What changed in this filing

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Item 1. Business

2023-02-17 compared with 2022-02-22 · 69 added, 75 removed, 178 unchanged (45% of the section changed)

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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® and Stearns & Foster®, which are described below:

Our portfolio of product brands includes many highly recognized brands, including 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 2021 Mattress Satisfaction Report for the third year in a row.

Power 2022 Mattress Satisfaction Report for the fourth year in a row.

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

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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.

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

• Dreams ® - Dreams is the leading specialty bedding retailer in the United Kingdom ("U.K.").

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.

In addition to operating over 200 brick-and-mortar stores and an e-commerce channel throughout the U.K., 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 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.

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

In 2023, we plan to complete the rollout of a complete refresh of our North American Stearns & Foster® portfolio that began 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.

We also expect to launch a new portfolio of Tempur-Pedic® Breeze mattresses and Tempur-Ergo® Smart Bases in 2023.

The new lineup of Tempur-Pedic® Breeze products builds upon our successful legacy Breeze portfolio.

The updated collection features incremental innovation and technologies that were designed to be a solution to the most common causes of poor sleep, including aches and pains, sleeping hot and snoring.

The upgraded Tempur-Ergo® Smart Base assortment features improved ergonomic design with new, proprietary lumbar support, upgraded Sleeptracker-AI® technology and industry-leading relaxation modes, including Wave Form TM massage.

In our International segment, we are launching an all-new line of Tempur® products in over 90 markets through our wholly-owned subsidiaries and third-party distributors in 2023.

This new line of products will broaden Tempur®'s price range, with the super-premium price point ceiling maintained and the floor expanded into the premium category to expand our global addressable market.

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 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.

In 2022, we continued to drive this initiative, as we increased the number of wholesale doors retailing our products, launched e-commerce websites for Sealy® and Stearns & Foster® in the U.S.

and expanded our company-owned store footprint around the world.

We are continuing to expand our Direct channel to strengthen our distribution footprint and provide alternatives to allow the customer to shop on their preferred terms - whether online or in-store.

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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.

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

For consumers that prefer to purchase directly from the manufacturer and are seeking a more personalized and educational sales experience, we have over 700 retail stores worldwide, including our retail stores owned through our international joint venture operations.

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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.

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.

We also operate Dreams®, which 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.

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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.

We further expanded this initiative in 2022 with the opening of direct-to-consumer e-commerce platforms for Sealy® and Stearns & Foster® in the U.S.

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

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We believe that sales of products to furniture and bedding stores are typically subject to modest seasonality inherent in the bedding industry, with sales expected to be generally lower in the second and fourth quarters.

Sales in a particular quarter can also be impacted by competitive industry dynamics.

Sales in a particular quarter can also be impacted by competitive industry dynamics and global macroeconomic conditions.

Additionally, the U.S.

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For a list of our principal manufacturing and distribution facilities, please refer to ITEM 2, "Properties".

We obtain the raw materials used to produce our pressure-relieving Tempur® material and components used in the manufacture of Tempur products from outside sources.

We currently acquire chemicals and proprietary additives for Tempur products as well as other components such as textiles from a number of suppliers with manufacturing locations around the world.

We obtain the raw materials used to produce our pressure-relieving Tempur® material and components used in the manufacture of Tempur-Pedic® products from third-party sources.

We currently acquire chemicals and proprietary additives for Tempur-Pedic® products as well as other components such as textiles from a number of suppliers with manufacturing locations around the world.

These supplier relationships may be modified in order to maintain quality, cost and delivery expectations.

We do not consider ourselves dependent upon any single outside vendor as a source of raw materials for Tempur products and believe that sufficient alternate sources of supply for the same or similar raw materials are available.

All critical components are purchased under supply agreements.

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 will become available.

Raw materials for Sealy® and non-branded 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 from key suppliers for each component.

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

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

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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 from key suppliers for each component.

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

All critical components are purchased under supply agreements.

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.

For further information regarding the loss of suppliers and disruptions in the supply of our raw materials and components on the Company, please refer to "Risk Factors" in ITEM 1A of Part I of this Report.

The rapid increase in demand experienced in 2021 for bedding products challenged the entire bedding industry and supply chain, including our business.

This broad-based increase in demand coupled with supply chain constraints, which continued in 2022, has created operational challenges for production.

This constrained production for certain products increased our production costs in 2021 and 2022, and may continue to do so.

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 position ourselves to service the long-term demand outlook for our brands and products.

Research and Development

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and foreign patents and patent applications regarding certain elements of the design and function of many of our mattress and pillow products.

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

Patent and Trademark Office.

In addition, we have U.S.

applications pending for additional trademarks.

Several of our trademarks have been registered, or are the subject of pending applications, in various foreign countries.

As of December 31, 2022, we held hundreds of trademark registrations worldwide, which we believe have significant value and are important to the marketing of our products to retailers.

Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturpedic® and Stearns & Foster® are our trademarks registered with the U.S.

Patent and Trademark Office, as are many other of our registered trademarks and pending applications.

trademark registration is renewable indefinitely as long as the trademark remains in use.

We also own numerous trademarks, trade names, service marks, logos and design marks, including Sealy®, Stearns & Foster® and Sealy Posturepedic®.

We also own numerous trademarks, trade names, service marks, logos and design marks in the U.S.

and a number of other countries, including Dreams and SOVA.

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

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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.

For example, in 2018, the European Union ("EU") adopted the General Data Protection Regulation ("GDPR").

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 EU.

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.

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.

states have also recently introduced legislation offering similar protections to resident citizens to that provided under the GDPR, such as the California Privacy Rights Act ("CPRA") (which amends the California Consumer Privacy Act ("CCPA")), the Virginia Consumer Data Protection Act ("VCDPA"), the Colorado Privacy Act ("CPA"), the Connecticut Data Privacy Act ("CTDPA") and the Utah Consumer Privacy Act (“UCPA”) (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.

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

For example, in 2021, 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").

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.

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, CPRA, CCPA, VCDPA, CPA, CTDPA, UCPA and PIPL.

Environmental, Social and Corporate Governance ("ESG")

We recognize that as a corporate citizen we have a responsibility to protect our communities and environment.

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 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

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

The Nominating and Corporate Governance Committee of our Board of Directors oversees our practices and positions relating to ESG issues.

Our Chairman and CEO has ultimate responsibility for the Company's ESG performance.

Executive officers are held accountable for the Company's ESG performance through the Company's performance-based long-term equity incentive plan.

We believe that sound ESG practices can help identify, manage and mitigate risks while contributing to the financial success of our business.

Below are some highlights of the progress we made on certain of our ESG initiatives in 2022:

• 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

wholly owned manufacturing operations to 100% for the trailing twelve months ended September 30, 2022, compared to 96% in 2021

• Expanded our commitment to achieving zero landfill waste to include our corporate offices and our research and development facilities by 2025

• Achieved a 3% 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

• Substantially aligned our sustainability reporting to the Task Force on Climate-Related Financial Disclosures (TCFD) framework in 2022

• Formalized our ESG processes and stances in a new Environmental Policy Statement

• Launched our new Sealy® Naturals TM mattress collection made with sustainable and responsibly sourced materials

• Continued to bring industry-leading innovation to market that provides consumers with higher quality sleep at a variety of price points

• Contributed over $1 million through the Tempur Sealy Foundation and donated more than 8,300 mattresses worth approximately $13.7 million

• Completed the implementation of a new global enterprise resource planning ("ERP") system, which is expected to fortify our cybersecurity and drive long-term efficiencies across our global operation

• Increased the percentage of U.S.

employee base that self identifies as a minority from 47% to 49%, and increased percentage of U.S.

employee base that self identifies as female from 30% to 32%

• Increased the number of women represented on our Board of Directors from 33% to 43%

• Embedded ESG as a metric in executive leadership's 2022 compensation program

Human Capital Management

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

Inclusion and Diversity

Diversity, Equity and Inclusion

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

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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

• 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.

• Promote the consideration of a diverse slate of qualified candidates during the hiring process

• Employ a uniform, global process for determining compensation based on experience and skill sets to remove potential biases

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

• Analyze gender and minority pay equity regularly and adjust as warranted

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

As part of ongoing efforts to provide transparency regarding initiatives to promote, track and measure our diversity, equity and inclusion efforts within our employee population, we disclosed additional metrics in our 2023 Corporate Social Values Report located on the Tempur Sealy Investor website at http://investor.tempursealy.com.

Our website and the 2023 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.

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

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

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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.

We offer employees access to a learning management system where they 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.

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-K

Item 1. Business