10-Q 1 tpx-20240930.htm 10-Q 2024.09.30 tpx-20240930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the quarterly period ended September 30, 2024
or
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 001-31922

TEMPUR SEALY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-1022198
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1000 Tempur Way
Lexington, Kentucky 40511
(Address of principal executive offices)
Registrant’s telephone number, including area code: (800) 878-8889
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.01 par valueTPXNew York Stock Exchange

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. ý  Yes  o No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ý Yes    o 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 definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging Growth Company
x
 o
 o
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

The number of shares outstanding of the registrant’s common stock as of November 1, 2024 was 173,652,870 shares.


Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, (this "Report"), including the information incorporated by reference herein, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which includes information concerning one or more of our plans; objectives; goals; strategies and other information that is not historical information. Many of these statements appear, in particular, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I, ITEM 2 of this Report. When used in this Report, the words "assumes," "estimates," "expects," "guidance," "anticipates," "might," "projects," "predicts," "plans," "proposed," "targets," "intends," "believes," "will," "may," "could," "is likely to" and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations and beliefs and various assumptions. There can be no assurance that we will realize our expectations or that our beliefs will prove correct.

Numerous factors, many of which are beyond the Company's control, could cause actual results to differ materially from any that may be expressed herein as forward-looking statements in this Report. These risk factors include the impact of the macroeconomic environment including its impact on consumer behavior in both the U.S. and internationally on our business segments and expectations regarding growth of the mattress industry; changes in economic conditions, including inflationary trends in the price of raw materials; uncertainties arising from global events (including the Russia-Ukraine conflict and the conflict in the Middle East), labor costs and other employment-related costs; loss of suppliers and disruptions in the supply of raw materials; competition in our industry; the effects of strategic investments on our operations, including our efforts to expand our global market share and actions taken to increase sales growth including the pending merger with Mattress Firm Group Inc. ("Mattress Firm"); expectations regarding the satisfaction of closing conditions prior to consummation of the acquisition of Mattress Firm, including the outcome of the pending litigation with the U.S. Federal Trade Commission ("FTC"); expectations regarding Mattress Firm's ongoing operations; the ability to successfully integrate Mattress Firm into the Company's operations and realize synergies from the transaction; the possibility that the expected benefits of the acquisition are not realized when expected or at all; general economic, financial and industry conditions, particularly conditions relating to the financial performance and related credit issues present in the retail sector, as well as consumer confidence and the availability of consumer financing; the ability to develop and successfully launch new products; capital project timelines; the ability to realize all synergies and benefits of acquisitions (including the pending merger with Mattress Firm); our reliance on information technology ("IT") and the associated risks involving realized or potential security lapses and/or cyber based attacks; the impact of cybersecurity incidents (including the July 2023 incident) on our business, results of operations or financial condition, including our assessments of such impact; the Company's ability to restore its critical operational data and IT systems in a reasonable time frame following a cybersecurity incident; changes in interest rates; effects of changes in foreign exchange rates on our reported earnings; expectations regarding our target leverage and our share repurchase program; compliance with regulatory requirements and the possible exposure to liability for failures to comply with these requirements; the outcome of pending tax audits or other tax, regulatory or investigation proceedings and pending litigation; changes in foreign tax rates and changes in tax laws generally, including the ability to utilize tax loss carryforwards; and our capital structure and debt level, including our ability to meet financial obligations and continue to comply with the terms and financial ratio covenants of our credit facilities.

Other potential risk factors include the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report") and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. In addition, there may be other factors that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us apply only as of the date of this Report and are expressly qualified in their entirety by the cautionary statements included in this Report. Except as may be required by law, we undertake no obligation to publicly update or revise any of the forward-looking statements, whether as a result of new information, future events, or otherwise.

When used in this Report, except as specifically noted otherwise, the term "Tempur Sealy International" refers to Tempur Sealy International, Inc. only, and the terms "Company," "we," "our," "ours" and "us" refer to Tempur Sealy International, Inc. and its consolidated subsidiaries. When used in this Report, the term "Tempur" may refer to Tempur-branded products and the term "Sealy" may refer to Sealy-branded products or to Sealy Corporation and its historical subsidiaries, in all cases as the context requires. In addition, when used in this Report, "2023 Credit Agreement" refers to the Company's senior credit facility entered into in 2023, and amended in February 2024; "2029 Senior Notes" refers to the 4.00% senior notes due 2029 issued in 2021; and "2031 Senior Notes" refers to the 3.875% senior notes due 2031 issued in 2021.
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TABLE OF CONTENTS
 
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PART I.     FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in millions, except per common share amounts)
(unaudited)
 Three Months EndedNine Months Ended
 September 30,September 30,
 2024202320242023
Net sales$1,300.0 $1,277.1 $3,723.0 $3,754.9 
Cost of sales710.1 703.4 2,066.3 2,139.0 
Gross profit589.9 573.7 1,656.7 1,615.9 
Selling and marketing expenses272.0 272.9 813.2 799.8 
General, administrative and other expenses118.6 122.2 347.4 344.2 
Equity income in earnings of unconsolidated affiliates(2.5)(4.6)(10.5)(13.4)
Operating income201.8 183.2 506.6 485.3 
Other expense, net:
Interest expense, net30.8 32.6 98.5 99.0 
Other expense (income), net0.4 (0.1)(0.5)(0.2)
Total other expense, net31.2 32.5 98.0 98.8 
Income before income taxes 170.6 150.7 408.6 386.5 
Income tax provision(40.8)(36.8)(95.5)(93.5)
Net income before non-controlling interest129.8 113.9 313.1 293.0 
Less: Net (loss) income attributable to non-controlling interest(0.2)0.6 0.7 2.0 
Net income attributable to Tempur Sealy International, Inc.$130.0 $113.3 $312.4 $291.0 
Earnings per common share:
Basic$0.75 $0.66 $1.80 $1.69 
Diluted$0.73 $0.64 $1.75 $1.64 
Weighted average common shares outstanding:
Basic173.7 172.2 173.6 172.1 
Diluted178.2 177.6 178.1 177.0 
See accompanying Notes to Condensed Consolidated Financial Statements. 
4

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
 2024202320242023
Net income before non-controlling interest$129.8 $113.9 $313.1 $293.0 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments37.0 (31.5)14.0 0.6 
Pension benefits loss  (0.3) 
Other comprehensive income (loss), net of tax37.0 (31.5)13.7 0.6 
Comprehensive income166.8 82.4 326.8 293.6 
Less: Comprehensive (loss) income attributable to non-controlling interest(0.2)0.6 0.7 2.0 
Comprehensive income attributable to Tempur Sealy International, Inc.$167.0 $81.8 $326.1 $291.6 
 
See accompanying Notes to Condensed Consolidated Financial Statements.


5

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
 September 30, 2024December 31, 2023
ASSETS(unaudited)
Current Assets:
Cash and cash equivalents$104.2 $74.9 
Accounts receivable, net467.6 431.4 
Inventories496.2 483.1 
Prepaid expenses and other current assets87.3 113.8 
Total Current Assets1,155.3 1,103.2 
Property, plant and equipment, net843.8 878.3 
Goodwill1,097.3 1,083.3 
Other intangible assets, net714.6 714.8 
Operating lease right-of-use assets617.6 636.5 
Deferred income taxes14.2 15.6 
Other non-current assets125.2 122.2 
Total Assets$4,568.0 $4,553.9 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current Liabilities:  
Accounts payable$346.8 $311.3 
Accrued expenses and other current liabilities466.8 427.1 
Short-term operating lease obligations129.9 119.6 
Current portion of long-term debt46.4 44.9 
Income taxes payable21.9 5.3 
Total Current Liabilities1,011.8 908.2 
Long-term debt, net2,227.1 2,527.0 
Long-term operating lease obligations548.7 574.8 
Deferred income taxes128.9 127.9 
Other non-current liabilities78.3 82.6 
Total Liabilities3,994.8 4,220.5 
Redeemable non-controlling interest8.7 10.0 
Total Stockholders' Equity564.5 323.4 
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity$4,568.0 $4,553.9 
 
See accompanying Notes to Condensed Consolidated Financial Statements. 


6

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($ in millions)
(unaudited)

Three Months Ended September 30, 2024
Tempur Sealy International, Inc. Stockholders' Equity
Redeemable
Non-controlling Interest
Common StockTreasury StockAccumulated Other Comprehensive LossTotal Stockholders'
Equity
Shares IssuedAt ParShares IssuedAt CostAdditional Paid in CapitalRetained Earnings
Balance as of June 30, 2024
$8.9 283.8 $2.8 110.2 $(3,331.0)$484.3 $3,415.7 $(160.0)$411.8 
Net income130.0 130.0 
Net income attributable to non-controlling interest(0.2)— 
Foreign currency adjustments, net of tax37.0 37.0 
Dividends declared on common stock ($0.13 per share)
(22.9)(22.9)
Exercise of stock options— 0.1 (0.1) 
Issuances of PRSUs and RSUs
— 0.1 (0.1) 
Treasury stock repurchased - PRSU/RSU releases— — — 
Amortization of unearned stock-based compensation
8.6 8.6 
Balance as of September 30, 2024
$8.7 283.8 $2.8 110.2 $(3,330.8)$492.7 $3,522.8 $(123.0)$564.5 

Three Months Ended September 30, 2023
Tempur Sealy International, Inc. Stockholders' Equity
Redeemable
Non-controlling Interest
Common StockTreasury StockAccumulated Other Comprehensive LossTotal Stockholders'
Equity
Shares IssuedAt ParShares IssuedAt CostAdditional Paid in CapitalRetained Earnings
Balance as of June 30, 2023
$9.4 283.8 $2.8 111.6 $(3,384.1)$536.7 $3,127.5 $(144.8)138.1 
Net income113.3 113.3 
Net income attributable to non-controlling interest0.6 — 
Dividend paid to non-controlling interest in subsidiary(0.4)— 
Foreign currency adjustments, net of tax(31.5)(31.5)
Dividends declared on common stock ($0.11 per share)
(19.4)(19.4)
Exercise of stock options(0.1)3.1 (1.1)2.0 
Issuances of PRSUs and RSUs
— 0.2 (0.2) 
Treasury stock repurchased - PRSU/RSU releases— (0.1)(0.1)
Amortization of unearned stock-based compensation
11.7 11.7 
Balance as of September 30, 2023
$9.6 283.8 $2.8 111.5 $(3,380.9)$547.1 $3,221.4 $(176.3)$214.1 

See accompanying Notes to Condensed Consolidated Financial Statements.

7

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
($ in millions)
(unaudited)

Nine Months Ended September 30, 2024
Tempur Sealy International, Inc. Stockholders' Equity
Redeemable
Non-controlling Interest
Common StockTreasury StockAccumulated Other Comprehensive LossTotal Stockholders'
Equity
Shares IssuedAt ParShares IssuedAt CostAdditional Paid in CapitalRetained Earnings
Balance as of December 31, 2023
$10.0 283.8 $2.8 111.5 $(3,380.6)$558.7 $3,279.2 $(136.7)$323.4 
Net income312.4 312.4 
Net income attributable to non-controlling interests0.7 — 
Dividend paid to non-controlling interest in subsidiary(2.0)— 
Adjustment to pension liability, net of tax(0.3)(0.3)
Foreign currency adjustments, net of tax14.0 14.0 
Dividends declared on common stock ($0.39 per share)
(68.8)(68.8)
Exercise of stock options— 1.5 (1.2)0.3 
Issuances of PRSUs and RSUs
(2.2)92.1 (92.1) 
Treasury stock repurchased - PRSU/RSU releases0.9(43.8)(43.8)
Amortization of unearned stock-based compensation
27.3 27.3 
Balance as of September 30, 2024
$8.7 283.8 $2.8 110.2 $(3,330.8)$492.7 $3,522.8 $(123.0)$564.5 

Nine Months Ended September 30, 2023
Tempur Sealy International, Inc. Stockholders' (Deficit) Equity
Redeemable
Non-controlling Interest
Common StockTreasury StockAccumulated Other Comprehensive LossTotal Stockholders'
(Deficit) Equity
Shares IssuedAt ParShares IssuedAt CostAdditional Paid in CapitalRetained Earnings
Balance as of December 31, 2022
$9.8 283.8 $2.8 113.4 $(3,434.7)$598.2 $2,988.5 $(176.9)$(22.1)
Net income291.0 291.0 
Net income attributable to non-controlling interests2.0 — 
Dividend paid to non-controlling interest in subsidiary(2.2)— 
Foreign currency adjustments, net of tax0.6 0.6 
Dividends declared on common stock ($0.33 per share)
(58.1)(58.1)
Exercise of stock options(0.2)4.6 (1.8)2.8 
Issuances of PRSUs and RSUs
(2.7)85.2 (85.2) 
Treasury stock repurchased
0.1 (5.0)(5.0)
Treasury stock repurchased - PRSU/RSU releases0.9(31.0)(31.0)
Amortization of unearned stock-based compensation
35.9 35.9 
Balance as of September 30, 2023
$9.6 283.8 $2.8 111.5 $(3,380.9)$547.1 $3,221.4 $(176.3)$214.1 


See accompanying Notes to Condensed Consolidated Financial Statements.

8

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(unaudited)
 Nine Months Ended
 September 30,
 20242023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before non-controlling interest$313.1 $293.0 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization121.9 99.6 
Amortization of stock-based compensation27.3 35.9 
Amortization of deferred financing costs2.8 2.9 
Bad debt expense9.9 7.1 
Deferred income taxes0.6 0.5 
Dividends received from unconsolidated affiliates23.4 18.1 
Equity income in earnings of unconsolidated affiliates(10.5)(13.4)
Foreign currency adjustments and other0.9 (1.9)
Changes in operating assets and liabilities48.0 37.4 
Net cash provided by operating activities537.4 479.2 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property, plant and equipment(76.4)(153.3)
Other0.5 0.5 
Net cash used in investing activities(75.9)(152.8)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Proceeds from borrowings under long-term debt obligations1,165.3 1,491.5 
Repayments of borrowings under long-term debt obligations(1,472.6)(1,689.9)
Proceeds from exercise of stock options0.3 2.8 
Treasury stock repurchased(43.8)(36.0)
Dividends paid(70.1)(58.8)
Repayments of finance lease obligations and other(14.8)(12.8)
Net cash used in financing activities(435.7)(303.2)
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS3.5 (1.0)
Increase in cash and cash equivalents29.3 22.2 
CASH AND CASH EQUIVALENTS, beginning of period74.9 69.4 
CASH AND CASH EQUIVALENTS, end of period$104.2 $91.6 
Supplemental cash flow information:  
Cash paid during the period for:  
Interest$89.8 $92.2 
Income taxes, net of refunds$80.1 $84.4 

See accompanying Notes to Condensed Consolidated Financial Statements.
9

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited)

(1) Summary of Significant Accounting Policies
 
(a) Basis of Presentation and Description of Business. Tempur Sealy International, Inc., a Delaware corporation, together with its subsidiaries, is a U.S. based, multinational company. The term "Tempur Sealy International" refers to Tempur Sealy International, Inc. only, and the term "Company" refers to Tempur Sealy International, Inc. and its consolidated subsidiaries.

The Company designs, manufactures and distributes bedding products, which include mattresses, foundations and adjustable bases, and other products, which include pillows and other accessories. The Company also derives income from royalties by licensing Sealy® and Stearns & Foster® brands, technology and trademarks to other manufacturers. The Company sells its products through two sales channels: Wholesale and Direct.

The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market and distribute Sealy® and Stearns & Foster® branded products. The Company's ownership interests in each of these joint ventures is 50.0%. The equity method of accounting is used for these joint ventures, over which the Company has significant influence but does not have control, and consolidation is not otherwise required. The Company's equity in the net income and losses of these investments is reported in equity income in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Income.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States ("GAAP") for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended December 31, 2023, included in the 2023 Annual Report filed with the Securities and Exchange Commission on February 16, 2024.
 
The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.

(b) Inventories. Inventories are stated at the lower of cost or net realizable value, determined by the first-in, first-out method, and consist of the following:
September 30,December 31,
(in millions)20242023
Finished goods$347.4 $335.4 
Work-in-process16.7 16.5 
Raw materials and supplies132.1 131.2 
 $496.2 $483.1 

(c) Warranties. The Company provides warranties on certain products, which vary by segment, product and brand. Estimates of warranty expenses are based primarily on historical claims experience and product testing. Estimated future obligations related to these products are charged to cost of sales in the period in which the related revenue is recognized. The Company considers the impact of recoverable salvage value on warranty costs in determining its estimate of future warranty obligations.

The Company provides warranties on mattresses with varying warranty terms. Tempur-Pedic mattresses sold in the North America segment and all Sealy mattresses have warranty terms ranging from 10 to 25 years, generally non-prorated for the first 10 to 15 years and then prorated for the balance of the warranty term. Tempur-Pedic mattresses sold in the International segment have warranty terms ranging from 5 to 15 years, non-prorated for the first 5 years and then prorated on a straight-line basis for the last 10 years of the warranty term. Tempur-Pedic pillows have a warranty term of 3 years, non-prorated.

10

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The Company had the following activity for its accrued warranty expense from December 31, 2023 to September 30, 2024:
(in millions)
Balance as of December 31, 2023$40.8 
Amounts accrued5.1 
Warranties charged to accrual(9.3)
Balance as of September 30, 2024$36.6 

As of September 30, 2024 and December 31, 2023, $17.5 million and $18.9 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $19.1 million and $21.9 million of accrued warranty expense is included in other non-current liabilities on the Company's accompanying Condensed Consolidated Balance Sheets, respectively.

(d) Allowance for Credit Losses. The allowance for credit losses is the Company's best estimate of the amount of expected lifetime credit losses in the Company's accounts receivable. The Company regularly reviews the adequacy of its allowance for credit losses. The Company estimates losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding. As of September 30, 2024, the Company's accounts receivable were substantially current. Account balances are charged off against the allowance for credit losses after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. The allowance for credit losses is included in accounts receivable, net in the accompanying Condensed Consolidated Balance Sheets.

The Company had the following activity for its allowance for credit losses from December 31, 2023 to September 30, 2024:
(in millions)
Balance as of December 31, 2023
$66.9 
Amounts accrued9.9 
Write-offs charged against the allowance(5.9)
Balance as of September 30, 2024
$70.9 

(e) Fair Value. Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of those instruments. Borrowings under the 2023 Credit Agreement (as defined in Note 4, "Debt") and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair value of the following material financial instruments were based on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments. The fair values of these material financial instruments are as follows:
Fair Value
(in millions)September 30, 2024December 31, 2023
2029 Senior Notes$746.7 $724.2 
2031 Senior Notes$714.2 $677.6 

11

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(f) Definitive Agreement with Mattress Firm. On May 9, 2023, Tempur Sealy International and Mattress Firm entered into a definitive agreement and plan of merger (the "Merger Agreement") for a proposed business acquisition in which Tempur Sealy International, through a wholly-owned subsidiary, will acquire Mattress Firm in a transaction valued at approximately $4.0 billion. The transaction is expected to be funded by approximately $2.7 billion of cash consideration and the issuance of 34.2 million shares of common stock resulting in a total stock consideration value of $1.3 billion based on a closing share price of $37.62 as of May 8, 2023.

On July 2, 2024, the FTC filed a complaint for a temporary restraining order and preliminary injunction in the United States District Court for the Southern District of Texas (the "Court") and an administrative complaint (together with the complaint filed with the Court, the "Actions") to challenge the proposed acquisition of Mattress Firm by the Company. On October 4, 2024, the Company filed a complaint in the Court seeking an injunction against the FTC's administrative proceeding. Refer to Note 8, "Commitments and Contingencies" for further details.

On September 23, 2024, the Company announced that it entered into a purchase agreement with MW SO Holdings Company, LLC (“Mattress Warehouse”), a leading independently owned bedding specialty retailer, for the sale of 73 Mattress Firm retail locations and the Company’s Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers. Mattress Warehouse is a multi-branded retailer offering a full array of mattresses at various price points. The Company will continue to supply its Tempur-Pedic®, Stearns & Foster® and Sealy® products to the divested Mattress Firm and Sleep Outfitters stores. The divestiture is subject to the closing of the Company’s acquisition of Mattress Firm and other customary closing conditions. It is expected to close approximately one quarter after the closing of the Mattress Firm transaction.

The Company continues to believe that a successful litigation process can be completed in the coming months, which would allow the transaction to close in late 2024 or early 2025. Following the close of the transaction, Mattress Firm is expected to operate as a separate business unit within the Company.

(2) Net Sales     

The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30, 2024Three Months Ended September 30, 2023
(in millions)North AmericaInternationalConsolidatedNorth AmericaInternationalConsolidated
Channel
Wholesale$878.4 $103.4 $981.8 $885.1 $89.5 $974.6 
Direct136.9 181.3 318.2 138.6 163.9 302.5 
Net sales$1,015.3 $284.7 $1,300.0 $1,023.7 $253.4 $1,277.1 
North AmericaInternationalConsolidatedNorth AmericaInternationalConsolidated
Geographical region
United States$935.3 $ $935.3 $939.1 $ $939.1 
All Other80.0 284.7 364.7 84.6 253.4 338.0 
Net sales$1,015.3 $284.7 $1,300.0 $1,023.7 $253.4 $1,277.1 

Substantially all revenue is associated with bedding product sales.

12

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
(in millions)North AmericaInternationalConsolidatedNorth AmericaInternationalConsolidated
Channel
Wholesale$2,510.1 $308.0 $2,818.1 $2,585.4 $291.0 $2,876.4 
Direct384.7 520.2 904.9 374.7 503.8 878.5 
Net sales$2,894.8 $828.2 $3,723.0 $2,960.1 $794.8 $3,754.9 
North AmericaInternationalConsolidatedNorth AmericaInternationalConsolidated
Geographical region
United States$2,671.7 $ $2,671.7 $2,740.2 $ $2,740.2 
All Other223.1 828.2 1,051.3 219.9 794.8 1,014.7 
Net sales$2,894.8 $828.2 $3,723.0 $2,960.1 $794.8 $3,754.9 

Substantially all revenue is associated with bedding product sales.
(3) Goodwill
The following summarizes changes to the Company's goodwill, by segment:
(in millions) North AmericaInternationalConsolidated
Balance as of December 31, 2023$609.7 $473.6 $1,083.3 
Foreign currency translation and other(2.4)16.4 14.0 
Balance as of September 30, 2024$607.3 $490.0 $1,097.3 

(4) Debt

Debt for the Company consists of the following:
September 30, 2024December 31, 2023
(in millions, except percentages)AmountRateAmountRateMaturity Date
2023 Credit Agreement:
Term A Facility$481.3 (1)$500.0 (2)October 10, 2028
Revolver (1)183.0 (2)October 10, 2028
2031 Senior Notes800.0 3.875%800.0 3.875%October 15, 2031
2029 Senior Notes800.0 4.000%800.0 4.000%April 15, 2029
Securitized debt28.8 (3)157.6 (3)October 8, 2026
Finance lease obligations (4)
93.5 92.1 Various
Other84.2 60.9 Various
Total debt2,287.8 2,593.6 
Less: Deferred financing costs14.3 21.7 
Total debt, net2,273.5 2,571.9 
Less: Current portion46.4 44.9 
Total long-term debt, net$2,227.1 $2,527.0 
(1)
Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.250%.
(2)
Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.625% as of December 31, 2023.
(3)
Interest at one month SOFR index plus 10 basis points of credit spread adjustment, plus 85 basis points.
(4)
New finance lease obligations are a non-cash financing activity.

As of September 30, 2024, the Company was in compliance with all applicable debt covenants.

2023 Credit Agreement

On October 10, 2023, the Company entered into the 2023 Credit Agreement with a syndicate of banks. The 2023 Credit Agreement provides for a $1.15 billion revolving credit facility, a $500.0 million term loan facility, and an incremental facility in an aggregate amount of up to the greater of $850.0 million and additional amounts subject to the conditions set forth in the 2023 Credit Agreement, plus the amount of certain prepayments, plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test. The 2023 Credit Agreement has a $60.0 million sub-facility for the issuance of letters of credit.

On February 6, 2024, the Company and certain other parties thereto entered into an amendment to the 2023 Credit Agreement which provides for a $625.0 million delayed draw term A loan and a $40.0 million increase in availability on the existing revolving loan. Once drawn, the instruments will have the same terms and conditions as the Company's existing term loans and revolving loans, respectively, under the 2023 Credit Agreement. This amendment was executed in connection with the Company's financing strategy for the pending acquisition of Mattress Firm.

On October 24, 2024, the Company and certain other parties thereto entered into an Amendment No. 2 ("Amendment No. 2") and an Amendment No. 3 ("Amendment No. 3" and together with Amendment No. 2, the "Amendments") to the Company's 2023 Credit Agreement dated as of October 10, 2023, as amended. Amendment No. 2 extends the termination date for $605.0 million of the Company's existing delayed draw term A loan commitments until October 24, 2025. Amendment No. 3 provides for an incremental term B loan in the aggregate principal amount of $1.6 billion (the "Term B Loan"). The proceeds of the Term B Loan were funded into escrow on the closing of Amendment No. 3 and will mature on October 24, 2031. The proceeds of the Term B Loan will be used to pay fees and expenses in connection with Amendment No. 3 and may be released upon the closing of the previously disclosed Mattress Firm acquisition. If the closing of the Mattress Firm acquisition does not occur prior to the first anniversary of the funding date, the Company will be required to repay the Term B Loan.

The Term B Loan will bear interest at either (i) a base rate plus an applicable margin of 1.50%, (ii) a "Term Benchmark" rate (a Term SOFR rate as defined in the 2023 Credit Agreement) plus an applicable margin of 2.50% or (iii) an "RFR Loan" rate (a Daily Simple SOFR rate as defined in the 2023 Credit Agreement) plus an applicable margin of 2.50%. The Term B Loan will have similar terms and conditions as the Company's existing term loans under the 2023 Credit Agreement, except that the Term B Loan will not have financial maintenance covenants but will benefit from (i) mandatory prepayments with respect to certain cash that constitutes excess cash flow under the 2023 Credit Agreement and (ii) additional protections, including a prepayment premium in connection with certain repricing transactions that occur on or prior to the six-month anniversary of the funding date.

Certain of the Company's present and future domestic subsidiaries guarantee the obligations under the Term B Loan. The obligations under the Term B Loan are secured by a pledge of (i) solely for the benefit of the Term B Lenders, the escrow account, the proceeds of the Term B Loan funded into the escrow account and all interest or other income thereof and (ii) substantially all of the assets of the Company, the Additional Borrower and the subsidiary guarantors, subject to certain exceptions and exclusions.

The Company had no outstanding borrowings under the revolving credit facility as of September 30, 2024. Total availability under the revolving facility was $1,189.2 million, after a $0.8 million reduction for outstanding letters of credit, as of September 30, 2024.

Securitized Debt

The Company and certain of its subsidiaries are party to a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization"). As of September 30, 2024, total availability under the Accounts Receivable Securitization was $144.2 million. On October 8, 2024, the Company and certain of its subsidiaries entered into a new amendment to the Accounts Receivable Securitization. The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to October 8, 2026. While subject to a $200.0 million overall limit, the availability of revolving loans varies over the course of the year based on the seasonality of the Company's accounts receivable.
13

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(5) Stockholders' Equity
 
(a) Treasury Stock. As of September 30, 2024, the Company had approximately $774.5 million remaining under its share repurchase authorization. The Company did not repurchase shares under the program during the three and nine months ended September 30, 2024. The Company did not repurchase shares under the program during the three months ended September 30, 2023. The Company repurchased 0.1 million shares under the program for approximately $5.0 million during the nine months ended September 30, 2023.

In addition, the Company acquired shares upon the vesting of certain restricted stock units ("RSUs") and performance restricted stock units ("PRSUs"), which were withheld to satisfy tax withholding obligations during each of the three and nine months ended September 30, 2024 and 2023, respectively. The shares withheld were valued at the closing price of the stock on the New York Stock Exchange on the vesting date or first business day prior to vesting, resulting in an immaterial amount of treasury stock acquired during the three months ended September 30, 2024 and $0.1 million of treasury stock acquired during the three months ended September 30, 2023. The Company acquired approximately $43.8 million and $31.0 million in treasury stock during the nine months ended September 30, 2024 and 2023, respectively.

(b) Accumulated Other Comprehensive Loss ("AOCL"). AOCL consisted of the following:
Three Months EndedNine Months Ended
 September 30,September 30,
(in millions)2024202320242023
Foreign Currency Translation
Balance at beginning of period$(158.5)$(143.2)$(135.5)$(175.3)
Other comprehensive income (loss):
Foreign currency translation adjustments (1)
37.0 (31.5)14.0 0.6 
Balance at end of period$(121.5)$(174.7)$(121.5)$(174.7)
Pensions
Balance at beginning of period$(1.5)$(1.6)$(1.2)$(1.6)
Other comprehensive loss:
Net change from period revaluations (2)
  (0.3) 
Balance at end of period$(1.5)$(1.6)$(1.5)$(1.6)
(1)
In 2024 and 2023, there were no tax impacts related to foreign currency translation adjustments and no amounts were reclassified to earnings.
(2)
In 2024, there were no tax impacts related to pension adjustments.

(6) Other Items

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:
(in millions)September 30, 2024December 31, 2023
Wages and benefits$92.7 $102.1 
Unearned revenue72.1 53.3 
Advertising65.1 62.6 
Taxes23.1 15.4 
Other213.8 193.7 
$466.8 $427.1 

14

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(7) Stock-Based Compensation

The Company's stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023 included PRSUs, RSUs and non-qualified stock options. A summary of the Company's stock-based compensation expense is presented in the following table:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2024202320242023
PRSU expense$3.6 $5.9 $12.2 $18.8 
RSU expense4.4 5.3 13.4 15.5 
Option expense0.6 0.5 1.7 1.6 
Total stock-based compensation expense$8.6 $11.7 $27.3 $35.9 

The Company grants PRSUs to executive officers and certain members of management. Actual payout under the PRSUs is dependent upon the achievement of certain financial goals. During the first quarter of 2024, the Company granted PRSUs as a component of the long-term incentive plan ("2024 PRSUs"). The Company has recorded stock-based compensation expense related to the 2024 PRSUs during the three and nine months ended September 30, 2024, as it was probable that the Company would achieve the specified performance targets for the performance period.

(8) Commitments and Contingencies
 
The Company is involved in various legal and administrative proceedings incidental to the operations of its business. Except as disclosed, the Company believes that the outcome of all such pending proceedings in the aggregate will not have a material adverse effect on its business, financial condition, liquidity or operating results. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable potential losses. Accordingly, the Company has not established material reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could, in the future, enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows.

Mattress Firm Pending Acquisition

On July 2, 2024, the FTC filed the Actions alleging that, if consummated, the pending acquisition of Mattress Firm may substantially lessen competition and would be an unfair method of competition. If the administrative court or the Court rule in favor of the FTC, the completion of the acquisition of Mattress Firm may be delayed for a significant period of time (including beyond the termination date of February 9, 2025) or prevented from occurring. On July 16, 2024 the Court entered a temporary restraining order enjoining the completion of the merger until the Court rules on the FTC's motion for a preliminary injunction. In each of the Company's and Mattress Firm's respective answers to the Actions, the Company and Mattress Firm each denied the FTC's substantive allegations; asserted numerous defenses; described the pro-competitive aspects and significant consumer benefits relating to the merger; and denied that the combination of their respective businesses would violate any law. On October 4, 2024, the Company filed a complaint in the Court seeking an injunction against the FTC's administrative proceeding.

(9) Income Taxes

The Company's effective tax rates for the three months ended September 30, 2024 and 2023 were 23.9% and 24.4%, respectively. The Company's effective tax rates for the nine months ended September 30, 2024 and 2023 were 23.4% and 24.3%, respectively. The Company's effective tax rates for the three and nine months ended September 30, 2024 and 2023 differed from the U.S. federal statutory rate of 21.0% principally due to subpart F income (i.e., global intangible low-taxed income, or "GILTI," earned by the Company's foreign subsidiaries), foreign income tax rate differentials, state and local taxes, changes in the Company's uncertain tax positions, the excess tax benefit related to stock-based compensation and certain other permanent items.

15

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The OECD (Organization for Economic Co-operation and Development) has proposed a global minimum effective tax of 15.0% on income arising in each jurisdiction ("Pillar 2") that has been agreed upon in principle by over 140 countries. During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. Accordingly, the Company is evaluating the potential consequences of Pillar 2 on its longer-term financial position. In 2024, the Company does not expect Pillar 2 to have a material impact on its financial results.

(10) Earnings Per Common Share
The following table sets forth the components of the numerator and denominator for the computation of basic and diluted earnings per share for net income attributable to Tempur Sealy International:
Three Months EndedNine Months Ended
 September 30,September 30,
(in millions, except per common share amounts)2024202320242023
Numerator:
Net income attributable to Tempur Sealy International, Inc.$130.0 $113.3 $312.4 $291.0 
Denominator:   
Denominator for basic earnings per common share-weighted average shares173.7 172.2 173.6 172.1 
Effect of dilutive securities4.5 5.4 4.5 4.9 
Denominator for diluted earnings per common share-adjusted weighted average shares178.2 177.6 178.1 177.0 
Basic earnings per common share$0.75 $0.66 $1.80 $1.69 
Diluted earnings per common share$0.73 $0.64 $1.75 $1.64 

The Company excludes shares issuable upon exercise of outstanding stock options from the diluted earnings per common share computation because their exercise price was greater than the average market price of Tempur Sealy International's common stock or they were otherwise anti-dilutive.

As a result, the Company did not exclude any shares for the three months ended September 30, 2024 and September 30, 2023. The Company excluded an immaterial amount of shares for the nine months ended September 30, 2024, and 0.2 million shares for the nine months ended September 30, 2023. Holders of non-vested stock-based compensation awards do not have voting rights but do participate in dividend equivalents distributed upon the award vesting.
(11) Business Segment Information
 
The Company operates in two segments: North America and International. These segments are strategic business units that are managed separately based on geography. The North America segment consists of manufacturing and distribution subsidiaries and licensees located in the U.S., Canada and Mexico. The International segment consists of manufacturing and distribution subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). The Company evaluates segment performance based on net sales, gross profit and operating income.

The Company's North America and International segment assets include investments in subsidiaries that are appropriately eliminated in the Company's accompanying Condensed Consolidated Financial Statements. The remaining inter-segment eliminations are comprised of intercompany accounts receivable and payable.

16

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes total assets by segment:
(in millions)September 30, 2024December 31, 2023
North America$5,619.6 $5,291.0 
International1,535.7 1,405.2 
Corporate1,727.3 1,269.5 
Inter-segment eliminations(4,314.6)(3,411.8)
Total assets$4,568.0 $4,553.9 

 The following table summarizes property, plant and equipment, net, by segment:
(in millions)September 30, 2024December 31, 2023
North America$712.3 $753.8 
International95.9 91.3 
Corporate35.6 33.2 
Total property, plant and equipment, net$843.8 $878.3 
     
The following table summarizes operating lease right-of-use assets by segment:
(in millions)September 30, 2024December 31, 2023
North America$422.1 $453.5 
International192.1 180.2 
Corporate3.4 2.8 
Total operating lease right-of-use assets$617.6 $636.5 

The following table summarizes segment information for the three months ended September 30, 2024:
(in millions)North AmericaInternationalCorporateEliminationsConsolidated
Net sales$1,015.3 $284.7 $— $— $1,300.0 
Inter-segment sales$ $(0.1)$— $0.1 $— 
Inter-segment royalty expense (income)9.3 (9.3)— — — 
Gross profit426.7 163.2 — — 589.9 
Operating income (loss)193.3 51.7 (43.2)— 201.8 
Income (loss) before income taxes190.7 54.5 (74.6)— 170.6 
Depreciation and amortization (1)
$32.3 $7.3 $11.2 $— $50.8 
Capital expenditures9.7 6.2 0.5 — 16.4 
(1)Depreciation and amortization includes stock-based compensation amortization expense.

17

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the three months ended September 30, 2023:
(in millions)North AmericaInternationalCorporateEliminationsConsolidated
Net sales$1,023.7 $253.4 $— $— $1,277.1 
Inter-segment sales$0.2 $0.1 $— $(0.3)$— 
Inter-segment royalty expense (income)9.5 (9.5)— — — 
Gross profit430.4 143.3 — — 573.7 
Operating income (loss)195.5 40.0 (52.3)— 183.2 
Income (loss) before income taxes192.5 41.2 (83.0)— 150.7 
Depreciation and amortization (1)
$25.1 $6.3 $13.5 $— $44.9 
Capital expenditures28.8 7.7 4.1 — 40.6 
(1)Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes segment information for the nine months ended September 30, 2024:
(in millions)North AmericaInternationalCorporateEliminationsConsolidated
Net sales$2,894.8 $828.2 $— $— $3,723.0 
Inter-segment sales$0.5 $0.1 $— $(0.6)$— 
Inter-segment royalty expense (income)26.0 (26.0)— — — 
Gross profit1,189.3 467.4 — — 1,656.7 
Operating income (loss)508.1 128.3 (129.8)— 506.6 
Income (loss) before income taxes499.3 137.5 (228.2)— 408.6 
Depreciation and amortization (1)
$94.5 $20.6 $34.1 $— $149.2 
Capital expenditures46.5 21.3 8.6 — 76.4 
(1)Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes segment information for the nine months ended September 30, 2023:
(in millions)North AmericaInternationalCorporateEliminationsConsolidated
Net sales$2,960.1 $794.8 $— $— $3,754.9 
Inter-segment sales$0.8 $0.5 $— $(1.3)$— 
Inter-segment royalty expense (income)26.2 (26.2)— — — 
Gross profit1,177.8 438.1 — — 1,615.9 
Operating income (loss)505.6 118.1 (138.4)—