What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 181 added, 132 removed, 594 unchanged (35% of the section changed)

4 unchanged sentences

($ in millions, except per common share amounts)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

9 unchanged sentences

Loss on extinguishment of debt — 0.9 23.0 0.9

Other (income) expense, net ( 0.1 ) 0.3 ( 0.4 ) 0.8

Other expense (income), net 0.1 ( 0.5 ) ( 0.3 ) 0.3

Total other expense, net 13.6 20.5 68.5 62.2

4 unchanged sentences

Net income before non-controlling interests 177.4 121.8 448.5 204.8

Net (loss) income attributable to non-controlling interests ( 0.4 ) 0.2 ( 0.2 ) 0.3

Net income (loss) attributable to non-controlling interests — 0.4 ( 0.2 ) 0.7

Net income attributable to Tempur Sealy International, Inc.

2 unchanged sentences

Earnings per share for continuing operations $ 0.91 $ 0.58 $ 2.26 $ 0.97

Loss per share for discontinued operations — — — —

Earnings per share for discontinued operations — 0.01 — 0.01

Earnings per share $ 0.91 $ 0.59 $ 2.26 $ 0.98

Earnings per share for continuing operations $ 0.87 $ 0.56 $ 2.18 $ 0.96

Loss per share for discontinued operations — — — ( 0.01 )

Earnings per share for discontinued operations — 0.01 — 0.01

Earnings per share $ 0.87 $ 0.57 $ 2.18 $ 0.97

7 unchanged sentences

($ in millions)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

2 unchanged sentences

Foreign currency translation adjustments ( 29.9 ) 12.1 ( 34.0 ) ( 0.2 )

Other comprehensive income (loss), net of tax 6.7 10.7 ( 4.1 ) ( 12.3 )

Other comprehensive (loss) income, net of tax ( 29.9 ) 12.1 ( 34.0 ) ( 0.2 )

Comprehensive income 147.5 133.9 414.5 204.6

Comprehensive (loss) income attributable to non-controlling interests ( 0.4 ) 0.2 ( 0.2 ) 0.3

Comprehensive income (loss) attributable to non-controlling interests — 0.4 ( 0.2 ) 0.7

Comprehensive income attributable to Tempur Sealy International, Inc.

5 unchanged sentences

($ in millions)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

ASSETS (Unaudited)

32 unchanged sentences

($ in millions)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Tempur Sealy International, Inc.

Stockholders' Equity

Non-controlling Interest Common Stock Treasury Stock Accumulated Other Comprehensive Loss Non-controlling Interest in Subsidiaries Total Stockholders' Equity

Non-controlling Interest Common Stock Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity

Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings

Balance as of March 31, 2021

Balance as of June 30, 2021

$ 8.5 283.8 $ 2.8 87.3 $ ( 2,416.6 ) $ 597.1 $ 2,287.9 $ ( 69.6 ) $ 401.6

1 unchanged sentence

Net loss attributable to non-controlling interest — —

Purchase of remaining interest in subsidiary ( 3.4 ) ( 1.2 ) ( 4.6 )

Foreign currency adjustments, net of tax ( 29.9 ) ( 29.9 )

8 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2021

Balance, September 30, 2021

$ 8.5 283.8 $ 2.8 91.0 $ ( 2,595.8 ) $ 608.0 $ 2,447.0 $ ( 99.5 ) $ 362.5

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Tempur Sealy International, Inc.

2 unchanged sentences

Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings

Balance as of March 31, 2020

Balance as of June 30, 2020

$ 8.7 283.8 $ 2.8 77.4 $ ( 2,026.3 ) $ 584.2 $ 1,779.5 $ ( 100.0 ) $ 0.8 $ 241.0

1 unchanged sentence

Net income attributable to non-controlling interests 0.2 0.2 0.2

Dividend paid to non-controlling interest in subsidiary ( 0.1 ) ( 0.1 )

Foreign currency adjustments, net of tax 12.1 12.1

4 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2020

Balance, September 30, 2020

$ 8.9 283.8 $ 2.8 77.4 $ ( 2,026.1 ) $ 656.6 $ 1,900.9 $ ( 87.9 ) $ 1.0 $ 447.3

4 unchanged sentences

(in millions) (unaudited)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Tempur Sealy International, Inc.

9 unchanged sentences

Exercise of stock options ( 0.9 ) 25.0 ( 10.6 ) 14.4

Dividends declared on common stock ($ 0.07 per share)

( 29.0 ) ( 29.0 )

Issuances of PRSUs, RSUs, and DSUs

Dividends declared on common stock ( 47.3 ) ( 47.3 )

Issuances of RSUs

( 1.6 ) 41.8 ( 41.8 ) —

3 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2021

Balance, September 30, 2021

$ 8.5 283.8 $ 2.8 91.0 $ ( 2,595.8 ) $ 608.0 $ 2,447.0 $ ( 99.5 ) $ — $ 362.5

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Tempur Sealy International, Inc.

18 unchanged sentences

Amortization of unearned stock-based compensation

Balance, June 30, 2020

Balance, September 30, 2020

$ 8.9 283.8 $ 2.8 77.4 $ ( 2,026.1 ) $ 656.6 $ 1,900.9 $ ( 87.9 ) $ 1.0 $ 447.3

4 unchanged sentences

($ in millions) (unaudited)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS:

Net income before non-controlling interests $ 448.5 $ 204.8

Loss from discontinued operations, net of tax 0.5 1.1

Loss (income) from discontinued operations, net of tax 0.6 ( 1.3 )

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

23 unchanged sentences

Repayments of finance lease obligations and other ( 9.5 ) ( 8.9 )

Net cash (used in) provided by financing activities from continuing operations ( 260.5 ) 1.4

Net cash (used in) provided by continuing operations ( 5.4 ) 84.6

Net operating cash flows used in discontinued operations ( 0.7 ) ( 1.0 )

Net cash provided by (used in) financing activities from continuing operations 356.4 ( 228.5 )

Net cash provided by continuing operations 445.9 158.0

Net operating cash flows (used in) provided by discontinued operations ( 0.8 ) 1.5

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 6.8 ) 4.8

(Decrease) increase in cash and cash equivalents ( 6.9 ) 81.9

Increase in cash and cash equivalents 438.3 164.3

CASH AND CASH EQUIVALENTS, beginning of period 65.0 64.9

29 unchanged sentences

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,

September 30, December 31,

(in millions) 2021 2020

9 unchanged sentences

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, 2020 to June 30, 2021:

The Company had the following activity for sales returns from December 31, 2020 to September 30, 2021:

(in millions)

2 unchanged sentences

Returns charged to accrual ( 101.8 )

Balance as of June 30, 2021 $ 51.5

Balance as of September 30, 2021 $ 48.3

TEMPUR SEALY INTERNATIONAL, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

As of June 30, 2021 and December 31, 2020, $ 36.2 million and $ 31.6 million of accrued sales returns are included as a component of accrued expenses and other current liabilities and $ 15.3 million and $ 13.3 million of accrued sales returns are included in other non-current liabilities on the Company’s accompanying Condensed Consolidated Balance Sheets, respectively.

As of September 30, 2021 and December 31, 2020, $ 32.8 million and $ 31.6 million of accrued sales returns are included as a component of accrued expenses and other current liabilities and $ 15.5 million and $ 13.3 million of accrued sales returns are included in other non-current liabilities on the Company's accompanying Condensed Consolidated Balance Sheets, respectively.

(d) Warranties .

7 unchanged sentences

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, 2020 to June 30, 2021:

The Company had the following activity for its accrued warranty expense from December 31, 2020 to September 30, 2021:

(in millions)

2 unchanged sentences

Warranties charged to accrual ( 16.5 )

Balance as of June 30, 2021 $ 45.8

As of June 30, 2021 and December 31, 2020, $ 21.8 million and $ 20.3 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $ 24.0 million and $ 23.9 million of accrued warranty expense is included in other non-current liabilities on the Company’s accompanying Condensed Consolidated Balance Sheets, respectively.

Balance as of September 30, 2021 $ 47.1

As of September 30, 2021 and December 31, 2020, $ 22.6 million and $ 20.3 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $ 24.5 million and $ 23.9 million of accrued warranty expense is included in other non-current liabilities on the Company's accompanying Condensed Consolidated Balance Sheets, respectively.

(e) Allowance for Credit Losses .

3 unchanged sentences

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.

As of June 30, 2021, the Company's accounts receivable were substantially current.

As of September 30, 2021, the Company's accounts receivable were substantially current.

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, 2020 to June 30, 2021:

The Company had the following activity for its allowance for credit losses from December 31, 2020 to September 30, 2021:

(in millions)

2 unchanged sentences

Write-offs charged against the allowance ( 4.5 )

Balance as of June 30, 2021

Balance as of September 30, 2021

TEMPUR SEALY INTERNATIONAL, INC.

2 unchanged sentences

(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, 2021:

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

(in millions) North America International Consolidated North America International Consolidated

11 unchanged sentences

Net sales $ 1,120.0 $ 238.3 $ 1,358.3 $ 994.7 $ 137.6 $ 1,132.3

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

(in millions) North America International Consolidated North America International Consolidated

16 unchanged sentences

Acquisition of Dreams Topco Limited

On May 26, 2021, the Company entered into a share purchase agreement with Project Dream S.à.r.l.

and certain members of the management team and Dreams Topco Limited to purchase the entire issued share capital of Dreams Topco Limited and its direct and indirect subsidiaries ("Dreams").

Dreams has developed a successful multi-channel sales strategy, with over 200 brick and mortar retail locations in the United Kingdom, an industry-leading online channel, as well as manufacturing and delivery assets.

On August 2, 2021, the Company completed the acquisition of Dreams.

The purchase price was approximately $ 475 million, less net debt and is subject to a customary working capital adjustment period.

On August 2, 2021, the Company completed the acquisition of Dreams Topco Limited and its direct and indirect subsidiaries ("Dreams"), for a cash purchase price of $ 476.7 million, which includes $ 49.7 million of cash acquired and a working capital adjustment payable of $ 6.6 million.

The transaction was funded using cash on hand and bank financing.

The financial results of Dreams subsequent to the date of acquisition are included in the condensed consolidated financial statements of the Company.

The Company accounted for this transaction as a business combination.

The preliminary allocation of the purchase price is based on the fair values of the assets acquired and liabilities assumed as of August 2, 2021.

The Company continues to obtain information to complete its valuation of intangible assets, as well as to determine the acquired assets and liabilities, including tax assets, liabilities and other attributes.

The components of the preliminary purchase price allocation are as follows:

(in millions)

Accounts receivable, net $ 3.5

Inventory 51.1

Property, plant and equipment 30.4

Goodwill 331.3

Indefinite-lived intangible asset 143.1

Operating lease right-of-use assets 158.2

Other current and non-current assets 7.1

Accounts payable ( 55.6 )

Accrued expenses and other current liabilities ( 68.5 )

Operating lease liabilities ( 165.1 )

Other liabilities ( 2.4 )

Purchase price, net of cash acquired $ 427.0

The indefinite-lived intangible asset represents the Dreams' portfolio of trade names as marketed through Dreams.

The Company applied the income approach through a relief from royalty method to fair value the trade name asset using level 2 inputs.

The indefinite-lived intangible asset is not deductible for income tax purposes.

Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the expansion of retail competency and online capabilities, and expected synergistic manufacturing and distribution benefits to be realized from the acquisition.

The goodwill is not deductible for income tax purposes and is included within the International business segment.

The following summarizes changes to the Company's goodwill, by segment:

1 unchanged sentence

Balance as of December 31, 2020 $ 610.3 $ 156.0 $ 766.3

Goodwill resulting from acquisitions — 331.3 331.3

Foreign currency translation and other 1.0 ( 16.5 ) ( 15.5 )

Balance as of June 30, 2021 $ 613.0 $ 154.0 $ 767.0

Balance as of September 30, 2021 $ 611.3 $ 470.8 $ 1,082.1

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

Debt for the Company consists of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in millions, except percentages) Amount Rate Amount Rate Maturity Date

2 unchanged sentences

Revolver — (1) — (2) October 16, 2024

2031 Senior Notes 800.0 3.875 % — N/A October 15, 2031

2029 Senior Notes 800.0 4.000 % — N/A April 15, 2029

10 unchanged sentences

Total long-term debt, net $ 2,285.8 $ 1,323.0

(1) Interest at LIBOR plus applicable margin of 1.250 % as of June 30, 2021.

(1) Interest at LIBOR plus applicable margin of 1.250 % as of September 30, 2021.

(2) Interest at LIBOR plus applicable margin of 1.250 % as of December 31, 2020.

3 unchanged sentences

Refer to Note 6, "Leases".

As of June 30, 2021, the Company was in compliance with all applicable debt covenants.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

As of September 30, 2021, the Company was in compliance with all applicable debt covenants.

2019 Credit Agreement

4 unchanged sentences

The amendment increased the revolving credit facility from $ 425.0 million to $ 725.0 million.

As of June 30, 2021, total availability under the revolving credit facility was $ 629.3 million after borrowings of $ 95.6 million and a $ 0.1 million reduction for outstanding letters of credit.

As of September 30, 2021, total availability under the revolving credit facility was $ 724.9 million after a $ 0.1 million reduction for outstanding letters of credit.

On May 26, 2021, the Company entered into an additional amendment to the 2019 Credit Agreement.

The amendment provides for a $ 300.0 million delayed draw term loan.

Once drawn, the delayed draw term loan will have the same terms and conditions as the Company's existing term loans under the 2019 Credit Agreement.

On July 30, 2021 the Company drew down the full $ 300.0 million available under the delayed draw term loan to fund, in part, the Dreams acquisition.

The delayed draw term loan has the same terms and conditions as the Company's existing term loans under the 2019 Credit Agreement.

On September 21, 2021, the Company entered into an additional amendment to the 2019 Credit Agreement to remove the limit to the amount of netted cash that may be deducted from indebtedness for purposes of calculating certain leverage ratios.

Securitized Debt

3 unchanged sentences

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.

As of June 30, 2021, the Company had fully drawn down the Accounts Receivable Securitization with borrowings of $ 160.7 million.

As of September 30, 2021, total availability under the Accounts Receivable Securitization was $ 169.1 million.

2031 Senior Notes

On March 25, 2021, Tempur Sealy International issued $ 800.0 million in aggregate principal amount of 4.00 % senior notes due 2029 (the "2029 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S.

On September 24, 2021, Tempur Sealy International issued $ 800.0 million in aggregate principal amount of 3.875 % senior notes due 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

The 2029 Senior Notes were issued pursuant to an indenture, dated as of March 25, 2021 (the "2029 Indenture"), among Tempur Sealy International, certain subsidiaries of Tempur Sealy International as guarantors (the "Guarantors"), and The Bank of New York Mellon Trust Company, N.A., as trustee.

The 2031 Senior Notes were issued pursuant to an indenture, dated as of September 24, 2021 (the "2031 Indenture"), among Tempur Sealy International, certain subsidiaries of Tempur Sealy International as guarantors (the "Guarantors"), and The Bank of New York Mellon Trust Company, N.A., as trustee.

The 2031 Senior Notes are general unsecured senior obligations of Tempur Sealy International and are guaranteed on a senior unsecured basis by the Guarantors.

The 2031 Senior Notes mature on October 15, 2031, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on April 15, 2022.

Tempur Sealy International has the option to redeem all or a portion of the 2031 Senior Notes at any time on or after October 15, 2026.

The initial redemption price is 101.938 % of the principal amount, plus accrued and unpaid interest, if any.

The redemption price will decline each year after 2026 until it becomes 100.0 % of the principal amount beginning on October 15, 2029.

In addition, Tempur Sealy International has the option at any time prior to October 15, 2026 to redeem some or all of the 2031 Senior Notes at 100.0 % of the original principal amount plus a “make-whole” premium and accrued and unpaid interest, if any.

Tempur Sealy International may also redeem up to 40.0 % of the 2031 Senior Notes prior to October 15, 2024, under certain circumstances with the net cash proceeds from certain equity offerings, at 103.875 % of the principal amount plus accrued and unpaid interest, if any.

Tempur Sealy International may make such redemptions as described in the preceding sentence only if, after any such redemption, at least 60.0 % of the original aggregate principal amount of the 2031 Senior Notes issued remains outstanding.

The 2031 Indenture restricts the ability of Tempur Sealy International and the ability of certain of its subsidiaries to, among other things:

(i) incur, directly or indirectly, debt;

(ii) make, directly or indirectly, certain investments and restricted payments;

(iii) incur or suffer to exist, directly or indirectly, liens on its properties or assets;

(iv) sell or otherwise dispose of, directly or indirectly, assets;

(v) create or otherwise cause or suffer to exist any consensual restriction on the right of certain of the subsidiaries of Tempur Sealy International to pay dividends or make any other distributions on or in respect of their capital stock;

and (vi) enter into transactions with affiliates.

These covenants are subject to a number of exceptions and qualifications.

As a result of the issuance of the 2031 Senior Notes, $ 11.4 million of deferred financing costs were capitalized in the third quarter of 2021 and will be amortized as interest expense over the respective debt instrument period, 10 years, using the effective interest method.

2029 Senior Notes

persons in accordance with Regulation S under the Securities Act.

The 2029 Senior Notes were issued pursuant to an indenture, dated as of March 25, 2021 (the "2029 Indenture"), among Tempur Sealy International, the Guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee.

The 2029 Senior Notes are general unsecured senior obligations of Tempur Sealy International and are guaranteed on a senior unsecured basis by the Guarantors.

The 2029 Senior Notes mature on April 15, 2029, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on October 15, 2021.

1 unchanged sentence

The initial redemption price is 102.00 % of the principal amount, plus accrued and unpaid interest, if any.

The redemption price will decline each year after 2024 until it becomes 100.0 % of the principal amount beginning on April 15, 2026.

redemption price will decline each year after 2024 until it becomes 100.0 % of the principal amount beginning on April 15, 2026.

In addition, Tempur Sealy International has the option at any time prior to April 15, 2024 to redeem some or all of the 2029 Senior Notes at 100.0 % of the original principal amount plus a “make-whole” premium and accrued and unpaid interest, if any.

1 unchanged sentence

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The 2029 Indenture restricts the ability of Tempur Sealy International and the ability of certain of its subsidiaries to, among other things:

22 unchanged sentences

The fair values of these material financial instruments are as follows:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

2023 Senior Notes $ — $ 255.1

1 unchanged sentence

2029 Senior Notes 825.4 —

2031 Senior Notes 803.0 —

TEMPUR SEALY INTERNATIONAL, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

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, 2021 and December 31, 2020:

(in millions) June 30, 2021 December 31, 2020

The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Condensed Consolidated Balance Sheet as of September 30, 2021 and December 31, 2020:

(in millions) September 30, 2021 December 31, 2020

Operating lease assets Operating lease right-of-use assets $ 464.5 $ 304.3

6 unchanged sentences

Total lease obligations $ 586.2 $ 407.5

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, 2021 and 2020:

Three Months Ended Six Months Ended

June 30, June 30,

The following table summarizes the classification of lease expense in the Company's Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2021 2020 2021 2020

7 unchanged sentences

Total lease expense $ 42.5 $ 31.4 $ 110.8 $ 90.2

The following table sets forth the scheduled maturities of lease obligations as of June 30, 2021:

The following table sets forth the scheduled maturities of lease obligations as of September 30, 2021:

(in millions) Operating Leases Finance Leases Total

Year Ended December 31,

2021 (excluding the six months ended June 30, 2021)

2021 (excluding the nine months ended September 30, 2021)

$ 29.1 $ 4.6 $ 33.7

10 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The following table provides lease term and discount rate information related to operating and finance leases as of June 30, 2021:

June 30, 2021

The following table provides lease term and discount rate information related to operating and finance leases as of September 30, 2021:

September 30, 2021

Weighted average remaining lease term (years):

4 unchanged sentences

Finance leases 5.35 %

The following table provides supplemental information related to the Company's Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020:

Six Months Ended

(in millions) June 30, 2021 June 30, 2020

The following table provides supplemental information related to the Company's Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020:

Nine Months Ended

(in millions) September 30, 2021 September 30, 2020

Cash paid for amounts included in the measurement of lease obligations:

9 unchanged sentences

The Board of Directors authorized increases to the Company's share repurchase authorization of $ 211.4 million and $ 325.3 million during February and April 2021, respectively.

The Company repurchased 1.6 million, under the program, for approximately $ 61.6 million during the three months ended June 30, 2021.

The Company did no t repurchase shares under the program during the three months ended June 30, 2020.

The Company repurchased 10.0 million and 2.6 million shares, under the program, for approximately $ 361.4 million and $ 187.5 million during the six months ended June 30, 2021 and 2020, respectively.

The Company repurchased 4.1 million, under the program, for approximately $ 190.0 million during the three months ended September 30, 2021.

The Company did no t repurchase shares under the program during the three months ended September 30, 2020.

The Company repurchased 14.1 million and 2.6 million shares, under the program, for approximately $ 551.4 million and $ 187.5 million during the nine months ended September 30, 2021 and 2020, respectively.

These amounts may differ from the repurchases of common stock amounts in the Condensed Consolidated Statements of Cash Flows due to unsettled share repurchases at the end of a period.

As of June 30, 2021, the Company had approximately $ 376.8 million remaining under its share repurchase authorization.

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 six months ended June 30, 2021 and 2020.

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 $ 0.8 million and $ 0.2 million in treasury stock acquired during the three months ended June 30, 2021 and 2020, respectively.

The Company acquired approximately $ 14.1 million and $ 12.0 million in treasury stock during the six months ended June 30, 2021 and 2020, respectively.

As of September 30, 2021, the Company had approximately $ 186.9 million remaining under its share repurchase authorization.

On October 28, 2021, the Company announced that its Board of Directors authorized an increase to the share repurchase authorization bringing the total authorization to $ 600.0 million.

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 $ 0.3 million and $ 0.1 million in treasury stock acquired during the three months ended September 30, 2021 and 2020, respectively.

The Company acquired approximately $ 14.4 million and $ 12.1 million in treasury stock to satisfy tax withholding obligations during the nine months ended September 30, 2021 and 2020, respectively.

TEMPUR SEALY INTERNATIONAL, INC.

2 unchanged sentences

AOCL consisted of the following:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2021 2020 2021 2020

21 unchanged sentences

Accrued expenses and other current liabilities consisted of the following:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

Wages and benefits $ 101.1 $ 102.5

Advertising 72.4 74.4

Operating lease obligations 98.2 61.0

Advertising 79.5 74.4

Taxes 26.7 150.4

7 unchanged sentences

(9) Stock-Based Compensation

The Company’s stock-based compensation expense for the three and six months ended June 30, 2021 and 2020 included PRSUs, non-qualified stock options, RSUs and deferred stock units ("DSUs").

The Company's stock-based compensation expense for the three and nine months ended September 30, 2021 and 2020 included PRSUs, non-qualified stock options, 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,

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2021 2020 2021 2020

6 unchanged sentences

During the first quarter of 2021, the Company granted PRSUs as a component of the long-term incentive plan ("2021 PRSUs").

The Company has recorded stock-based compensation expense related to the 2021 PRSUs during the three and six months ended June 30, 2021, as it was probable that the Company would achieve the specified performance target for the performance period.

The Company has recorded stock-based compensation expense related to the 2021 PRSUs during the three and nine months ended September 30, 2021, as it was probable that the Company would achieve the specified performance target for the performance period.

(10) Commitments and Contingencies

2 unchanged sentences

(11) Income Taxes

The Company’s effective tax rate for the three months ended June 30, 2021 and 2020 was 24.1 % and 28.9 %, respectively.

The Company's effective tax rate for the six months ended June 30, 2021 and 2020 was 23.9 % and 28.1 %.

The Company's effective tax rate for the three and six months ended June 30, 2021 and 2020 differed from the U.S.

The Company's effective tax rate for the three months ended September 30, 2021 and 2020 was 24.9 % and 25.2 %, respectively.

The Company's effective tax rate for the nine months ended September 30, 2021 and 2020 was 24.3 % and 26.5 %.

The Company's effective tax rate for the three and nine months ended September 30, 2021 and 2020 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 deficiency (or benefit) related to stock-based compensation and certain other permanent items.

As discussed in Note 3, "Acquisitions," the goodwill and indefinite-lived intangible asset recognized as part of the Dreams acquisition is not deductible for income tax purposes.

The Company has been involved in a dispute with the Danish Tax Authority ("SKAT") regarding the royalty paid by a U.S.

8 unchanged sentences

The uncertain income tax liabilities for the Danish Tax Matter for the Settlement Years and for the years 2012 through 2021 (the "2012 to Current Period") are reflected in the Company's Condensed Consolidated Balance Sheet as per below:

June 30, 2021 December 31, 2020

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

September 30, 2021 December 31, 2020

Period Balance Sheet Presentation DKK USD DKK USD

2 unchanged sentences

Total 312.4 $ 48.6 1,142.3 $ 187.5

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The deferred tax asset for the U.S.

correlative benefit associated with the accrual of Danish tax for the 2012 to Current Period at June 30, 2021 and December 31, 2020 is approximately $ 11.6 million and $ 12.0 million, respectively.

At June 30, 2021 and December 31, 2020, respectively, the Company held cash on deposit with SKAT.

The deposit at June 30, 2021 and December 31, 2020 is included within the Company’s Condensed Consolidated Balance Sheet as per below:

June 30, 2021 December 31, 2020

correlative benefit associated with the accrual of Danish tax for the 2012 to Current Period at September 30, 2021 and December 31, 2020 is approximately $ 12.7 million and $ 12.0 million, respectively.

During the three months ended September 30, 2021, the Company made a tax deposit with SKAT of DKK 97.2 million (approximately $ 15.1 million) applicable to a tax assessment by SKAT for the year 2015.

The Company is contesting this assessment (as well as assessments made by SKAT in 2020 for the years 2012 through 2014 for which the Company made deposits totaling approximately DKK 210.8 million (approximately $ 32.9 million) to SKAT).

The Company has other taxes on deposit with SKAT of approximately DKK 9.8 million (approximately $ 1.5 million).

At September 30, 2021 and December 31, 2020, respectively, the Company held cash on deposit with SKAT.

The deposit at September 30, 2021 and December 31, 2020 is included within the Company's Condensed Consolidated Balance Sheet as per below:

September 30, 2021 December 31, 2020

DKK USD DKK USD

3 unchanged sentences

If the Company is not successful in resolving the Danish Tax Matter for the 2012 to Current Period or there is a change in facts and circumstances, the Company may be required to further increase its uncertain income tax position associated with this matter, or decrease its deferred tax asset, also related to this matter, which could have a material impact on the Company's reported earnings.

There were no other significant changes in the Danish Tax Matter or other uncertain tax positions during the three or six months ended June 30, 2021.

There were no other significant changes in the Danish Tax Matter or other uncertain tax positions during the three or nine months ended September 30, 2021.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

(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,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions, except per common share amounts) 2021 2020 2021 2020

Income from continuing operations, net of income attributable to non-controlling interests $ 141.1 $ 22.9 $ 271.8 $ 83.8

Income from continuing operations, net of income (loss) attributable to non-controlling interests $ 177.5 $ 119.0 $ 449.3 $ 202.8

Denominator for basic earnings per common share-weighted average shares 195.8 206.4 198.9 208.8

3 unchanged sentences

Diluted earnings per common share for continuing operations $ 0.87 $ 0.56 $ 2.18 $ 0.96

The Company excluded 5.2 million shares and 3.2 million shares for the three and six months ended June 30, 2020, 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 an immaterial number of shares for the three and six months ended June 30, 2021.

The Company excluded an immaterial number of shares 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 for the three and nine months ended September 30, 2021.

The Company excluded an immaterial number of shares and 0.5 million shares for the three and nine months ended September 30, 2020, 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.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

(13) Business Segment Information

4 unchanged sentences

The International segment consists of Tempur manufacturing and distribution subsidiaries, Sealy distribution subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico).

On August 2, 2021, the Company acquired Dreams, which is included in the International segment.

Corporate operating expenses are not included in either of the segments and are presented separately as a reconciling item to consolidated results.

3 unchanged sentences

The following table summarizes total assets by segment:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

North America $ 4,258.2 $ 3,740.3

3 unchanged sentences

Total assets $ 4,467.3 $ 3,308.6

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The following table summarizes property, plant and equipment, net, by segment:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

North America $ 432.5 $ 415.3

3 unchanged sentences

The following table summarizes operating lease right-of-use assets by segment:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

North America $ 277.9 $ 256.6

2 unchanged sentences

Total operating lease right-of-use assets $ 464.5 $ 304.3

The following table summarizes segment information for the three months ended June 30, 2021:

The following table summarizes segment information for the three months ended September 30, 2021:

(in millions) North America International Corporate Eliminations Consolidated

9 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

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 June 30, 2020:

The following table summarizes segment information for the three months ended September 30, 2020:

(in millions) North America International Corporate Eliminations Consolidated

9 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes segment information for the six months ended June 30, 2021:

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The following table summarizes segment information for the nine months ended September 30, 2021:

(in millions) North America International Corporate Eliminations Consolidated

9 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes segment information for the six months ended June 30, 2020:

The following table summarizes segment information for the nine months ended September 30, 2020:

(in millions) North America International Corporate Eliminations Consolidated

9 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The following table summarizes property, plant and equipment, net by geographic region:

(in millions)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

United States

4 unchanged sentences

The following table summarizes operating lease right-of-use assets by geographic region:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

United States $ 276.4 $ 255.0

1 unchanged sentence

Total operating lease right-of-use assets $ 464.5 $ 304.3

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)

The following table summarizes net sales by geographic region:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in millions) 2021 2020 2021 2020

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements