UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 26, 2010
LEGGETT & PLATT, INCORPORATED
(Exact name of registrant as specified in its charter)
| Missouri | 001-07845 | 44-0324630 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| No. 1 Leggett Road, Carthage, MO | 64836 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code 417-358-8131
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) Adoption of the 2010 Award Formula for the Company’s 2009 Key Officers Incentive Plan. On March 26, 2010, the Compensation Committee of the Company’s Board of Directors (the “Committee”) adopted the Award Formula for 2010 (the “2010 Award Formula”) for the Company’s 2009 Key Officers Incentive Plan (the “Plan”). The Plan was filed March 26, 2009 as Appendix B to the Company’s Proxy Statement. The 2010 Award Formula is applicable to the Company’s eleven executive officers, including the named executive officers listed below. Under the 2010 Award Formula, an executive officer will be eligible to receive a cash award calculated by multiplying his annual salary at the end of the year by a percentage set by the Committee (“Target Percentage”), then applying the award formula. Corporate participants and Profit Center participants have separate award calculations based on factors defined in the 2010 Award Formula.
Corporate Participants. The 2010 Award Formula for Corporate participants is based on (i) the Company’s return on capital employed (“ROCE”) (60% relative weight), (ii) the Company’s cash flow (20% relative weight), and (iii) individual performance goals established outside the Plan (20% relative weight). For Corporate participants, no awards are paid for ROCE achievement below 19.0% and cash flow below $260 million. The maximum payout percentage is capped at 150%. David S. Haffner (President & Chief Executive Officer), Matthew C. Flanigan (Senior Vice President – Chief Financial Officer) and Karl G. Glassman (Executive Vice President & Chief Operating Officer) are Corporate participants.
Profit Center Participants. The 2010 Award Formula for Profit Center participants is based on (i) ROCE by the operations under the executive’s management (40% relative weight); (ii) budgeted earnings of the operations under the executive’s management (40% relative weight); and (iii) individual performance goals established outside the Plan (20% relative weight). For Profit Center participants, no awards are paid for achievement below 80% of the ROCE and the budgeted earnings target for that business segment. The maximum payout percentage is capped at 150%. Joseph D. Downes, Jr. (Senior Vice President, President – Industrial Materials) and Paul R. Hauser (Senior Vice President, President – Residential Furnishings) are Profit Center participants.
Individual Performance Goals. The assessment of most of the individual performance goals referenced above is inherently subjective and qualitative. The types of goals for our named executive officers in 2010 include, among other things, strategic planning, talent management/succession planning, new product development, continuous improvement projects, cost savings initiatives, compliance improvements, sales and operations planning, development of new growth platforms, and various improvements at specific global operations.
The foregoing is only a brief description of the 2010 Award Formula and is qualified in its entirety by such formula which is attached and incorporated by reference as Exhibit 10.2. Certain adjustments have been made to the GAAP definitions of the above measures as described in the attached 2010 Award Formula.
Increase in Base Salaries for Named Executive Officers. Attached and incorporated by reference as Exhibit 10.3 is the Company’s Summary Sheet for Executive Cash Compensation disclosing the named executive officers’ 2009 annual salaries and Target Percentages and increases for 2010 approved by the Committee on March 26, 2010.
Amendment to the Company’s 2005 Executive Stock Unit Program. On March 26, 2010, the Committee amended Section 4.6 of the Company’s 2005 Executive Stock Unit Program
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(“ESU Program”). The ESU Program allows executives to contribute up to 10% of their compensation above a certain threshold to purchase stock units at a 15% discount from the market value of Company common stock on the purchase date. Stock units are converted to shares of common stock on a one-to-one basis, and paid out upon termination of employment, disability or death. Stock units may be settled in cash at the discretion of the Company. The Company automatically matches 50% of the executive’s contribution and will match up to an additional 50% if certain financial objectives for the year are met. In addition, ESU Program accounts earn dividend equivalents, also at a 15% discount. Section 4.6 has been amended to align the additional matching contributions with the corporate ROCE thresholds and targets established each year under the 2009 Key Officers Incentive Plan as follows:
4.6 Additional Matching Contributions. The Company will make an Additional Matching Contribution equal to a
percentage of the Participant’s Contribution for the applicable Calendar Year if the Company’s return on capital employed (“ROCE”) for the Calendar Year is at least 13.1% meets the threshold level established
for corporate payouts under the Key Officers Incentive Plan (the “Incentive Plan”). ROCE will be calculated in the same manner as it is calculated under the Company’s Key Management Incentive Plan for a given
year. The Additional Matching Contribution will begin at 25% of the Participant’s Contribution for the applicable Calendar Year if the Company’s for ROCE is 13.1% achievement at
the threshold level (19% for 2010) and increase ratably to a maximum 50% of the Participant’s Contribution if the Company’s for ROCE is at least 14.1%.achievement at the target level (23% for
2010). Such Contribution will be credited to the Account of each Participant who was employed as of the last business day of the Calendar Year, plus each Participant whose employment terminated prior to such date (a) due to Disability or
death, or (b) after the Participant has attained 55 years of age and has at least 5 Years of Vesting Service. Additional Matching Contributions, if any, will be credited to the Participant’s Account by March 15th following the
applicable Calendar Year.
The amendment did not change how the corporate ROCE is calculated. It is calculated the same under the Key Management Incentive Plan and 2009 Key Officer’s Incentive Plan. Reference is made to the ESU Program, as amended, which was filed December 9, 2009, as Exhibit 10.1 to the Company’s Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. |
Description | |
| 10.1 | The Company’s 2009 Key Officers Incentive Plan, effective as of January 1, 2009, filed March 26, 2009 as Appendix B to the Company’s Proxy Statement, is incorporated by reference. (SEC File No. 001-07845) | |
| 10.2 | 2010 Award Formula under the Company’s 2009 Key Officers Incentive Plan. | |
| 10.3 | Summary Sheet for Executive Cash Compensation. | |
| 10.4 | The Company’s 2005 Executive Stock Unit Program, as amended, effective December 31, 2009, filed December 9, 2009 as Exhibit 10.1 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845) | |
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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 hereunto duly authorized.
| LEGGETT & PLATT, INCORPORATED | ||||||
| Date: March 31, 2010 |
By: | /s/ John G. Moore | ||||
| John G. Moore | ||||||
| Vice President – Chief Legal & HR Officer and | ||||||
| Secretary | ||||||
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EXHIBIT INDEX
| Exhibit No. |
Description | |
| 10.1 | The Company’s 2009 Key Officers Incentive Plan, effective as of January 1, 2009, filed March 26, 2009 as Appendix B to the Company’s Proxy Statement, is incorporated by reference. (SEC File No. 001-07845) | |
| 10.2 | 2010 Award Formula under the Company’s 2009 Key Officers Incentive Plan. | |
| 10.3 | Summary Sheet for Executive Cash Compensation. | |
| 10.4 | The Company’s 2005 Executive Stock Unit Program, as amended, effective December 31, 2009, filed December 9, 2009 as Exhibit 10.1 to the Company’s Form 8-K, is incorporated by reference. (SEC File No. 001-07845) | |
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EXHIBIT 10.2
AWARD FORMULA FOR 2010
LEGGETT & PLATT, INCORPORATED
2009 KEY OFFICERS INCENTIVE PLAN
The 2009 Key Officers Incentive Plan (“Plan”) provides cash awards to participants based on the Company’s operating results for the prior year. There are two award formulas under the Plan, one for Corporate participants and one for Profit Center participants.
Under both formulas, a participant’s award is calculated by reference to a percentage of the participant’s annual salary at the end of the year (the “target percentage”). The award formula and each participant’s target percentage are determined by the Plan Committee no later than 90 days after the beginning of each year or before 25% of the performance period has elapsed.
Participants in the Plan are the executive officers of the Company. The Company has a separate Key Management Incentive Plan for other employees. Awards under the Key Management Incentive Plan are calculated in substantially the same manner as awards under the Plan.
For 2010, awards under the Plan will be determined by achievement of the following performance objectives. In addition, awards will be made based on the achievement of Individual Performance Goals, which will be established separately from this Plan and will be wholly independent of awards under this Plan.
| Participant Type |
Performance Objectives |
Relative Weight |
|||
| Corporate Participants |
Return on Capital Employed (ROCE) | 60 | % | ||
| Cash Flow | 20 | % | |||
| Individual Performance Goals* | 20 | % | |||
| Profit Center Participants |
Return on Capital Employed (ROCE) | 40 | % | ||
| Budgeted Earnings | 40 | % | |||
| Individual Performance Goals* | 20 | % | |||
| * | This portion of the award is established outside the Plan. |
Award Formula for Corporate Participants
Awards for Corporate participants are determined by the Company’s aggregate 2010 financial results. The performance objectives are calculated as follows. Financial results from acquisitions completed during the year are excluded from the calculations.
| ROCE = |
EBIT |
|||
| Net PP&E and Working Capital1,2 |
| 1 | We use a quarterly average for PP&E and Working Capital |
| 2 | Working Capital, excluding cash and current maturities of long-term debt, as presented on the December 31, 2009 and December 31, 2010 Company’s Consolidated Balance Sheets |
| Cash Flow = |
EBITDA – Capital Expenditures +/- Change in Working Capital1 |
| 1 | Change in Working Capital, excluding cash and current maturities of long-term debt, from December 31, 2009 to December 31, 2010, as reflected on the Company’s Consolidated Balance Sheets |
The Committee shall adjust all items of gain, loss or expense for the fiscal year determined to be (i) extraordinary or unusual in nature, (ii) infrequent in occurrence, (iii) related to the disposal of a segment of a business, or (iv) related to a change in accounting principle, all as determined in accordance with standards established under Generally Accepted Accounting Principles.
Achievement targets and payout percentages for Corporate participants are set forth below. No awards are paid for ROCE achievement below 19% and Cash Flow below $260M. The payout is capped at 150%. The payout will be interpolated for achievement levels falling between those set out in the schedule.
2010
Corporate Payout Schedule
| ROCE | Cash Flow | ||||||||
| Achievement |
Payout | Achievement | Payout | ||||||
| < 19% |
0% | <$ | 260M | 0% | |||||
| 19% |
50% | Threshold | $ | 260M | 50% | ||||
| 21% |
75% | $ | 272.5M | 75% | |||||
| 23% |
100% | Target | $ | 285M | 100% | ||||
| 25% |
125% | $ | 297.5M | 125% | |||||
| 27% |
150% | Maximum | $ | 310M | 150% | ||||
The award is calculated by multiplying a participant’s salary, target percentage, the relative weight of the performance measure, and the payout percentage. The sample calculation set forth below assumes a participant with a base salary of $250,000 and a target percentage of 50%. If the Company achieved 23% ROCE and $260M Cash Flow, the participant’s award under the Plan (which does not include the Individual Performance Goals), would be $87,500.
| Performance Objective |
Participant’s Base Salary |
Participant’s Target % |
Relative Weight |
Payout Percentage |
Award | ||||||||||
| ROCE |
$ | 250,000 | 50 | % | 60 | % | 100 | % | $ | 75,000 | |||||
| Cash Flow |
$ | 250,000 | 50 | % | 20 | % | 50 | % | $ | 12,500 | |||||
| Total Award |
$ | 87,500 | |||||||||||||
Award Formula for Profit Center Participants
Profit Center participants in the Plan manage numerous operating locations. The Company sets a Budgeted Earnings target and a ROCE target for each operating location every year. The achievement of those targets at each operating location “rolls up” to an aggregate achievement for all the operations under a Profit Center participant’s management.
The performance objectives are calculated as follows. Financial results from acquisitions completed during the year are excluded from the calculations.
Budgeted Earnings = Operating Income + Corporate Allocations1 + Intracompany Sales Credits2
2
| 1 | Corporate allocations include certain general and administrative corporate income and expenses allocated on the basis of sales and EBIT, as described in footnote F of Form 10-K dated February 25, 2010. |
| 2 | Intracompany sales credits equal to 10% of product cost apply only to those operations that do not transfer product at amounts that approximate market-based selling prices. |
| ROCE = |
Budgeted Earnings |
|||
| Net PP&E + Working Capital1,2 |
| 1 | We use monthly averaging for PP&E and Working Capital. |
| 2 | Working Capital excludes cash and current maturities of long-term debt and balance sheet items not directly related to on-going profit center activity, such as interest receivable and payable, income taxes receivable and payable, current deferred taxes assets and liabilities, unbudgeted restructuring liabilities, and dividends payable. |
The Committee shall adjust all items of gain, loss or expense for the fiscal year determined to be (i) extraordinary or unusual in nature, (ii) infrequent in occurrence, (iii) related to the disposal of a segment of a business, or (iv) related to a change in accounting principle, all as determined in accordance with standards established under Generally Accepted Accounting Principles.
Achievement targets and payout percentages for Profit Center participants are set forth below. No awards are paid for achievement below 80% of the ROCE and Budgeted Earnings target for that business segment. The payout is capped at 150%. The payout will be interpolated for achievement levels falling between those set out in the schedule.
2010
Profit Center Payout Schedule
| Achievement |
Payout | |||
| <80% | 0% | |||
| 80% | Threshold | 60% | ||
| 90% | 80% | |||
| 100% | Target | 100% | ||
| 110% | 120% | |||
| 120% | 140% | |||
| 125% | Maximum | 150% |
The award is calculated by multiplying a participant’s salary, target percentage, the relative weight of the performance measure, and the payout percentage. The sample calculation below assumes a participant with a base salary of $250,000 and a target percentage of 50%. If the business segment achieved 100% of its ROCE target and 90% of its Budgeted Earnings target, the participant’s award under the Plan (which does not include the Individual Performance Goals), would be $90,000.
| Performance Objective |
Participant’s Base Salary |
Participant’s Target % |
Relative Weight |
Payout Percentage |
Award | ||||||||||
| ROCE |
$ | 250,000 | 50 | % | 40 | % | 100 | % | $ | 50,000 | |||||
| Budgeted Earnings |
$ | 250,000 | 50 | % | 40 | % | 80 | % | $ | 40,000 | |||||
| Total Award |
$ | 90,000 | |||||||||||||
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EXHIBIT 10.3
SUMMARY SHEET FOR EXECUTIVE CASH COMPENSATION
The following table sets forth annual base salaries provided to the Company’s principal executive officer, principal financial officer and other named executive officers in 2009 and the 2010 base salaries approved by the Compensation Committee of the Board of Directors (“Committee”) on March 26, 2010.
| Named Executive Officers |
2009 Base Salaries |
2010 Base Salaries | ||||
| David S. Haffner, President & Chief Executive Officer |
$ | 900,000 | $ | 922,500 | ||
| Matthew C. Flanigan, Senior Vice President – Chief Financial Officer |
$ | 395,000 | $ | 405,000 | ||
| Karl G. Glassman, Executive Vice President & Chief Operating Officer |
$ | 675,000 | $ | 692,000 | ||
| Joseph D. Downes, Jr., Senior Vice President, President – Industrial Materials |
$ | 291,800 | $ | 312,100 | ||
| Paul R. Hauser, Senior Vice President, President – Residential Furnishings |
$ | 320,600 | $ | 328,600 | ||
The executive officers will also be eligible to receive a cash award under the Company’s 2009 Key Officers Incentive Plan (filed March 26, 2009 as Appendix B to the Company’s Proxy Statement) in accordance with the 2010 Award Formula (filed March 31, 2010 as Exhibit 10.2 to the Company’s Form 8-K). An executive’s cash award is calculated by multiplying his annual salary at the end of the year by a percentage (“Target Percentage”) set by the Committee, then applying an award formula adopted by the Committee for that year. The Target Percentages applicable to the Company’s principal executive officer, principal financial officer and other named executive officers are shown in the following table. Some of the Target Percentages increased in 2010 as reflected below.
| Named Executive Officers |
2009 Target Percentages |
2010 Target Percentages | ||
| David S. Haffner, President & Chief Executive Officer |
80% | 90% | ||
| Matthew C. Flanigan, Senior Vice President – Chief Financial Officer |
60% | 65% | ||
| Karl G. Glassman, Executive Vice President & Chief Operating Officer |
70% | 75% | ||
| Joseph D. Downes, Jr., Senior Vice President, President – Industrial Materials |
50% | 50% | ||
| Paul R. Hauser, Senior Vice President, President – Residential Furnishings |
50% | 50% |
Individual Performance Goals. An executive’s cash award under the Award Formula for 2010 is based, in part, on individual performance goals established outside the 2009 Key Officers Incentive Plan (20% relative weight). The assessment of most of these individual performance goals is inherently subjective and qualitative. The types of goals for our named executive officers in 2010 include, among other things, strategic planning, talent management/succession planning, new product development, continuous improvement projects, cost savings initiatives, compliance improvements, sales and operations planning, development of new growth platforms, and various improvements at specific global operations.