulty, they may be unable to pay their debts to us, they may reject their contractual obligations to us under bankruptcy laws or otherwise, or we may have to negotiate significant discounts and/or extend financing terms with these customers. Any of these risks, if realized, could adversely affect our revenues and increase our operating expenses by requiring larger provisions for bad debt, which could have a material ~~negative impact~~adverse effect on our financial condition, results of operations ~~and~~or cash flows.

~~Although we deny liability in all threatened~~Technology failures or pending litigation proceedings and believe that we have valid bases to contest all claims made against us, we have, at June 30, 2017, an aggregate litigation contingency accrual of $3 million. Based on current facts and circumstances, aggregate reasonably possible (but not probable and therefore not recorded) losses in excess of accruals for litigation contingencies (which include antitrust, Brazilian VAT and other matters) are estimated to be $25 million. If our assumptions or analyses regarding these contingencies are incorrect, or if facts change, we could realize loss greater than the recorded accruals, and greater than our estimate of reasonably possible losses in excess of the recorded accruals. These lossescybersecurity breaches could have a material adverse effect on our results of operations, reputation, competitiveness, stock price and long-term shareholder value.

We rely on information systems to obtain, process, analyze and manage data, as well as to facilitate the manufacture and distribution of inventory to and from our facilities. We receive, process and ship orders, manage the billing of and collections from our customers, and manage the accounting for and payment to our vendors. Technology failures or cybersecurity breaches of a new or existing infrastructure could create system disruptions or unauthorized disclosure of confidential information. We cannot be certain that advances in attackers’ capabilities will not compromise our technology protecting information systems. If these systems are interrupted or damaged by these events or fail for any extended period of time, then our results of operations could be adversely affected. We may incur remediation costs, increased cybersecurity protection costs, lost revenues resulting from unauthorized use of proprietary information, litigation and legal costs, reputational damage, damage to our competitiveness and negative impact on stock price and long-term shareholder value.

Tariffs imposed by the United States government resulting in increased costs of imports could have a material adverse effect on our ~~financial condition,~~ results of ~~operations~~operations.

The United States recently imposed broad-ranging tariffs of 25% on imports of steel products and ~~cash flows. For more information regarding~~10% on imports of aluminum products. The Administration has also compiled a long list of products under consideration for potential tariffs on imports from China. After a period of notice and consultation, the list could be finalized and tariffs implemented, potentially including some products imported by us from China. Any tariffs that result in increased costs of imported products and materials could require us to increase prices to our ~~litigation contingency accruals and reasonably possible losses~~domestic customers or, if we are unable to do so, result in ~~excess~~lowering our gross margins on products sold. As a result, the tariffs could have a material adverse effect on our results of ~~accruals, see Note 15 “Contingencies” on page 27 of the Notes to Consolidated Condensed Financial Statements.~~operations.

~~Our goodwill and other long-lived assets are subject to potential impairment which could negatively impact our earnings.~~

A significant portion of our assets consists of goodwill and other long-lived assets, the carrying value of which may be reduced if we determine that those assets are impaired. At June 30, 2017, goodwill and other intangible assets represented $993 million, or 30% of our total assets. In addition, net property, plant and equipment and sundry assets totaled $749 million, or 23% of total assets. If actual results differ from the assumptions and estimates used in the goodwill and long-lived asset valuation calculations, we could incur impairment charges, which would negatively impact our earnings.

We review our reporting units for potential goodwill impairment in the second quarter as part of our annual goodwill impairment testing, and more often if an event or circumstance occurs making it likely that impairment exists. In addition, we test for the recoverability of long-lived assets at year-end, and more often if an event or circumstance indicates the carrying value may not be recoverable. We conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations. If we are not able to achieve projected performance levels, future impairments could be possible, which would negatively impact our earnings.

Business disruptions to our steel rod mill, if coupled with an inability to purchase an adequate and/or timely supply of quality steel rod from alternative sources, could have a material negative impact on our Residential Products and Industrial Products segments and Company results of operations.

We purchase steel scrap from third party suppliers. This scrap is converted into steel rod in our mill in Sterling, Illinois. Our steel rod mill has annual output of approximately 500,000 tons, a substantial majority of which is used by our three wire mills. Our wire mills convert the steel rod into drawn steel wire. This wire is used in the production of many of our products, including mattress innersprings.

A disruption to the operation of, or supply of steel scrap to, our steel rod mill could require us to purchase steel rod from alternative supply sources, subject to market availability. ~~Current~~Ongoing trade ~~action~~actions by ~~domestic rod producers~~the Administration, along with the existence of antidumping and countervailing duty orders against ~~several foreign suppliers, initiated March 28, 2017, could result in the imposition of duties on steel rod imports which~~multiple countries, could result in reduced market availability and/or higher cost of steel rod.

If we experience a disruption to our ability to produce steel rod in our mill, coupled with a reduction of adequate and/or timely supply from alternative market sources of quality steel rod, we could experience a material negative impact on our Residential Products and Industrial Products segments and Company results of operations.

We are exposed to litigation contingencies that, if realized, could have a material negative impact on our financial condition, results of operations and cash flows.

We deny liability in all currently threatened or pending litigation proceedings and believe that we have valid bases to contest all claims made against us. We had, at June 30, 2018, no aggregate litigation contingency accrual (which does not include accrued expenses related to workers compensation, vehicle-related personal injury, product and general liability claims, taxation issues and environmental matters). Based on current facts and circumstances, aggregate reasonably possible (but not probable) losses in excess of the recorded accruals for litigation contingencies (which include Brazilian VAT and other matters) are estimated to be $21 million. If our assumptions or analysis regarding these contingencies is incorrect, or if facts and circumstances change, we could realize loss in excess of the recorded accruals (and in excess of the $21 million referenced above) which could have a material negative impact on our financial condition, results of operations and cash flows. For more information regarding our legal contingencies, please see Note 16 on page 27 of the Notes to Consolidated Condensed Financial Statements.

Our goodwill and other long-lived assets are subject to potential impairment which could negatively impact our earnings.

A significant portion of our assets consists of goodwill and other long-lived assets, the carrying value of which may be reduced if we determine that those assets are impaired. At June 30, 2018, goodwill and other intangible assets represented $1.0 billion, or 28% of our total assets. In addition, net property, plant and equipment and sundry assets totaled $840 million, or 23% of total assets. If actual results differ from the assumptions and estimates used in the goodwill and long-lived asset valuation calculations, we could incur impairment charges, which would negatively impact our earnings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The table below is a listing of our purchases of the Company’s common stock by calendar month for the periods presented.

Period
Total
Number of
Shares
Purchased
(1)

Average
Price
Paid
per
Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
(2)

Maximum
Number of
Shares that
may yet be
Purchased
Under the
Plans or
Programs
(2)
April 2017 —
$ —
—
8,162,345
May 2017 197,433
$ 53.15
180,815
7,981,530
June 2017 —
$ —
—
7,981,530
Total 197,433
$ 53.15
180,815



Period	Total Number of Shares Purchased ¹	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ²	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs ²
April 2018	212,479	$	40.84	212,479	8,676,523
May 2018	1,058,942	$	41.03	1,058,942	7,617,581
June 2018	—	$	—	—	7,617,581
Total	1,271,421	$	41.00	1,271,421

~~(1)~~

~~This number includes 16,618~~All shares ~~which~~ were ~~not~~ repurchased as part of a publicly announced plan or ~~program, all of which were outstanding shares surrendered to exercise stock options.~~program. It does not include shares withheld for taxes in option exercises and stock unit conversions, oras well as forfeitures of stock units, all of which totaled ~~26,494~~9,704 shares for the second quarter.


~~(2)~~ ²	On August 4, 2004, the Board authorized management to repurchase up to 10 million shares each calendar year beginning January 1, 2005. This standing authorization was first reported in the quarterly report on Form 10-Q for the period ended June 30, 2004, filed August 5, 2004, and shall remain in force until repealed by the Board of Directors.



ITEM 6.	EXHIBITS

EXHIBIT INDEX



Exhibit No.		Description

10.1*		Summary Sheet of Director Compensation.

~~10.2~~		Severance Benefit Agreement between the Company and Karl G. Glassman, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.1 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.3~~		Severance Benefit Agreement between the Company and Matthew C. Flanigan, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.2 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.4~~		Severance Benefit Agreement between the Company and Perry E. Davis, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.3 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.5~~		Severance Benefit Agreement between the Company and J. Mitchell Dolloff, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.4 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.6~~		~~Description of Personal Use of Corporate Aircraft by Karl G. Glassman, filed May 11, 2017 as Exhibit 10.8 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)~~

12*		Computation of Ratio of Earnings to Fixed Charges.

31.1*		Certification of Karl G. Glassman, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August ~~4, 2017.~~3, 2018.

31.2*		Certification of Matthew C. Flanigan, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August ~~4, 2017.~~3, 2018.

32.1*		Certification of Karl G. Glassman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August ~~4, 2017.~~3, 2018.

32.2*		Certification of Matthew C. Flanigan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August ~~4, 2017.~~3, 2018.

101.INS**		XBRL Instance Document.

101.SCH**		XBRL Taxonomy Extension Schema.

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase.

101.DEF**		XBRL Taxonomy Extension Definition Linkbase.

101.LAB**		XBRL Taxonomy Extension Label Linkbase.

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase.



*	Denotes filed herewith.
**	Filed as Exhibit 101 to this report are the following formatted in XBRL (eXtensible Business Reporting Language):
	(i) Consolidated Condensed Balance Sheets at June 30, ~~2017~~2018 and December 31, ~~2016;~~2017; (ii) Consolidated Condensed Statements of Operations for the three and six months ended June 30, ~~2017~~2018 and June 30, ~~2016;~~2017; (iii) Consolidated Condensed Statements of Comprehensive Income (Loss) for the three and six months ended June 30, ~~2017~~2018 and June 30, ~~2016;~~2017; (iv) Consolidated Condensed Statements of Cash Flows for the six months ended June 30, ~~2017~~2018 and June 30, ~~2016;~~2017; and (v) Notes to Consolidated Condensed Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	LEGGETT & PLATT, INCORPORATED

DATE: August ~~4, 2017~~3, 2018	By:	/s/ KARL G. GLASSMAN
		Karl G. Glassman President and Chief Executive Officer

DATE: August ~~4, 2017~~3, 2018	By:	/s/ MATTHEW C. FLANIGAN
		Matthew C. Flanigan Executive Vice President and Chief Financial Officer

~~EXHIBIT INDEX~~



~~Exhibit No.~~		~~Description~~

10.1*		~~Summary Sheet of Director Compensation.~~

~~10.2~~		Severance Benefit Agreement between the Company and Karl G. Glassman, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.1 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.3~~		Severance Benefit Agreement between the Company and Matthew C. Flanigan, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.2 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.4~~		Severance Benefit Agreement between the Company and Perry E. Davis, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.3 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.5~~		Severance Benefit Agreement between the Company and J. Mitchell Dolloff, dated May 9, 2017, filed May 11, 2017 as Exhibit 10.4 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)

~~10.6~~		~~Description of Personal Use of Corporate Aircraft by Karl G. Glassman, filed May 11, 2017 as Exhibit 10.8 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845)~~

12*		~~Computation of Ratio of Earnings to Fixed Charges.~~

31.1*		~~Certification of Karl G. Glassman, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2017.~~

31.2*		~~Certification of Matthew C. Flanigan, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2017.~~

32.1*		~~Certification of Karl G. Glassman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 4, 2017.~~

32.2*		~~Certification of Matthew C. Flanigan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 4, 2017.~~

101.INS**		~~XBRL Instance Document.~~

101.SCH**		~~XBRL Taxonomy Extension Schema.~~

101.CAL**		~~XBRL Taxonomy Extension Calculation Linkbase.~~

101.DEF**		~~XBRL Taxonomy Extension Definition Linkbase.~~

101.LAB**		~~XBRL Taxonomy Extension Label Linkbase.~~

101.PRE**		~~XBRL Taxonomy Extension Presentation Linkbase.~~



*	~~Denotes filed herewith.~~
**	~~Filed as Exhibit 101 to this report are the following formatted in XBRL (eXtensible Business Reporting Language):~~
	(i) Consolidated Condensed Balance Sheets at June 30, 2017 and December 31, 2016; (ii) Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2017 and June 30, 2016; (iii) Consolidated Condensed Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and June 30, 2016; (iv) Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2017 and June 30, 2016; and (v) Notes to Consolidated Condensed Financial Statements.



	Quarter	Six Months Ended June 30,				Three Months Ended June 30,
	Divested	2017		2016		2017		2016
Trade sales:
Residential Products:
Machinery operation	Fourth quarter 2016	$	—	$	1.8	$	—	$	1.0
Industrial Products:
Wire Products operation	Fourth quarter 2016	—		9.0		—		4.4
Wire Products operation	Second quarter 2016	—		19.5		—		8.1
Specialized Products:
Commercial Vehicle Products (CVP) operation	Second quarter 2016	—		15.3		—		7.8
Total trade sales		$	—	$	45.6	$	—	$	21.3

EBIT:
Residential Products:
Machinery operation	Fourth quarter 2016	$	—	$	—	$	—	$	—
Industrial Products:
Wire Products operation	Fourth quarter 2016	—		.2		—		—
Wire Products operation	Second quarter 2016	—		1.2		—		.8
Specialized Products:
CVP operation	Second quarter 2016	—		2.8		—		1.3
Total EBIT		$	—	$	4.2	$	—	$	2.1



	Six Months Ended June 30, 2016
	Total Equity			Retained Earnings			Common Stock & Additional Contributed Capital			Treasury Stock			Noncontrolling Interest			Accumulated Other Comprehensive Income (Loss)
Beginning balance, January 1, 2016	$	1,097.7		$	2,209.2		$	531.5		$	(1,564.0	)	$	12.1		$	(91.1	)
Net earnings	210.9			210.9			—			—			—			—
(Earnings) loss attributable to noncontrolling interest, net of tax	—			(.2		)	—			—			.2			—
Dividends declared	(88.4		)	(90.9		)	2.5			—			—			—
Dividends paid to noncontrolling interest	(1.7		)	—			—			—			(1.7		)	—
Treasury stock purchased	(167.7		)	—			—			(167.7		)	—			—
Treasury stock issued	20.5			—			(15.8		)	36.3			—			—
Foreign currency translation adjustments	5.5			—			—			—			—			5.5
Cash flow hedges, net of tax	6.0			—			—			—			—			6.0
Defined benefit pension plans, net of tax	1.6			—			—			—			—			1.6
Stock-based compensation transactions, net of tax	16.4			—			16.4			—			—			—
Acquisition of noncontrolling interest	(35.2		)	—			(27.9		)	—			(8.3		)	1.0
Ending balance, June 30, 2016	$	1,065.6		$	2,329.0		$	506.7		$	(1,695.4	)	$	2.3		$	(77.0	)



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs (2)
April 2017	—	$	—	—	8,162,345
May 2017	197,433	$	53.15	180,815	7,981,530
June 2017	—	$	—	—	7,981,530
Total	197,433	$	53.15	180,815