What changed in this filing

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Item 1. Business

2022-02-22 compared with 2021-02-19 · 113 added, 107 removed, 140 unchanged (61% of the section changed)

We are committed to improving the sleep of more people, every night, all around the world.

As a global leader in the design, manufacture and distribution of bedding products, we know how crucial a good night of sleep is to overall health and wellness.

As a leading designer, manufacturer, distributor and retailer of bedding products, we know how crucial a good night of sleep is to overall health and wellness.

Utilizing over a century of knowledge and industry-leading innovation, we deliver award-winning products that provide breakthrough sleep solutions to consumers in over 100 countries.

Tempur Sealy has strong brands across a portfolio of bedding products serving a wide range of price points.

Our highly recognized brands include Tempur-Pedic®, Sealy® featuring Posturepedic® Technology and Stearns & Foster® and our non-branded offerings include private label and original equipment manufacturer ("OEM") products.

Our distinct brands allow for complementary merchandising strategies.

Our highly recognized brands include Tempur-Pedic®, Sealy® and Stearns & Foster® and our non-branded offerings include private label and original equipment manufacturer ("OEM") products.

Our distinct brands allow for complementary merchandising strategies at a range of price points.

Our powerful distribution model operates through an omni-channel strategy.

Our products are sold across wholesale and direct channels through brick and mortar retail stores and e-commerce platforms.

Our products are sold through third-party retailers, our more than 650 company-owned stores and our e-commerce platforms.

We have a global manufacturing footprint with approximately 12,000 employees around the world.

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Our long-term strategy is to drive earnings growth with high return on invested capital and strong free cash flow, which is a non-GAAP financial measure.

In order to achieve our long-term strategy while managing the current economic and competitive environments, we focus on developing the most innovative bedding products in all the markets we serve, making significant investments in our iconic global brands and optimizing our worldwide omni-channel distribution.

In order to achieve our long-term strategy, we focus on developing the most innovative bedding products in all the markets we serve, making significant investments in our iconic global brands and optimizing our worldwide omni-channel distribution.

We also intend to generate earnings growth through ongoing investments in research and development and productivity initiatives, which will improve our profitability and create long-term stockholder value.

We have a balanced approach to capital allocation that includes investments in our operations to facilitate long-term growth and returning capital to shareholders via quarterly cash dividends and share repurchases.

From time to time we also look at acquisition opportunities that could complement and strengthen our core business.

When doing so, we seek to balance our assessment of the industry environment, our business outlook and the potential for further strategic expansion, while also prudently managing our business.

We operate in two segments:

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These segments are strategic business units that are managed separately based on geography.

In the fourth quarter of 2020, we realigned our business segment reporting to include Mexico within the North America segment, which was previously included in the International segment.

The change in segment reporting aligned with changes in how our global operations are managed.

Our North America segment consists of Tempur and Sealy manufacturing and distribution subsidiaries, joint ventures and licensees located in the U.S., Canada and Mexico.

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

Our North America segment consists of manufacturing and distribution subsidiaries, joint ventures and licensees located in the U.S., Canada and Mexico.

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

On August 2, 2021, we acquired Dreams Topco Limited and its direct and indirect subsidiaries ("Dreams").

Dreams is also included in the International segment.

On January 31, 2020, we acquired an 80% ownership interest in a newly formed limited liability company containing substantially all of the assets of the Sherwood Bedding business.

Sherwood Bedding is a major manufacturer in the U.S.

private label and OEM bedding market, and this acquisition of a majority interest marks our entrance into the private label category.

private label and OEM bedding market, and this acquisition of a majority interest marked our entrance into the private label category.

Our principal executive office is located at 1000 Tempur Way, Lexington, Kentucky 40511 and our telephone number is (800) 878-8889.

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Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the Securities and Exchange Commission ("SEC") pursuant to Sections 13(a) or 15(d) of the Exchange Act, are available free of charge on our website at www.tempursealy.com as soon as reasonably practicable after such reports are electronically filed with the SEC.

Our website and its contents are not deemed incorporated by reference into this Report.

Our website and its contents are not incorporated by reference into this Report.

The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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We also routinely introduce new mattress models, launch new products and update our existing mattress products in each of our segments.

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In order to achieve our goal to improve the sleep of more people, every night, all around the world, one of our strategic initiatives is to leverage and strengthen our comprehensive portfolio of iconic brands and products.

Our portfolio of product brands includes many highly recognized brands, including Tempur®, Tempur-Pedic®, Sealy® featuring Posturepedic® Technology, Stearns & Foster® and Comfort Revolution®, which are described below:

Our portfolio of product brands includes many highly recognized brands, including Tempur®, Tempur-Pedic®, Sealy® and Stearns & Foster®, which are described below:

• Tempur-Pedic ® - Founded in 1991, the Tempur brand is our specialty innovation category leader designed to provide life changing sleep for our wellness-seeking consumers.

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Tempur-Pedic was awarded #1 in Customer Satisfaction for the retail mattress segment in the J.D.

Power 2020 Mattress Satisfaction Report.

In addition to earning the highest score for overall customer satisfaction, Tempur-Pedic was ranked highest for support, durability, comfort, value, warranty and contact with customer service.

Power 2021 Mattress Satisfaction Report for the third year in a row.

In addition, Tempur-Pedic was also awarded #1 in Customer Satisfaction for the online mattress segment in the same report.

• Stearns & Foster ® - The Stearns & Foster brand offers our consumers high quality mattresses built by certified craftsmen who have been specially trained.

Founded in 1846, the brand is designed and built with precise engineering and relentless attention to detail and fuses new innovative technologies with time-honored techniques, creating supremely comfortable beds.

• Sealy ® featuring Posturepedic® Technology - The Sealy brand originated in 1881 in Sealy, Texas, and for over a century has focused on offering trusted comfort, durability and excellent value while maintaining contemporary styles and great support.

• Sealy ® - The Sealy brand originated in 1881 in Sealy, Texas, and for over a century has focused on offering trusted comfort, durability and excellent value while maintaining contemporary styles and great support.

The Sealy Posturepedic™ brand, introduced in 1950, was engineered to provide all-over support and body alignment to allow full relaxation and deliver a comfortable night's sleep.

In 2017, we united all of our Sealy products under one masterbrand, which features the Posturepedic Technology™ in the Sealy Performance™, Sealy Posturepedic Plus and Sealy Premium™ collections.

Sealy was voted America's most-trusted mattress brand by American shoppers in the 2021 American Brand Trust Study.

Sealy is also the #1 best-selling mattress brand according to Furniture Today's Top 20 U.S.

Bedding Producers methodology, which includes Stearns & Foster.

• Cocoon by Sealy TM - The Cocoon by Sealy brand, introduced in 2016, is our offering in the below $1,000 e-commerce space, made with the high quality materials that consumers expect from Sealy, sold online at www.cocoonbysealy.com and delivered in a box directly to consumers' doorsteps.

• Comfort Revolution ® - Comfort Revolution originated in 1986 in West Long Beach, New Jersey.

The brand develops, produces, markets and distributes bedding products.

• Non-Branded - Our non-branded product offerings include private label and OEM products, including mattresses, pillows and other bedding products and components at a wide range of price points.

The addition of non-branded offerings expands our capabilities to service third-party retailers to capture manufacturing profits from bedding brands outside our own.

Our portfolio of retail brands includes Tempur-Pedic® retail stores, Sleep Outfitters®, Sleep Solutions Outlet TM , SOVA and a variety of other retail brands internationally, which operate in various countries.

Our portfolio of retail brands includes Tempur-Pedic® retail stores, Sleep Outfitters®, Sleep Solutions Outlet TM , Dreams®, SOVA and a variety of other retail brands internationally, which operate in various countries.

The retail brands named above are described below:

• Tempur-Pedic ® retail stores - Tempur-Pedic® retail stores are designed for the approximately one in five of U.S.

consumers, based on our research, that prefer to purchase directly from the manufacturer, and for those seeking a more personalized and educational sales experience.

• Tempur-Pedic ® retail stores - Tempur-Pedic® retail stores are designed for the consumers that prefer to purchase directly from the manufacturer, and for those seeking a more personalized and educational sales experience.

These retail boutiques are strategically located in high traffic, premium retail centers with customer demographics that closely align to the Tempur-Pedic customer profile.

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that sell these products, which reduces our disposal costs, and helps reduce the volume of products disposed of via landfill, thereby favorably impacting the environment.

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• Dreams ® - Dreams is the United Kingdom's ("UK") leading specialty bedding retailer.

As a multi-branded retailer, Dreams sells a variety of products across a range of price points.

In addition to operating over 200 brick-and-mortar stores and an e-commerce channel throughout the UK, Dreams also manufacturers the majority of the bedding products it sells in-house.

• SOVA - SOVA is a highly respected and well established premium bedding chain in Sweden.

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The assortment primarily focuses on premium to ultra premium brands and well trained sales staff targeting to sell quality beds with a very high average selling price.

In 2021, we are planning to launch a complete refresh of our North American Sealy portfolio.

In 2022, we plan to complete the rollout of a complete refresh of our North American Sealy portfolio that began in 2021.

The updated Sealy portfolio features new models in our Posturepedic Plus TM , Posturepedic® and Essentials product lines.

These models offer superior support and feature Sealy Chill TM and Surface-Guard Technology TM , making this product the ideal choice for the consumer searching for high quality sleep.

In 2020, we completed the national launch of the innovative Tempur-Ergo® Smart Base Collection with Sleeptracker® technology.

The smart base collection is our solution for those that want to improve their sleep through technology.

The Tempur-Ergo Smart Base with Sleeptracker® technology is a completely integrated sleep system that features sense and respond technology, personalized sleep analytics and coaching, smart home connectivity and voice control.

We expect to launch a complete refresh of our North American Stearns & Foster® portfolio in 2022.

The new line is designed to further distinguish our high-end traditional innerspring brand and includes superior technologies, clear product step-up stories, and a new, contemporary look.

We also plan to launch a Sealy-branded, eco-friendly mattress collection, as well as a Sealy mattress with a best-in-class pressure-relieving gel grid layer at a consumer-appealing, mid-market price point, in 2022 in the U.S.

We expect to begin the launch an all-new line of Tempur® products in Europe and Asia-Pacific in 2022 with the objective of reaching a new segment of international consumers.

This new line of products will broaden Tempur®'s price range with the super-premium average selling price ceiling maintained and the floor expanded into the premium category.

Omni-Channel Distribution

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One of Tempur Sealy's long-term initiatives is to be wherever the consumer wants to shop, and our wholesale business strategy brings this key business initiative to life by growing our share with existing customers, gaining new business and expanding into new channels of distribution.

In 2019, we announced three new or expanded third-party retail relationships in the U.S.

This resulted in the largest expansion of stores in our history.

In 2020, we successfully completed product rollout to our expanded distribution relationships, realizing robust wholesale channel growth as a result.

In 2020, we successfully completed the largest expansion of stores in our history by rolling out product to our expanded distribution relationships, realizing robust wholesale channel growth as a result.

We also invested in our direct business, generating triple-digit growth in North American web sales while supporting our company-owned stores and third-party retailers throughout difficulties resulting from the global COVID-19 pandemic.

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Our Direct channel includes company-owned stores, online and call centers and represented 18.2% of net sales in 2021.

The Direct channel growth rate has surpassed the Wholesale growth rate over the last few years, and we anticipate the Direct channel to continue to grow as a percentage of net sales in future years.

The Direct channel growth rate has surpassed the Wholesale growth rate over the last few years, and we anticipate the Direct channel will continue to grow as a percentage of net sales in future years.

Our expanded direct channel distribution complements our wholesale business, and we believe this balanced approach enhances the overall sales potential and profitability of Tempur Sealy.

For consumers that prefer to purchase directly from the manufacturer and for those seeking a more personalized and educational sales experience, we appeal to this consumer through our Tempur-Pedic retail stores.

As of December 31, 2020, we had 76 stores throughout the U.S.

For consumers that prefer to purchase directly from the manufacturer and are seeking a more personalized and educational sales experience, we have over 650 retail stores worldwide, including our retail stores owned through our international joint venture operations.

As of December 31, 2021, we had 88 Tempur-Pedic retail stores throughout the U.S.

that provide a low-pressure environment to explore the comprehensive line up of our Tempur-Pedic products.

Each showroom features knowledgeable, non-commissioned Brand Ambassadors who educate potential customers on Tempur-Pedic products in a relaxed, comfortable environment.

Going forward, our strategy for opening additional locations of Tempur-Pedic retail stores will remain consistent with our previous expansion approach.

In addition to our high-end Tempur-Pedic retail stores, we operate Sleep Outfitters, a regional bedding retailer that had 99 stores across Kentucky, Tennessee, Ohio, West Virginia and Alabama in 2020.

Going forward, we expect our strategy for opening additional locations of Tempur-Pedic retail stores to remain consistent with our previous expansion approach.

In addition to our high-end Tempur-Pedic retail stores, we operate Sleep Outfitters, a regional bedding retailer that had 104 stores in 2021.

Sleep Outfitters is a specialty mattress retailer that serves consumers across all price points with its extensive selection of Tempur-Pedic®, Sealy® and Stearns & Foster® products.

Our third-party retailers, Tempur-Pedic and Sleep Outfitters retail stores reach the vast majority of consumers who still prefer to touch and feel a mattress and speak to a retail sales associate, prior to making a purchase decision.

In August 2021, we expanded our retail presence in the International segment through our acquisition of Dreams.

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

Our third-party retailers, Tempur-Pedic retail stores, Dreams and Sleep Outfitters, and our other company-owned store concepts reach the vast majority of consumers who still prefer to touch and feel a mattress and speak to a retail sales associate prior to making a purchase decision.

However, our consumer insights also demonstrate that there is a growing segment of the population that prefers to purchase products online and, to a lesser degree, via a call center.

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For customers that prefer the convenience of making purchases online and having their bedding products delivered right to their front door, we have evolved our distribution model to include multiple online options to reach those that want to purchase our products without the need to go into a brick-and-mortar store.

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Our overall marketing strategy is to drive consumer demand through the use of effective marketing.

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Additionally, we source our adjustable bed bases and foundations from third party manufacturers.

We do not consider ourselves dependent upon any single outside manufacturer as a source of these products.

These are purchased under supply agreements from a limited number of key suppliers.

These products are dependent on components supply chains originating in China.

We believe over time that sufficient alternate sources of supply for the same or similar products will be available outside of China from our current or alternate suppliers.

Raw materials for Sealy, Sherwood and Comfort Revolution products consist mainly of polyethylene foam, textiles and steel innerspring components that we purchase from various suppliers.

and Canada, we source the majority of our requirements for polyurethane foam components and spring components for our Sealy and Stearns & Foster mattress units and adjustable bed bases from a key supplier for each component.

and Canada, we source the majority of our requirements for polyurethane foam components and spring components for our Sealy and Stearns & Foster mattress units from key suppliers for each component.

We also purchase a significant portion of our Sealy foundation parts from third party sources.

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We do not consider ourselves to be dependent in the long term upon any single outside vendor as a source of supply to our bedding business, and we believe over time that sufficient alternate sources of supply for the same, similar or alternate components are available.

Beginning in the second quarter of 2020, one key supplier's inability to supply components in the amount we required, as well as industry supply constraints generally, limited our production levels.

Additionally, the U.S.

government has mandated that domestic suppliers of certain materials used in the production of bedding products redirect such materials towards the production of personal protective equipment.

This has constrained production for certain products and has increased our production costs in the near term.

Our adjustable base products are dependent on components supply chains originating in China.

We believe over time that sufficient alternate courses of supply for the same or similar products will be available outside of China from our current and alternate suppliers.

The rapid increase in demand for bedding products challenged the entire bedding industry and supply chain, including our business.

The broad-based increase in demand coupled with supply chain constraints has created operational challenges for production.

This constrained production for certain products and increased our production costs in 2021.

We have taken actions and made numerous investments to expand capacity, diversify our suppliers and increase our safety stock to reduce these challenges going forward and service long-term demand outlook for our brands and products.

Research and Development

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We believe our consumer-research driven approach to innovation results in best-in-class products that benefit the consumer.

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Industry and Competition

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The foundation category is comprised of traditional foundations and adjustable foundations.

Additionally, the pillow market is comprised of traditional foam and feather pillows, as well as pillows made of visco-elastic, latex, foam, sponge, rubber and down.

The primary distribution channels for bedding products are retail furniture and bedding stores, department stores, wholesale clubs and online.

Additionally, the pillow market is comprised of traditional foam and feather pillows, as well as pillows made of visco-elastic, latex, foam, gel, rubber and down.

The primary distribution channels for bedding products are retail furniture and bedding stores, big-box retailers and online.

We encounter competition from a number of bedding manufacturers in both the highly concentrated domestic and highly fragmented international markets.

Participants in each of these markets compete primarily on price, quality, brand name recognition, product availability and product performance.

Mattress and pillow manufacturers and retailers are seeking to increase their channels of distribution and are looking for new ways to reach the consumer, including the recent expansion in the number of U.S.

Mattress and pillow manufacturers and retailers are seeking to increase their channels of distribution and are looking for new ways to reach the consumer, including the expansion in the number of U.S.

and international companies pursuing online direct-to-consumer models for mattresses.

In addition, retailers in both the U.S.

and internationally are increasingly seeking to integrate vertically in the furniture and bedding industries, including by offering their own brands of mattresses and pillows.

In addition, retailers both in the U.S.

and internationally are increasingly seeking to offer their own private label products.

The international market is served by a large number of manufacturers, primarily operating on a regional and local basis.

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market at prices less than fair value.

Department of Commerce issued an anti-dumping duty order regarding the 2018 petition on December 16, 2019 and the U.S.

International Trade Commission affirmed a range of tariffs on these imports from 57% to 1,731%.

Regarding the 2019 petition, the U.S.

International Trade Commission reached an affirmative preliminary determination in May 2020 that there was a reasonable indication that imports of mattresses from some of the countries at issue negatively impact, or threaten to negatively impact, the domestic mattress industry.

Department of Commerce reached an affirmative preliminary determination in October 2020 regarding the 2019 petition.

Department of Commerce and the U.S.

International Trade Commission are scheduled to announce final determinations on the 2019 petition in 2021.

As a result of the petitions, the U.S.

Department of Commerce issued anti-dumping duty orders on December 16, 2019 for the 2018 petition and on May 14, 2021 for the 2019 petition and the U.S.

International Trade Commission affirmed a range of tariffs on these imports.

Intellectual Property

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As of December 31, 2021, we held trademark registrations worldwide, which we believe have significant value and are important to the marketing of our products to retailers.

Tempur® and Tempur-Pedic® are trademarks registered with the U.S.

Tempur®, Tempur-Pedic® and Dreams® are trademarks registered with the U.S.

Patent and Trademark Office.

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In addition, we license the Bassett® trade name in various territories under a long-term agreement.

We derive income from royalties by licensing Sealy® and Tempur brands®, technology and trademarks to other manufacturers.

We derive income from royalties by licensing Sealy®, Stearns & Foster® and Tempur® brands, technology and trademarks to other manufacturers.

Under the license arrangements, licensees have the right to use certain trademarks and current proprietary and/or patented technology.

We also provide our licensees with product specifications, research and development, statistical services and marketing programs.

For the year ended December 31, 2020, our licensing activities as a whole generated net royalties of approximately $21.9 million.

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For the year ended December 31, 2021, our licensing activities as a whole generated royalties of approximately $29.1 million.

Governmental Regulation

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We also periodically dispose of small amounts of used machine lubricating oil and air compressor waste oil, primarily by recycling.

In the U.S., we are subject to federal, state and local laws and regulations relating to environmental health and safety, including the Federal Water Pollution Control Act and the Comprehensive Environmental Response, Compensation and Liability Act.

In the U.S., we are subject to federal, state and local laws and regulations relating to environmental health and safety, including the Federal Water Pollution Control Act, the Clean Air Act and the Resource, Conservation and Recovery Act.

We believe that we are in compliance with all applicable international, federal, state and local environmental statutes and regulations.

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We are not aware of any pending federal environmental legislation that would have a material impact on our operations, and have not been required to make, and do not expect to make, any material capital expenditures for environmental control facilities in the foreseeable future.

In connection with sales of our products, we often collect and process personal data from our customers.

As such, we are subject to certain regulations relating to information technology security and personal data protection and privacy.

In connection with sales of our products and operation of our business, we collect and process personal data from our customers and employees.

As such, we are subject to certain laws and regulations relating to information technology security and personal data protection and privacy.

For example, in 2018, the European Union adopted the General Data Protection Regulation ("GDPR"), which took effect in May 2018.

The GDPR imposed a new and expanded set of ongoing compliance requirements on companies, including us, that process personal data from citizens living in the European Union ("EU").

The GDPR imposed a new and expanded set of ongoing compliance requirements on companies, including us, that process personal data from citizens living in the European Union.

In addition, there are country-specific data privacy laws in Europe which tend to follow the principles laid out in the GDPR, but in some cases, impose additional requirements on data controllers.

In addition, several U.S.

states have recently introduced legislation that mirror some of the protections provided by the GDPR.

California’s Consumer Privacy Act ("CCPA") came into effect on January 1, 2020 and granted consumers in California certain rights related to the access to, deletion of, and sharing of their personal information that is collected by businesses, including us.

We have implemented a global compliance system and have put reasonable measures in place to facilitate adherence to the continuing compliance requirements of data privacy laws such as the GDPR and CCPA.

states have also recently introduced legislation that mirror some of the protections provided by the GDPR, such as the California Consumer Privacy Act ("CCPA"), the Virginia Consumer Data Protection Act ("VCDPA") and the Colorado Privacy Act ("CPA").

The CCPA came into effect on January 1, 2020, the VCDPA on March 2, 2021 and the CPA on July 7, 2021 (together the "U.S.

state privacy laws").

state privacy laws grant consumers certain rights related to their personal information, such as access to and deletion of their personal information, placing strict data collection requirements on businesses, including ours.

In Asia-Pacific, several data privacy laws regulate the processing of personal data of resident citizens and compliance requirements vary widely.

For example, the People's Republic of China recently consolidated its existing data privacy laws into one overarching regime with the introduction of the Personal Information Protection Law ("PIPL") on November 1, 2021.

The PIPL is widely considered one of the strictest data privacy laws in the world, with significant restrictions placed on businesses transferring personal information outside of China or use without separate citizen consent.

We have implemented a global compliance system, appointed

dedicated resources and have put reasonable measures in place to facilitate adherence to the continuing compliance requirements of applicable worldwide data privacy laws such as the GDPR, CCPA, VCDPA, CPA and PIPL.

Environmental, Social and Corporate Governance ("ESG")

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Our executive leadership and board members believe that our success as an organization must be inclusive of our impact on our communities and environment.

We delivered significant progress on our environmental initiatives in 2020.

We transitioned to sourcing renewable energy from wind farms to fully power our wholly-owned U.S.

and European manufacturing operations and began the installation of solar panels to partially power our largest manufacturing operations.

In 2020, we also improved the percent of waste recycled from our North American wholly-owned manufacturing operations to 91.0% and achieved a 28.0% reduction in greenhouse gas emissions per unit produced at our wholly-owned manufacturing and logistics operations.

Our progress in 2020 represents a significant step towards achieving our new, long-term sustainability goal.

We expect to achieve carbon neutrality by fully reducing or offsetting our greenhouse gas emissions from our wholly-owned manufacturing, logistics and retail operations by 2040.

This will reduce both Scope 1 emissions (direct emissions from sources we own or control) and Scope 2 emissions (emissions attributable to the electricity we consume).

We plan to achieve this long-term goal through absolute emission reductions from the continued use of renewable energy and operational efficiency improvements, as well as the funding of carbon offsets.

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In addition, we intend to extend our sustainability efforts to our global supply chain by encouraging our suppliers to establish their own sustainability goals.

Through this initiative, we aim to increase sustainability awareness and initiatives within our supplier base with the goal of reducing our Scope 3 emissions (emissions from sources we do not directly own or control) and reducing the environmental footprint of our supply chain.

In 2020, we also delivered on our social and corporate governance initiatives.

We established a qualitative ESG performance metric in executive leadership's compensation beginning in 2021.

We also increased the wages of U.S.

salaried employees and created new jobs in an uncertain economy, increasing our global employee headcount by 21%.

Amid the global pandemic, keeping our employees and consumers safe and healthy was and continues to be our top priority.

In addition to many employee safety initiatives, we also developed and launched our Clean Shop Promise TM protocol which focused on providing customers a comfortable and hygienic experience as they returned to shopping in stores.

These industry-leading cleanliness guidelines were implemented at all of our own stores and offered to retailers.

Throughout the year, we also utilized our extensive operations and expertise to manufacture medical grade mattresses and other products for use by medical facilities and professionals on the frontline of the global COVID-19 pandemic.

We actively engaged with numerous government and healthcare organizations to assess product need and timing, donating a significant amount of product to COVID-19 workers, healthcare facilities, field hospitals and homeless shelters.

These donations marked a continuation of our legacy of charitable giving, with the Company donating over $100 million in products, cash and stock over the last ten years.

We believe that ESG initiatives can create value for our stakeholders and contribute to the financial success of our business.

Below are some highlights of the progress we made on our social values initiatives in 2021:

• Achieved an 8.4% reduction in greenhouse gas emissions per unit produced at our wholly owned manufacturing and logistics operations compared to the prior year, furthering our progress towards our goal of achieving carbon neutrality by 2040

• Improved the percent of waste diverted from landfills from our U.S.

wholly owned manufacturing operations to 94% for the trailing twelve months ended September 30, 2021, compared to 91% in 2020, furthering our progress towards our goal of achieving zero landfill waste by the end of 2022

• Installed multi-million dollar solar panel technology at our largest manufacturing site, located in Albuquerque, New Mexico, which is expected to reduce the annual electric consumption purchased from public utility by over 3 million kWh

• The Tempur Sealy Foundation made its largest gift yet in the form of $2 million to support the establishment of the Tempur Sealy Pediatric Sleep Center at Kentucky Children's Hospital

• Designed and developed Sealy Naturals, a mattress line made with sustainable materials, that will launch in the U.S.

• Developed accessible marketing material and shopping experiences by implementing a bilingual marketing program and reflecting our diverse consumer base in advertising campaigns

Corporate Governance

• The Nominating Corporate Governance Committee of our Board of Directors established oversight of our practices and positions relating to ESG issues

• Embedded ESG as a metric in executive leadership's compensation for 2021

• Increased the number of women represented on our Board of Directors by 50% to three directors, representing 33% of the Board's composition

Human Capital Management

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As part of our commitment to our workforce, we focus on the following key areas noted below:

Global Workforce and Diversity.

As of December 31, 2020, we had approximately 9,000 Tempur Sealy employees, approximately 6,300 of which are located in the U.S.

and 2,700 in the rest of the world.

We are committed to continuing our efforts to ensure that we have a diverse workforce in terms of demographic, thought and experience.

To realize our commitment to equal opportunity employment we promote a diverse slate of qualified candidates during the hiring process;

Inclusion and Diversity

We have a diverse global workforce that includes a range of skill sets, perspectives, backgrounds, ethnicity, genders and qualifications.

We are committed to fostering a culture that is inclusive and representative of the communities where we operate.

As an Equal Employment Opportunity Employer, we are committed to providing opportunities to all employees and applicants and prohibiting discrimination and harassment.

The following are some of the actions that we take to realize our commitment to equal opportunity employment:

• Goal of promoting a diverse slate of qualified candidates during the hiring process

• Outreach with organizations in each of our local communities to increase the flow of minority, female, veteran and disabled applicants for employment

conduct an annual gender and minority pay equity analysis;

and attend external, community-based activities sponsored by local organizations assisting women, minorities, veterans and other demographic groups.

Women represent 25% of our Board of Directors and minorities represent 13% of our Board of Directors.

Freedom of Association and Collective Bargaining.

Approximately 26% of our employees are represented by various labor unions with separate collective bargaining agreements.

Due to the large number of collective bargaining agreements, we are periodically in negotiations with certain of the unions representing our employees.

We consider our overall relations with our workforce to be satisfactory.

Our current collective bargaining agreements, which are typically one to three years in length, expire at various times beginning in 2021 through 2023.

As of December 31, 2020, our North America segment employed approximately 300 individuals covered under collective bargaining agreements expiring in 2021 and our International segment employed approximately 500 individuals covered under collective bargaining agreements expiring in 2021.

Employee Retention.

Employee retention helps us operate efficiently and achieve our Company goals.

We believe our commitment to living out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees.

• Periodic gender and minority pay equity analysis

• Involvement in external, community-based activities sponsored by local organizations, including those that assist women, minorities and veterans

As part of ongoing efforts to support our understanding, tracking and transparency of inclusion and diversity within our employee population, we disclosed additional metrics in our 2022 Corporate Social Values Report located on the Tempur Sealy Investor website at http://investor.tempursealy.com.

Our website and the 2022 Corporate Social Values Report are not incorporated by reference into this Report.

Employee Health and COVID-19

We are committed to a safe and healthy work environment and are committed to our global safety policy.

With sleep and wellness at the core of our business, we recognize the connection between sleeping and living well and overall health.

We offer a number of initiatives to help our employees maintain or improve their health and wellness.

In 2021, we continued to implement numerous health and safety measures across our global operations in an effort to minimize the risk of COVID-19 infections, following all local government directives and CDC recommendations.

While working in a Tempur Sealy building, unvaccinated employees are required to wear a mask, and all employees are encouraged to maintain physical distancing.

Additionally, each employee is subject to a temperature and wellness check each time they enter the building.

Hand sanitizer and other sanitizing products are available throughout each building for employee use.

People Development and Training

Our goal is to design and offer development opportunities that improve Company performance by meeting individual learning and development needs and strengthen our culture by reinforcing Company values.

We use the 70/20/10 learning and development model.

This approach gives employees the opportunity to develop their skills through a combination of job experience (70%), mentoring (20%), and formal training (10%).

Training at Tempur Sealy includes, but is not limited to, formal training programs, leadership development mentorships, professional and industry conferences, and education assistance.

During 2021, we rolled out our new learning management system, the Learning Zone, where employees can take courses on a variety of individual and leadership development topics.

All our professional employees have access to this system, and there are thousands of individual modules offered through our partnership with Skillsoft.

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What changed 10-K

Item 1. Business