Item 1. Financial Statements
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 Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Net sales $ 665.2 $ 722.8 $ 1,487.6 $ 1,413.7
Cost of sales 399.3 409.4 864.6 818.5
Gross profit 265.9 313.4 623.0 595.2
Selling and marketing expenses 135.1 163.3 306.1 316.8
General, administrative and other expenses 82.4 72.7 163.0 143.4
Equity income in earnings of unconsolidated affiliates ( 5.0 ) ( 3.6 ) ( 4.8 ) ( 6.5 )
Operating income 53.4 81.0 158.7 141.5
Other expense, net:
Interest expense, net 20.6 22.5 40.9 44.9
Other expense (income), net 0.3 — 0.8 ( 7.8 )
Total other expense, net 20.9 22.5 41.7 37.1
Income from continuing operations before income taxes 32.5 58.5 117.0 104.4
Income tax provision ( 9.4 ) ( 15.8 ) ( 32.9 ) ( 32.7 )
Income from continuing operations 23.1 42.7 84.1 71.7
Income (loss) from discontinued operations, net of tax 0.1 ( 1.2 ) ( 1.1 ) ( 1.6 )
Net income before non-controlling interests 23.2 41.5 83.0 70.1
Less: Net income (loss) attributable to non-controlling interests 0.2 ( 0.1 ) 0.3 0.1
Net income attributable to Tempur Sealy International, Inc. $ 23.0 $ 41.6 $ 82.7 $ 70.0
Earnings per common share:
Basic
Earnings per share for continuing operations $ 0.44 $ 0.78 $ 1.60 $ 1.31
Loss per share for discontinued operations — ( 0.02 ) ( 0.02 ) ( 0.03 )
Earnings per share $ 0.44 $ 0.76 $ 1.58 $ 1.28
Diluted
Earnings per share for continuing operations $ 0.44 $ 0.76 $ 1.58 $ 1.29
Loss per share for discontinued operations — ( 0.02 ) ( 0.02 ) ( 0.03 )
Earnings per share $ 0.44 $ 0.74 $ 1.56 $ 1.26
Weighted average common shares outstanding:
Basic 51.6 54.7 52.5 54.7
Diluted 52.0 56.0 53.0 55.6
See accompanying Notes to Condensed Consolidated Financial Statements.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Net income before non-controlling interests $ 23.2 $ 41.5 $ 83.0 $ 70.1
Other comprehensive income, net of tax:
Foreign currency translation adjustments 10.7 3.0 ( 12.3 ) 7.0
Other comprehensive income (loss), net of tax 10.7 3.0 ( 12.3 ) 7.0
Comprehensive income 33.9 44.5 70.7 77.1
Less: Comprehensive income (loss) attributable to non-controlling interests 0.2 ( 0.1 ) 0.3 0.1
Comprehensive income attributable to Tempur Sealy International, Inc. $ 33.7 $ 44.6 $ 70.4 $ 77.0
See accompanying Notes to Condensed Consolidated Financial Statements .
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
June 30, 2020 December 31, 2019
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 146.8 $ 64.9
Accounts receivable, net 341.8 372.0
Inventories 258.8 260.5
Prepaid expenses and other current assets 198.1 202.8
Total Current Assets 945.5 900.2
Property, plant and equipment, net 462.8 435.8
Goodwill 757.5 732.3
Other intangible assets, net 633.5 641.4
Operating lease right-of-use assets 281.6 245.4
Deferred income taxes 13.6 14.1
Other non-current assets 107.4 92.6
Total Assets $ 3,201.9 $ 3,061.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 247.1 $ 251.7
Accrued expenses and other current liabilities 455.2 473.2
Current portion of long-term debt 256.4 37.4
Income taxes payable 43.0 11.0
Total Current Liabilities 1,001.7 773.3
Long-term debt, net 1,497.2 1,502.6
Long-term operating lease obligations 239.3 205.4
Deferred income taxes 93.0 102.1
Other non-current liabilities 121.0 118.0
Total Liabilities 2,952.2 2,701.4
Total Stockholders' Equity 249.7 360.4
Total Liabilities and Stockholders' Equity $ 3,201.9 $ 3,061.8
See accompanying Notes to Condensed Consolidated Financial Statements.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
($ in millions)
(unaudited)
Three Months Ended June 30, 2020
Tempur Sealy International, Inc. Stockholders' Equity
Common Stock Treasury Stock Accumulated Other Comprehensive Loss Non-controlling Interests in Subsidiaries Total Stockholders' Equity
Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings
Balance as of March 31, 2020
99.2 $ 1.0 47.7 $ ( 2,026.5 ) $ 578.7 $ 1,756.5 $ ( 110.7 ) $ 9.4 $ 208.4
Net income 23.0 23.0
Net income attributable to non-controlling interests 0.2 0.2
Dividend paid to non-controlling interest in subsidiary ( 0.1 ) ( 0.1 )
Foreign currency adjustments 10.7 10.7
Exercise of stock options — — 0.2 0.2
Issuances of PRSUs, RSUs, and DSUs
— 0.4 ( 0.4 ) —
Treasury stock repurchased - PRSU/RSU/DSU releases — ( 0.2 ) ( 0.2 )
Amortization of unearned stock-based compensation
7.5 7.5
Balance, June 30, 2020
99.2 $ 1.0 47.7 $ ( 2,026.3 ) $ 586.0 $ 1,779.5 $ ( 100.0 ) $ 9.5 $ 249.7
Three Months Ended June 30, 2019
Tempur Sealy International, Inc. Stockholders' Equity
Common Stock Treasury Stock Accumulated Other Comprehensive Loss Non-controlling Interest in Subsidiaries Total Stockholders' Equity
Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings
Balance as of March 31, 2019
99.2 $ 1.0 44.5 $ ( 1,736.7 ) $ 537.1 $ 1,542.2 $ ( 91.3 ) $ 1.2 $ 253.5
Net income 41.6 41.6
Net loss attributable to non-controlling interest ( 0.1 ) ( 0.1 )
Foreign currency adjustments 3.0 3.0
Exercise of stock options ( 0.1 ) 0.9 2.2 3.1
Issuances of PRSUs, RSUs, and DSUs
— 0.3 ( 0.3 ) —
Treasury stock repurchased
— ( 1.5 ) ( 1.5 )
Treasury stock repurchased - PRSU/RSU/DSU releases — ( 0.3 ) ( 0.3 )
Amortization of unearned stock-based compensation
6.6 6.6
Balance, June 30, 2019
99.2 $ 1.0 44.4 $ ( 1,737.3 ) $ 545.6 $ 1,583.8 $ ( 88.3 ) $ 1.1 $ 305.9
See accompanying Notes to Condensed Consolidated Financial Statements .
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)
(in millions) (unaudited)
Six Months Ended June 30, 2020
Tempur Sealy International, Inc. Stockholders' Equity
Common Stock Treasury Stock Accumulated Other Comprehensive Loss Non-controlling Interests in Subsidiaries Total Stockholders' Equity
Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings
Balance as of December 31, 2019
99.2 $ 1.0 45.4 $ ( 1,832.8 ) $ 575.7 $ 1,703.3 $ ( 87.7 ) $ 0.9 $ 360.4
Net income 82.7 82.7
Net income attributable to non-controlling interests 0.3 0.3
Adoption of accounting standard effective January 1, 2020, net of tax ( 6.5 ) ( 6.5 )
Acquisition of non-controlling interest in subsidiary 8.4 8.4
Dividend paid to non-controlling interest in subsidiary ( 0.1 ) ( 0.1 )
Foreign currency adjustments ( 12.3 ) ( 12.3 )
Exercise of stock options — 0.3 1.2 1.5
Issuances of PRSUs, RSUs, and DSUs
( 0.4 ) 5.7 ( 5.7 ) —
Treasury stock repurchased
2.6 ( 187.5 ) ( 187.5 )
Treasury stock repurchased - PRSU/RSU/DSU releases 0.1 ( 12.0 ) ( 12.0 )
Amortization of unearned stock-based compensation
14.8 14.8
Balance, June 30, 2020
99.2 $ 1.0 47.7 $ ( 2,026.3 ) $ 586.0 $ 1,779.5 $ ( 100.0 ) $ 9.5 $ 249.7
Six Months Ended June 30, 2019
Tempur Sealy International, Inc. Stockholders' Equity
Common Stock Treasury Stock Accumulated Other Comprehensive Loss Non-controlling Interest in Subsidiaries Total Stockholders' Equity
Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings
Balance as of December 31, 2018
99.2 $ 1.0 44.7 $ ( 1,737.0 ) $ 532.1 $ 1,513.8 $ ( 95.3 ) $ 2.9 $ 217.5
Net income 70.0 70.0
Net income attributable to non-controlling interest 0.1 0.1
Repurchase of interest in subsidiary ( 1.9 ) ( 1.9 )
Foreign currency adjustments 7.0 7.0
Exercise of stock options ( 0.2 ) 1.7 3.8 5.5
Issuances of PRSUs, RSUs, and DSUs
( 0.2 ) 3.5 ( 3.5 ) —
Treasury stock repurchased
— ( 2.3 ) ( 2.3 )
Treasury stock repurchased - PRSU/RSU/DSU releases 0.1 ( 3.2 ) ( 3.2 )
Amortization of unearned stock-based compensation
13.2 13.2
Balance, June 30, 2019
99.2 $ 1.0 44.4 $ ( 1,737.3 ) $ 545.6 $ 1,583.8 $ ( 88.3 ) $ 1.1 $ 305.9
See accompanying Notes to Condensed Consolidated Financial Statements .
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions) (unaudited)
Six Months Ended
June 30,
2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS:
Net income before non-controlling interests $ 83.0 $ 70.1
Loss from discontinued operations, net of tax 1.1 1.6
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization 47.5 43.5
Amortization of stock-based compensation 14.8 13.2
Amortization of deferred financing costs 1.7 1.2
Bad debt expense 26.5 4.6
Deferred income taxes ( 6.6 ) 8.8
Dividends received from unconsolidated affiliates 1.5 2.3
Equity income in earnings of unconsolidated affiliates ( 4.8 ) ( 6.5 )
Foreign currency adjustments and other 1.0 ( 6.3 )
Changes in operating assets and liabilities, net of effect of business acquisitions 4.7 ( 86.6 )
Net cash provided by operating activities from continuing operations 170.4 45.9
CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:
Purchases of property, plant and equipment ( 49.4 ) ( 39.9 )
Acquisitions, net of cash acquired ( 37.9 ) ( 17.1 )
Other 0.1 10.3
Net cash used in investing activities from continuing operations ( 87.2 ) ( 46.7 )
CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:
Proceeds from borrowings under long-term debt obligations 1,073.9 509.2
Repayments of borrowings under long-term debt obligations ( 866.9 ) ( 509.8 )
Proceeds from exercise of stock options 1.5 5.5
Treasury stock repurchased ( 199.5 ) ( 5.5 )
Payments of deferred financing costs ( 1.6 ) ( 0.1 )
Repayments of finance lease obligations and other ( 6.0 ) ( 3.3 )
Net cash provided by (used in) financing activities from continuing operations 1.4 ( 4.0 )
Net cash provided by (used in) continuing operations 84.6 ( 4.8 )
CASH USED IN DISCONTINUED OPERATIONS
Operating cash flows ( 1.0 ) ( 2.0 )
Investing cash flows — —
Financing cash flows — —
Net cash used in discontinued operations ( 1.0 ) ( 2.0 )
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 1.7 ) ( 0.7 )
Increase (decrease) in cash and cash equivalents 81.9 ( 7.5 )
CASH AND CASH EQUIVALENTS, beginning of period 64.9 45.8
CASH AND CASH EQUIVALENTS, end of period 146.8 38.3
LESS: CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS — —
CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS $ 146.8 $ 38.3
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 41.1 $ 45.9
Income taxes, net of refunds $ 7.2 $ 35.2
See accompanying Notes to Condensed Consolidated Financial Statements.
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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 develops, manufactures, markets and sells 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 a group of Asia-Pacific joint ventures to develop markets for Sealy® branded products in those regions. The Company’s ownership interest in 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 carrying value in its equity method investments of $ 24.8 million and $ 22.5 million at June 30, 2020 and December 31, 2019, respectively, is recorded in other non-current assets within the accompanying Condensed Consolidated Balance Sheets. 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, 2019, included in the 2019 Annual Report filed with the Securities and Exchange Commission on February 21, 2020.
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) Adoption of New Accounting Standards.
Goodwill. Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") No. 2017-04, "Intangibles - Goodwill and Other (Topic 350)." The ASU simplifies the test for goodwill impairment, by eliminating Step 2 of the impairment test. Under ASU 2017-04, the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill for the reporting unit. Adoption of this guidance did not have an impact on the Company's financial statements.
Credit Losses . Effective January 1, 2020, the Company adopted ASU No. 2016-13 , "Financial Instruments - Credit Losses (Topic 326)," which requires entities to estimate expected lifetime credit losses on financial assets and provide expanded disclosures. The ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted the new credit losses standard using the modified retrospective approach. The cumulative effect of adoption at January 1, 2020 was $ 6.5 million, net of tax. The Company's primary financial assets are its trade accounts receivable, which are short-term financings under industry standard credit and trade terms.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(c) Inventories . Inventories are stated at the lower of cost and net realizable value, determined by the first-in, first-out method , and consist of the following:
June 30, December 31,
(in millions) 2020 2019
Finished goods $ 136.4 $ 157.4
Work-in-process 10.6 10.8
Raw materials and supplies 111.8 92.3
$ 258.8 $ 260.5
(d) Accrued Sales Returns . The Company allows product returns through certain sales channels and on certain products. Estimated sales returns are provided at the time of sale based on historical sales channel return rates. Estimated future obligations related to these products are provided by a reduction of sales in the period in which the revenue is recognized. The Company considers the impact of recoverable salvage value on sales returns by segment in determining its estimate of future sales returns. Accrued sales returns are included in accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets.
The Company had the following activity for sales returns from December 31, 2019 to June 30, 2020:
(in millions)
Balance as of December 31, 2019 $ 39.3
Amounts accrued 51.3
Returns charged to accrual ( 49.3 )
Balance as of June 30, 2020 $ 41.3
As of June 30, 2020 and December 31, 2019, $ 27.9 million and $ 26.2 million of accrued sales returns are included as a component of accrued expenses and other current liabilities and $ 13.4 million and $ 13.1 million of accrued sales returns are included in other non-current liabilities on the Company’s accompanying Condensed Consolidated Balance Sheets, respectively.
(e) 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.
The Company had the following activity for its accrued warranty expense from December 31, 2019 to June 30, 2020:
(in millions)
Balance as of December 31, 2019 $ 41.6
Amounts accrued 9.4
Warranties charged to accrual ( 10.6 )
Balance as of June 30, 2020 $ 40.4
As of June 30, 2020 and December 31, 2019, $ 17.5 million and $ 19.4 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $ 22.9 million and $ 22.2 million of accrued warranty expense is included in other non-current liabilities on the Company’s accompanying Condensed Consolidated Balance Sheets, respectively.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(f) 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 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. 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 Company had the following activity for its allowance for credit losses from December 31, 2019 to June 30, 2020:
(in millions)
Balance as of December 31, 2019
$ 71.9
ASU 2016-13 adoption impact 8.9
Amounts accrued 26.5
Write-offs charged against the allowance ( 13.4 )
Balance as of June 30, 2020
$ 93.9
(2) Net Sales
The following table presents the Company's disaggregated revenue by channel, product and geographical region, including a reconciliation of disaggregated revenue by segment, for the three and six months ended June 30, 2020:
Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
(in millions) North America International Consolidated North America International Consolidated
Channel
Wholesale $ 494.6 $ 69.1 $ 563.7 $ 1,104.2 $ 181.9 $ 1,286.1
Direct 75.9 25.6 101.5 143.5 58.0 201.5
Net sales $ 570.5 $ 94.7 $ 665.2 $ 1,247.7 $ 239.9 $ 1,487.6
North America International Consolidated North America International Consolidated
Product
Bedding $ 533.0 $ 73.6 $ 606.6 $ 1,173.3 $ 189.8 $ 1,363.1
Other 37.5 21.1 58.6 74.4 50.1 124.5
Net sales $ 570.5 $ 94.7 $ 665.2 $ 1,247.7 $ 239.9 $ 1,487.6
North America International Consolidated North America International Consolidated
Geographical region
United States $ 542.0 $ — $ 542.0 $ 1,174.5 $ — $ 1,174.5
Canada 28.5 — 28.5 73.2 — 73.2
International — 94.7 94.7 — 239.9 239.9
Net sales $ 570.5 $ 94.7 $ 665.2 $ 1,247.7 $ 239.9 $ 1,487.6
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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, product and geographical region, including a reconciliation of disaggregated revenue by segment, for the three and six months ended June 30, 2019:
Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
(in millions) North America International Consolidated North America International Consolidated
Channel
Wholesale $ 528.5 $ 103.7 $ 632.2 $ 1,030.3 $ 217.8 $ 1,248.1
Direct 59.6 31.0 90.6 101.8 63.8 165.6
Net sales $ 588.1 $ 134.7 $ 722.8 $ 1,132.1 $ 281.6 $ 1,413.7
North America International Consolidated North America International Consolidated
Product
Bedding $ 554.2 $ 108.4 $ 662.6 $ 1,068.6 $ 223.8 $ 1,292.4
Other 33.9 26.3 60.2 63.5 57.8 121.3
Net sales $ 588.1 $ 134.7 $ 722.8 $ 1,132.1 $ 281.6 $ 1,413.7
North America International Consolidated North America International Consolidated
Geographical region
United States $ 533.7 $ — $ 533.7 $ 1,030.9 $ — $ 1,030.9
Canada 54.4 — 54.4 101.2 — 101.2
International — 134.7 134.7 — 281.6 281.6
Net sales $ 588.1 $ 134.7 $ 722.8 $ 1,132.1 $ 281.6 $ 1,413.7
(3) Acquisitions
Acquisition of Sherwood Bedding
On January 31, 2020, the Company acquired an 80 % ownership interest in a newly formed limited liability company containing substantially all of the assets of the Sherwood Bedding business for a cash purchase price of approximately $ 39.1 million, which included $ 1.2 million of cash acquired.
The Company accounted for this transaction as a business combination. The preliminary allocation of the purchase price is based on estimated fair values of the assets acquired and liabilities assumed as of January 31, 2020, which included the following:
(in millions)
Working capital (accounts receivable and inventory, net of accounts payable and accrued liabilities) $ 5.8
Property and equipment 10.1
Goodwill 26.7
Customer relationships intangible assets 3.7
Operating lease right-of-use assets 19.9
Long-term operating lease liabilities ( 19.9 )
Non-controlling interest ( 8.4 )
Purchase price, net of cash acquired $ 37.9
Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the private label product growth opportunities and expected synergistic manufacturing benefits to be realized from the acquisition. The goodwill is deductible for income tax purposes and will be included within the North American reporting unit for goodwill impairment assessments.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Acquisition of Innovative Mattress Solutions, LLC ("iMS")
On January 11, 2019, iMS filed for bankruptcy and the Company provided debtor-in-possession financing in connection with the iMS Chapter 11 proceedings. On April 1, 2019, the Company acquired substantially all of the net assets of iMS in a transaction valued at approximately $ 24.0 million, including assumed liabilities of approximately $ 11.0 million as of March 31, 2019 (referred to as the "Sleep Outfitters Acquisition"). The acquisition of this regional bedding retailer furthers the Company’s North American retail strategy, which is focused on meeting customer demand through geographic representation and sales expertise.
The Company accounted for this transaction as a business combination. Total cash consideration was $ 13.2 million, which included $ 5.1 million of cash acquired. The final allocation of the purchase price is based on the fair values of the assets acquired and liabilities assumed as of April 1, 2019, which included the following:
(in millions)
Working capital (accounts receivable and inventory, net of accounts payable and accrued liabilities) $ ( 1.4 )
Property and equipment 5.0
Goodwill 2.4
Other intangible assets 2.1
Operating lease right-of-use assets 28.5
Long-term operating lease liabilities ( 28.5 )
Purchase price, net of cash acquired $ 8.1
Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the growth opportunities and expected retail synergistic benefits to be realized from the acquisition. The goodwill is deductible for income tax purposes and will be included within the North American reporting unit for goodwill impairment assessments.
(4) Goodwill
The following summarizes changes to the Company’s goodwill, by segment:
(in millions) North America International Consolidated
Balance as of December 31, 2019 $ 576.6 $ 155.7 $ 732.3
Goodwill resulting from acquisitions 26.7 — 26.7
Foreign currency translation and other ( 2.8 ) 1.3 ( 1.5 )
Balance as of June 30, 2020 $ 600.5 $ 157.0 $ 757.5
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(5) Debt
Debt for the Company consists of the following:
June 30, 2020 December 31, 2019
(in millions, except percentages) Amount Rate Amount Rate Maturity Date
2019 Credit Agreement:
Term A Facility $ 414.4 (1) $ 425.0 (2) October 16, 2024
364-Day Term Loan 200.0 (3) — (3) May 12, 2021
Revolver — (1) — (2) October 16, 2024
2026 Senior Notes 600.0 5.500 % 600.0 5.500 % June 15, 2026
2023 Senior Notes 450.0 5.625 % 450.0 5.625 % October 15, 2023
Securitized debt — (4) — (4) April 6, 2021
Finance lease obligations (5)
71.2 64.1 Various
Other 25.2 7.9 Various
Total debt 1,760.8 1,547.0
Less: Deferred financing costs 7.2 7.0
Total debt, net 1,753.6 1,540.0
Less: Current portion 256.4 37.4
Total long-term debt, net $ 1,497.2 $ 1,502.6
(1) Interest at LIBOR plus applicable margin of 1.375 % as of June 30, 2020.
(2) Interest at LIBOR plus applicable margin of 1.625 % as of December 31, 2019.
(3) Interest at base rate plus applicable margin of 1.375 % per annum or a eurocurrency rate (subject to a 1.0 % floor) plus applicable margin of 2.375 % per annum.
(4) Interest at one month LIBOR index plus 80 basis points.
(5) Finance lease obligations are a non-cash financing activity. Refer to Note 6, "Leases".
As of June 30, 2020, the Company was in compliance with all applicable debt covenants.
2019 Credit Agreement
On October 16, 2019, the Company entered into the 2019 Credit Agreement with a syndicate of banks. The 2019 Credit Agreement provides for a $ 425.0 million revolving credit facility, a $ 425.0 million term loan facility, and an incremental facility in an aggregate amount of up to $ 550.0 million plus the amount of certain prepayments plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test. The 2019 Credit Agreement has a $ 60.0 million sub-facility for the issuance of letters of credit. As of June 30, 2020, total availability under the revolving credit facility was $ 423.9 million after a $ 1.1 million reduction for outstanding letters of credit.
On May 13, 2020, the Company and certain of its subsidiaries entered into an amendment to the existing 2019 Credit Agreement. The amendment provided for a new 364-day $ 200.0 million term loan (the "364-Day Loan"). The Company used the proceeds of the 364-Day Loan to repay borrowings under the existing $ 425.0 million revolving credit facility and to pay fees and expenses in connection with the amendment. The 364- Day Loan bears interest, at the borrower’s option, at a base rate plus a margin of 1.375 % per annum or a eurocurrency rate (subject to a 1.0 % floor) plus a margin of 2.375 % per annum. In addition, for so long as the 364-Day Loan remains outstanding, the Company is subject to certain additional restrictions under the covenants provided for in the Credit Agreement, including, but not limited to, the Company's ability to repurchase shares and make certain investments.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
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 June 30, 2020, the Company had availability of $ 40.8 million under the Accounts Receivable Securitization.
Fair Value of Financial Instruments
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 2019 Credit Agreement 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 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) June 30, 2020 December 31, 2019
2023 Senior Notes $ 457.5 $ 464.2
2026 Senior Notes 614.2 634.9
(6) Leases
The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Condensed Consolidated Balance Sheet as of June 30, 2020 and December 31, 2019:
(in millions) June 30, 2020 December 31, 2019
Assets
Operating lease assets Operating lease right-of-use assets $ 281.6 $ 245.4
Finance lease assets Property, plant and equipment, net 61.3 54.4
Total leased assets $ 342.9 $ 299.8
Liabilities
Short-term:
Operating lease obligations Accrued expenses and other current liabilities $ 58.3 $ 50.8
Finance lease obligations Current portion of long-term debt 9.9 8.2
Long-term:
Operating lease obligations Long-term operating lease obligations 239.3 205.4
Finance lease obligations Long-term debt, net 61.3 55.9
Total lease obligations $ 368.8 $ 320.3
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes the classification of lease expense in the Company's Condensed Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2020 2019 2020 2019
Operating lease expense:
Operating lease expense $ 18.7 $ 15.9 $ 36.7 $ 30.1
Short-term lease expense 2.5 1.3 5.7 2.3
Variable lease expense 4.4 5.0 9.7 8.8
Finance lease expense:
Amortization of right-of-use assets 2.2 2.3 4.4 4.2
Interest on lease obligations 1.1 1.2 2.3 2.4
Total lease expense $ 28.9 $ 25.7 $ 58.8 $ 47.8
The following table sets forth the scheduled maturities of lease obligations as of June 30, 2020:
(in millions) Operating Leases Finance Leases Total
Year Ended December 31,
2020 (excluding the six months ended June 30, 2020)
$ 38.2 $ 6.9 $ 45.1
2021 66.8 14.1 80.9
2022 57.9 12.0 69.9
2023 45.5 9.8 55.3
2024 37.1 8.0 45.1
Thereafter 104.6 40.4 145.0
Total lease payments 350.1 91.2 441.3
Less: Interest 52.5 20.0 72.5
Present value of lease obligations $ 297.6 $ 71.2 $ 368.8
The following table provides lease term and discount rate information related to operating and finance leases as of June 30, 2020:
June 30, 2020
Weighted average remaining lease term (years):
Operating leases 6.34
Finance leases 8.33
Weighted average discount rate:
Operating leases 5.16 %
Finance leases 5.94 %
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table provides supplemental information related to the Company's Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019:
Six Months Ended
(in millions) June 30, 2020 June 30, 2019
Cash paid for amounts included in the measurement of lease obligations:
Operating cash flows paid for operating leases $ 33.1 $ 27.8
Operating cash flows paid for finance leases $ 2.3 $ 2.4
Financing cash flows paid for finance leases $ 4.6 $ 3.3
Right-of-use assets obtained in exchange for new operating lease obligations $ 48.7 $ 55.0
Right-of-use assets obtained in exchange for new finance lease obligations $ 11.7 $ —
(7) Stockholders' Equity
(a) Treasury Stock. As of June 30, 2020, the Company had approximately $ 131.3 million remaining under the existing share repurchase program initially authorized by the Board of Directors in 2016. In February 2020, the Board of Directors authorized an increase, of $ 194.2 million, to its existing share repurchase authorization of Tempur Sealy International's common stock to $ 300.0 million. The Company did not repurchase shares under the program during the three months ended June 30, 2020. The Company repurchased 24,170 shares under the program for approximately $ 1.5 million during the three months ended June 30, 2019. The Company repurchased 2.6 million shares and 39,901 shares under the program for approximately $ 187.5 million and $ 2.3 million during the six months ended June 30, 2020 and 2019, respectively.
In addition, the Company acquired an insignificant amount of shares upon the vesting of certain restricted stock units ("RSUs"), which were withheld to satisfy tax withholding obligations during each of the three and six months ended June 30, 2020 and 2019. 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 approximately $ 0.2 million and $ 0.3 million in treasury stock acquired during the three months ended June 30, 2020 and 2019, respectively. The Company acquired approximately $ 12.0 million and $ 3.2 million in treasury stock during the six months ended June 30, 2020 and 2019, respectively.
(b) Shareholder Rights Agreement. On March 27, 2020, the Board of Directors authorized and declared a dividend distribution of one right (a "Right") for each outstanding share of common stock of the Company to stockholders of record at the close of business on April 7, 2020 (the “Record Date”). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, $ 0.01 par value per share (the “Preferred Shares”), of the Company at an exercise price of $273.00 per one one-thousandth of a Preferred Share, subject to adjustment (the “Exercise Price”). Generally, the Rights become exercisable in the event any person or group of affiliated or associated persons acquires beneficial ownership of 10 % ( 20 % in the case of a passive institutional investor) or more of the Company's common stock without the approval of the Board of Directors, and until such time are inseparable from and trade with the Company's common stock. The Rights have a de minimis fair value. The Rights were issued pursuant to the Rights Agreement dated as of March 27, 2020 (the "Rights Agreement"), between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. The Rights expire at the close of business on March 26, 2021 or upon an earlier redemption or exchange as provided in the Rights Agreement.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(c) AOCL . AOCL consisted of the following:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2020 2019 2020 2019
Foreign Currency Translation
Balance at beginning of period $ ( 105.2 ) $ ( 87.7 ) $ ( 82.2 ) $ ( 91.7 )
Other comprehensive loss:
Foreign currency translation adjustments (1)
10.7 3.0 ( 12.3 ) 7.0
Balance at end of period $ ( 94.5 ) $ ( 84.7 ) $ ( 94.5 ) $ ( 84.7 )
Pensions
Balance at beginning of period $ ( 5.5 ) $ ( 3.6 ) $ ( 5.5 ) $ ( 3.6 )
Other comprehensive loss:
Net change from period revaluations — — 0.1 —
Tax expense (2)
— — ( 0.1 ) —
Total other comprehensive income before reclassifications, net of tax $ — $ — $ — $ —
Net amount reclassified to earnings (1)
— — — —
Tax benefit (2)
— — — —
Total amount reclassified from accumulated other comprehensive loss, net of tax $ — $ — $ — $ —
Total other comprehensive loss — — — —
Balance at end of period $ ( 5.5 ) $ ( 3.6 ) $ ( 5.5 ) $ ( 3.6 )
(1) In 2020 and 2019, there were no tax impacts related to foreign currency translation adjustments and no amounts were reclassified to earnings.
(2) These amounts were included in the income tax provision in the accompanying Condensed Consolidated Statements of Income.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(8) Other Items
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
(in millions) June 30, 2020 December 31, 2019
Taxes $ 138.6 $ 136.0
Wages and benefits 59.4 79.5
Operating lease obligations 58.3 50.8
Advertising 42.5 56.9
Sales returns 27.9 26.2
Warranty 17.5 19.4
Rebates 6.6 13.6
Other 104.4 90.8
$ 455.2 $ 473.2
(9) Stock-Based Compensation
The Company’s stock-based compensation expense for the three and six months ended June 30, 2020 and 2019 included performance restricted stock units ("PRSUs"), non-qualified stock options, restricted stock units ("RSUs") and deferred stock units ("DSUs"). A summary of the Company’s stock-based compensation expense is presented in the following table:
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2020 2019 2020 2019
PRSU expense $ 0.9 $ 0.4 $ 1.2 $ 0.7
Option expense 1.2 1.2 2.4 2.4
RSU/DSU expense 5.4 5.0 11.2 10.1
Total stock-based compensation expense $ 7.5 $ 6.6 $ 14.8 $ 13.2
The Company grants PRSUs to executive officers and certain members of management. During the first quarter of 2020, the Company granted PRSUs as a component of the long-term incentive plan. Actual payout under the PRSUs is dependent upon the achievement of certain financial goals.
During 2017, the Company granted executive officers and certain members of management PRSUs if the Company achieves a certain level of adjusted earnings before interest, tax, depreciation and amortization as defined in the Company’s Credit Agreement ("Adjusted EBITDA per Credit Facility") during four consecutive fiscal quarters as described below (the "2019 Aspirational Plan PRSUs"). The 2019 Aspirational Plan PRSUs will vest based on the highest Adjusted EBITDA per Credit Facility in any four consecutive fiscal quarter period ending between (and including) March 31, 2018 and December 31, 2019 (the “First Designated Period”). At the end of the First Designated Period, the Adjusted EBITDA per Credit Facility targets were not met and one-half of the total 2019 Aspirational Plan PRSUs were forfeited.
The remaining one-half of the total 2019 Aspirational Plan PRSUs will vest based on the highest Adjusted EBITDA per Credit Facility in any four consecutive fiscal quarter period ending between (and including) March 31, 2020 and December 31, 2020 (the "Second Designated Period"). If the highest Adjusted EBITDA per Credit Facility in the Second Designated Period is $ 600.0 million then 66 % of the remaining 2019 Aspirational Plan PRSUs will vest; if the Adjusted EBITDA per Credit Facility is $ 650.0 million or more 100 % will vest; if Adjusted EBITDA per Credit Facility is between $ 600.0 million and $ 650.0 million then a pro rata portion will vest; and if Adjusted EBITDA per Credit Facility is below $ 600.0 million then all of the remaining 2019 Aspirational Plan PRSUs will be forfeited.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The Company did not record any stock-based compensation expense related to the 2019 Aspirational Plan PRSUs during the three and six months ended June 30, 2020, as it was not probable that the Company would achieve the specified performance target for the Second Designated Period. The Company will continue to evaluate the probability of achieving the performance condition in future periods and record the appropriate expense if necessary. Based on the price of the Company’s common stock on the grant date, the total unrecognized compensation expense related to this award if the performance target is met for the Second Designated Period would range from $ 33.0 million to $ 49.5 million, which would be a non-cash expense over the remaining service period if achievement of the performance condition becomes probable.
(10) Commitments and Contingencies
The Company is involved in various legal and administrative proceedings incidental to the operations of its business. 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.
(11) Income Taxes
The Company’s effective tax rate for the three months ended June 30, 2020 and 2019 was 28.9 % and 27.0 %, respectively. The Company's effective tax rate for the six months ended June 30, 2020 and 2019 was 28.1 % and 31.3 %, respectively. The Company's effective tax rate for the three and six months ended June 30, 2020 and 2019 differed from the U.S. federal statutory rate of 21.0% principally due to subpart F income (i.e., GILTI earned by the Company’s foreign subsidiaries), certain foreign income tax rate differentials, state and local taxes, changes in the Company’s uncertain tax positions, the excess tax deficiency (or benefit) related to stock-based compensation and certain other permanent items.
On March 27, 2020, the U.S. Government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions. The CARES Act is not expected to have a material impact on the Company’s consolidated financial statements.
The Company has been involved in a dispute with the Danish Tax Authority ("SKAT") regarding the royalty paid by a U.S. subsidiary of Tempur Sealy International to a Danish subsidiary (the "Danish Tax Matter") for tax years 2001 through current. The royalty is paid by the U.S. subsidiary for the right to utilize certain intangible assets owned by the Danish subsidiary in the U.S. production process.
At June 30, 2020 and December 31, 2019, the Danish income tax liability recorded in the Company’s balance sheet for the periods 2001 through June 30, 2020 and December 31, 2019, respectively, is DKK 1,121.1 million and DKK 1,110.6 million, respectively (approximately $ 169.1 million and $ 166.7 million using the applicable exchange rates at June 30, 2020 and December 31, 2019, respectively). The liability at June 30, 2020 and December 31, 2019 is included within the Company’s Condensed Consolidated Balance Sheet (translated at the exchange rate on June 30, 2020 and December 31, 2019) as per below:
June 30, 2020 December 31, 2019
DKK USD DKK USD
Accrued expenses and other current liabilities 847.3 $ 127.8 847.3 $ 127.2
Other non-current liabilities 273.8 41.3 263.3 39.5
Total 1,121.1 $ 169.1 1,110.6 $ 166.7
During the three months ended March 31, 2020 the Company made a tax deposit with SKAT of DKK 134.0 million applicable to a tax assessment by SKAT for the years 2012 and 2013. The Company is contesting such assessment. At June 30, 2020 and December 31, 2019, respectively, the Company held on deposit with SKAT DKK 1,104.1 million and DKK 970.1 million (approximately $ 166.5 million and $ 145.6 million using the applicable exchange rates at June 30, 2020 and December 31, 2019, respectively). The deposit is for the satisfaction of the anticipated liability for both tax and interest once these matters are concluded.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The deposit at June 30, 2020 and December 31, 2019 is included within the Company’s Condensed Consolidated Balance Sheet (translated at the exchange rates on June 30, 2020 and December 31, 2019) as per below:
June 30, 2020 December 31, 2019
DKK USD DKK USD
Prepaid expenses and other current assets 847.3 $ 127.8 847.3 $ 127.2
Other non-current assets 256.8 38.7 122.8 18.4
Total 1,104.1 $ 166.5 970.1 $ 145.6
There were no significant changes in the Danish Tax Matter or other uncertain tax positions during the three or six months ended June 30, 2020.
(12) 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 Ended Six Months Ended
June 30, June 30,
(in millions, except per common share amounts) 2020 2019 2020 2019
Numerator:
Income from continuing operations, net of income attributable to non-controlling interests $ 22.9 $ 42.8 $ 83.8 $ 71.6
Denominator:
Denominator for basic earnings per common share-weighted average shares 51.6 54.7 52.5 54.7
Effect of dilutive securities:
Employee stock-based compensation 0.4 1.3 0.5 0.9
Denominator for diluted earnings per common share-adjusted weighted average shares 52.0 56.0 53.0 55.6
Basic earnings per common share for continuing operations $ 0.44 $ 0.78 $ 1.60 $ 1.31
Diluted earnings per common share for continuing operations $ 0.44 $ 0.76 $ 1.58 $ 1.29
The Company excluded 1.3 million and 1.1 million shares for the three months ended June 30, 2020 and 2019, respectively, 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. The Company excluded 0.8 million and 1.1 million shares issuable upon exercise of outstanding stock options for the six months ended June 30, 2020 and 2019, respectively, 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. Holders of non-vested stock-based compensation awards do not have voting rights or rights to receive any dividends thereon.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(13) Business Segment Information
The Company operates in two segments: North America and International. Corporate operating expenses are not included in either of the segments and are presented separately as a reconciling item to consolidated results. These segments are strategic business units that are managed separately based on geography. The North America segment consists of Tempur and Sealy manufacturing and distribution subsidiaries, joint ventures and licensees located in the U.S. and Canada. The International segment consists of Tempur and Sealy manufacturing and distribution subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America. 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.
The following table summarizes total assets by segment:
(in millions) June 30, 2020 December 31, 2019
North America $ 3,299.5 $ 3,142.9
International 603.2 615.3
Corporate 549.9 477.1
Inter-segment eliminations ( 1,250.7 ) ( 1,173.5 )
Total assets $ 3,201.9 $ 3,061.8
The following table summarizes property, plant and equipment, net, by segment:
(in millions) June 30, 2020 December 31, 2019
North America $ 369.0 $ 328.9
International 51.2 51.8
Corporate 42.6 55.1
Total property, plant and equipment, net $ 462.8 $ 435.8
The following table summarizes operating lease right-of-use assets by segment:
(in millions) June 30, 2020 December 31, 2019
North America $ 237.0 $ 202.0
International 42.1 42.2
Corporate 2.5 1.2
Total operating lease right-of-use assets $ 281.6 $ 245.4
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the three months ended June 30, 2020:
(in millions) North America International Corporate Eliminations Consolidated
Net sales $ 570.5 $ 94.7 $ — $ — $ 665.2
Inter-segment sales $ 0.1 $ — $ — $ ( 0.1 ) $ —
Inter-segment royalty expense (income) 0.7 ( 0.7 ) — — —
Gross profit 216.2 49.7 — — 265.9
Operating income (loss) 69.4 9.6 ( 25.6 ) — 53.4
Income (loss) from continuing operations before income taxes 68.0 7.6 ( 43.1 ) — 32.5
Depreciation and amortization (1)
$ 18.6 $ 3.4 $ 9.8 $ — $ 31.8
Capital expenditures 18.1 3.1 2.0 — 23.2
(1) Depreciation and amortization includes stock-based compensation amortization expense.
The following table summarizes segment information for the three months ended June 30, 2019:
(in millions) North America International Corporate Eliminations Consolidated
Net sales $ 588.1 $ 134.7 $ — $ — $ 722.8
Inter-segment sales $ 0.9 $ 0.1 $ — $ ( 1.0 ) $ —
Inter-segment royalty expense (income) 1.0 ( 1.0 ) — — —
Gross profit 240.0 73.4 — — 313.4
Operating income (loss) 80.1 27.4 ( 26.5 ) — 81.0
Income (loss) from continuing operations before income taxes 78.6 23.2 ( 43.3 ) — 58.5
Depreciation and amortization (1)
$ 15.6 $ 3.5 $ 9.5 $ — $ 28.6
Capital expenditures 14.4 3.1 3.3 — 20.8
(1) Depreciation and amortization includes stock-based compensation amortization expense.
The following table summarizes segment information for the six months ended June 30, 2020:
(in millions) North America International Corporate Eliminations Consolidated
Net sales $ 1,247.7 $ 239.9 $ — $ — $ 1,487.6
Inter-segment sales $ 0.9 $ 0.1 $ — $ ( 1.0 ) $ —
Inter-segment royalty expense (income) 2.1 ( 2.1 ) — — —
Gross profit 493.4 129.6 — — 623.0
Operating income (loss) 170.8 36.2 ( 48.3 ) — 158.7
Income (loss) from continuing operations before income taxes 167.6 32.1 ( 82.7 ) — 117.0
Depreciation and amortization (1)
$ 36.2 $ 6.7 $ 19.4 $ — $ 62.3
Capital expenditures 39.4 5.5 4.5 — 49.4
(1) Depreciation and amortization includes stock-based compensation amortization expense.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the six months ended June 30, 2019:
(in millions) North America International Corporate Eliminations Consolidated
Net sales $ 1,132.1 $ 281.6 $ — $ — $ 1,413.7
Inter-segment sales $ 1.9 $ 0.4 $ — $ ( 2.3 ) $ —
Inter-segment royalty expense (income) 2.0 ( 2.0 ) — — —
Gross profit 444.4 150.8 — — 595.2
Operating income (loss) 144.4 52.6 ( 55.5 ) — 141.5
Income (loss) from continuing operations before income taxes 141.0 53.0 ( 89.6 ) — 104.4
Depreciation and amortization (1)
$ 30.6 $ 6.8 $ 19.3 $ — $ 56.7
Capital expenditures 27.3 6.0 6.6 — 39.9
(1) Depreciation and amortization includes stock-based compensation amortization expense.
The following table summarizes property, plant and equipment, net by geographic region:
(in millions)
June 30, 2020 December 31, 2019
United States
$ 395.7 $ 366.4
Canada
15.9 17.5
Other International
51.2 51.9
Total property, plant and equipment, net
$ 462.8 $ 435.8
Total International
$ 67.1 $ 69.4
The following table summarizes operating lease right-of-use assets by geographic region:
(in millions) June 30, 2020 December 31, 2019
United States $ 235.4 $ 198.3
Canada 4.1 4.9
Other International 42.1 42.2
Total operating lease right-of-use assets $ 281.6 $ 245.4
Total International $ 46.2 $ 47.1
The following table summarizes net sales by geographic region:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2020 2019 2020 2019
United States $ 542.0 $ 533.7 $ 1,174.5 $ 1,030.9
Canada 28.5 54.4 73.2 101.2
Other International 94.7 134.7 239.9 281.6
Total net sales $ 665.2 $ 722.8 $ 1,487.6 $ 1,413.7
Total International $ 123.2 $ 189.1 $ 313.1 $ 382.8
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.