What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-17 compared with 2022-02-22 · 77 added, 113 removed, 178 unchanged (52% of the section changed)

2 unchanged sentences

Risks related to our Business and Economic Environment

The uncertainty of the ongoing COVID-19, including new variants, could have a material adverse effect on our business, operations, or financial results in future periods.

The novel strain of coronavirus (COVID-19) first identified in Wuhan, China in December 2019 has now spread across the world.

The outbreak, and measures taken to contain or mitigate it, have had dramatic adverse consequences for the economy, including on demand, operations, supply chains and financial markets.

The nature and scope of the consequences to date are difficult to evaluate precisely, and their future course is impossible to predict with confidence.

The COVID-19 pandemic and related responses are continuing to evolve and, therefore, continue to present potential new risks to our business, particularly in light of new variants of the virus.

We have seen and expect to continue to see effects of the COVID-19 crisis on our business operations including impacts such as the following:

increased raw material prices, a decline in consumer confidence and spending, further increase in unemployment which could impact consumers' disposable income and, in turn, decrease sales of our products, required isolation in certain markets, disruptions in our supply chain, as the outbreak has disrupted travel, manufacturing and distribution throughout the world, increases in operating costs due to disruptions, the cost of complying with public health vaccine and testing mandates and personal protective equipment requirements and other increased employment-related costs.

The rapid development and uncertainty of the pandemic precludes any prediction as to the ultimate impact of COVID-19.

The full extent of the impact and effects of COVID-19 on our business,

operations, liquidity, financial condition and results of operations remain uncertain at this time but could be material.

Any of these events could potentially result in a material adverse impact on our business and results of operations.

We operate in a highly competitive industry and if we are unable to compete successfully, we may lose customers and our sales may decline.

13 unchanged sentences

We maintain relatively small supplies of our raw materials and components at our manufacturing facilities, and any disruption in the shipment of supplies could interrupt production of our products, which in turn could result in a decrease of our sales or could cause an increase in our cost of sales, either of which could decrease our liquidity and profitability.

Raw materials for Sealy, Sherwood Bedding 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 under supply agreements.

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 are available.

Our adjustable base 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 and alternate suppliers.

However, if a key supplier for an applicable component failed to supply components in the amount we require, this could significantly interrupt production of our products and increase our production costs in the near term.

Such a disruption could occur for a variety of reasons, including changes in international trade duties and other aspects of international trade policy, labor shortages, natural disasters, pandemics and political events.

For example, the ongoing conflict between Russia and Ukraine could result in a temporary disruption in supply of a component in our International segment.

If a key supplier for an applicable component failed to supply components in the amount we require, this could significantly interrupt production of our products and increase our production costs in the near term.

If we are not able to successfully mitigate such supply chain risks, we could experience disruptions in production or increased costs, which may result in a decrease in our gross margin or reduced sales, and have a material adverse effect on our business, results of operations and financial condition.

Changes in economic conditions, including inflationary trends in the price of our input costs, such as raw materials, could adversely affect our business and financial results.

Changes in economic conditions, including inflationary trends in the price of our input costs, such as raw materials, has adversely affected our business and financial results and could continue to do so in the future.

The bedding industry is subject to volatility in the price of petroleum-based and steel products, which affects the cost of polyurethane foam, polyester, polyethylene foam and steel innerspring component parts.

1 unchanged sentence

Given the significance of the cost of these materials to our products, volatility in the prices of the underlying commodities can significantly affect profitability.

We have experienced and may continue to experience, volatility and increases in the price of certain of these raw materials as a result of a global market and supply chain disruptions and the broader inflationary environment related to the COVID-19 pandemic.

We have experienced and may continue to experience, volatility and increases in the price of certain of these raw materials as a result of global market and supply chain disruptions and the broader inflationary environment related to the ongoing macroeconomic conditions.

Throughout 2022, we implemented pricing actions to mitigate these known commodity headwinds.

In January 2022, we implemented pricing actions designed to offset the dollar impact of these inflationary headwinds.

To the extent we are unable to absorb higher costs, or pass any such higher costs to our customers, our gross margin could be negatively affected, which could result in a decrease in our liquidity and profitability.

The ongoing COVID-19 pandemic, as well as other global health crises, could have a material adverse effect on our business, operations, or financial results in future periods.

The COVID-19 pandemic and it's variants, as well as periodic spikes in infection rates globally, and related responses are continuing to evolve and, therefore, could continue to present potential new risks to our business.

We have seen and expect to continue to see that the COVID-19 pandemic has, and there may be other global health crises in the future that will have, effects on our business operations, including secondary and tertiary effects such as increased raw material prices, a decline in consumer confidence and spending, further increase in unemployment which could impact consumers' disposable income and, in turn, decrease sales of our products, required isolation in certain markets, disruptions in our supply chain, as the outbreak has disrupted travel, manufacturing and distribution throughout the world and increases in operating costs due to disruptions.

As COVID-19 continues to evolve, or if similarly severe global health crises were to develop, the full extent of the impact and effects on our business, operations, liquidity, financial condition and results of operations remain uncertain and could be material.

Any of these events could potentially result in a material adverse impact on our business and results of operations.

Risks related to operating our business

11 unchanged sentences

• our ability to successfully mitigate the impact of headwinds facing our business, including increased commodity prices and the influx of low-end, imported beds that compete with certain of our products;

• our ability to successfully integrate potential acquisition opportunities;

• our ability to pursue and successfully integrate potential acquisition opportunities;

• general economic factors that impact consumer confidence, disposable income or the availability of consumer financing.

1 unchanged sentence

Each year we invest significant time and resources in research and development to improve our product offerings and launch new products.

In 2021, we began refreshing our Sealy portfolio with the launch of new models in our Posturepedic Plus TM , Posturepedic® and Essentials product lines and expect to complete this rollout in 2022.

Additionally in 2022, we are launching a refreshed Stearns & Foster product line and introducing a new Sealy® Naturals™ product line in the U.S.

and beginning the launch of a new line of Tempur mattresses internationally.

In 2022, we completed the launch of our refreshed Sealy portfolio of new models in our Posturepedic Plus TM , Posturepedic® and Essentials product lines.

We also began the launch of a refreshed Stearns & Foster product line and introduced a new Sealy® Naturals™ product line in the U.S.

In 2023, we expect to complete the launch of our refreshed Stearns & Foster® product line and begin the launch of a new line of Tempur® mattresses internationally.

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

There are a number of risks that are inherent in our new product line introductions, including that the anticipated level of market acceptance may not be realized, which could negatively impact our sales.

1 unchanged sentence

Because we depend on certain significant customers, a decrease or interruption in their business with us would reduce our sales and results of operations.

Our top five customers, collectively, accounted for approximately 33% of our net sales in 2021, and of these, there was one wholesale customer that contributed approximately 15%.

The credit environment in which our customers operate has been

relatively stable over the past few years.

Our top five customers, collectively, accounted for approximately 32% of our net sales in 2022, and of these, one wholesale customer contributed over 15%.

The credit environment in which our customers operate has been relatively stable over the past few years.

However, there have been signs of deterioration in the U.S.

retail sector, both nationally and regionally.

Some additional retailers that carry our products may consolidate, undergo restructurings or reorganizations, experience financial difficulty, or realign their affiliations, any of which could decrease the number of stores that carry our products or increase the ownership concentration in the retail industry.

retail sector, both nationally and regionally, including among our competitors.

Some additional retailers that carry our products, as well as some of our competitors, may

consolidate, undergo restructurings or reorganizations, may be acquired, experience financial difficulty or bankruptcy, or realign their affiliations, any of which could decrease the number of stores that carry our products, increase the ownership concentration in the retail industry or otherwise negatively impact the credit and retail environments in which we operate.

An increase in the concentration of our sales to large customers may negatively affect our profitability due to the impact of volume and other incentive programs related to these customers.

3 unchanged sentences

We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including cyber-based attacks, could harm our ability to effectively operate our business.

Consistent with other manufacturing and retail operations, we are dependent on information technology, including the Internet, for the storage, processing, and transmission of our electronic, business-related information assets.

We leverage our internal information technology, infrastructures, and those of our service providers, to enable, sustain and support our global business interests.

As such, our ability to effectively manage our business depends significantly on our information systems.

The failure of our current systems, or future upgrades, to operate effectively or to integrate with other systems, or a breach in security of these systems could cause reduced efficiency of our operations, and remediation of any such failure, problem or breach could reduce our liquidity and profitability.

Any disruptions caused by the failure of these systems could adversely impact our day-to-day business and decision making and could have a material adverse effect on our performance.

We are subject to laws and regulations relating to information technology security and personal data protection and privacy and this legislative landscape is forever evolving.

For example, the GDPR, which took effect in May 2018, the CCPA, which took effect in January 2020 and the PIPL, which took effect in November 2021, have imposed new and expanded compliance requirements on companies, including us, that process personal data from citizens living in the European Union, California and China.

In addition, there are country-specific data privacy laws in Europe and elsewhere in the world, such as those in Japan, Korea, Australia, New Zealand, Canada and Mexico, and state-specific data privacy laws forthcoming in the U.S., such as those in Virginia and Colorado, which broadly follow key principles laid out in the GDPR and the CCPA, but in some cases, impose different and additional requirements on businesses like ours.

We are actively working to ensure ongoing compliance with all data privacy and information technology security laws and regulations worldwide to which we are subject, which involves substantial resource and costs.

Despite our ongoing efforts to maintain compliance, we may not be successful due to various factors within or outside of our control.

Failure to comply with applicable laws and regulations could result in costly investigations from regulators and litigation, expose us to potentially significant penalties, and result in negative publicity that could damage our reputation and credibility.

Prior to 2020, we successfully implemented a new enterprise resource planning, or "ERP," system across several of our global subsidiaries.

We successfully implemented new ERP systems in certain significant U.S.

subsidiaries in 2020 and January 2021 and are continuing to implement this ERP system in other significant U.S.

subsidiaries with key go-live dates in 2022.

This new system replaces a substantial portion of our legacy systems that have historically supported our operations.

If we are unable to successfully continue the implementation of the replacement system or if errors or failures in the implementation process lead to production shutdowns, our business may be materially impacted and disrupted and we may be required to engage in unanticipated additional use of capital and other resources, which may adversely impact our results of operations.

In addition, if the cost of implementing this ERP system increases above our estimates, this could have a significant adverse effect on our profitability.

We rely on third party technology service providers in the ordinary course of our Direct channel.

The services provided include website infrastructure and hosting services, digital advertising platforms, private label credit card financing program and credit card payment authorization and capture services in support of our business, all of which are customarily provided by third party technology service providers for similarly-situated retail business operations.

Like others in the industry, we experience cyber-based attacks and incidents from time to time.

In the event that we or our service providers are unable to prevent or detect and remediate cyber-based attacks or other security incidents in a timely manner, our operations could be disrupted or we may incur financial or reputational losses arising from the theft, misuse, unauthorized disclosure or destruction of our information assets.

We rely on information technology systems to operate and manage our business and to process, maintain and safeguard information essential to our business as well as information relating to third-parties, including our customers, suppliers and employees.

These systems are vulnerable to events beyond our reasonable control, including cyberattacks and security breaches, and we may be subject to failure of our current systems, or future upgrades, to operate effectively or to integrate with other systems.

Such events could result in operational slowdowns, shutdowns or other difficulties;

loss of revenues or market share;

compromise or loss of sensitive or proprietary information;

destruction or corruption of data;

costs of remediation, upgrades, repair or recovery;

breaches of obligations to third parties under privacy laws or contracts;

or damage to our reputation or customer relationships;

each of which, depending on the extent or duration of the event, could materially and adversely impact our business, operating results or financial condition.

For example, we have implemented a new enterprise resource planning system ("ERP") across several of our global subsidiaries and in certain significant U.S.

subsidiaries throughout 2020, 2021 and 2022.

The new ERP system replaces a substantial portion of our legacy systems and if we are unable to successfully implement the replacement system or if errors or failures in the implementation process lead to production shutdowns, our business may be materially impacted and disrupted and we may be required to engage in unanticipated additional use of capital and other resources, which may adversely impact our results of operations or reduce our profitability.

We also rely on third-party technology service providers in ordinary course operations of our Direct channel, such as website hosting, payment systems and digital advertising.

We and our third-party service providers may be victims to cyber-based attacks and incidents from time to time, and failure to prevent, detect or remediate such events may disrupt our operations could and cause financial or reputational harm, including if insurance coverage is insufficient to cover all losses or all types of claims that may arise.

Furthermore, we are subject to a constantly evolving regulatory landscape of laws and regulations relating to information technology security and personal data protection and privacy, including but not limited to the EU's GDPR and California’s CCPA, each of which have imposed new and expanded compliance requirements on companies, including us, that process personal data from citizens living in applicable jurisdictions.

Any failure to comply with applicable laws and regulations relating to information technology and data privacy, due to various factors within or outside of our control, could result in costly investigations from regulators and litigation, expose us to potentially significant penalties, and result in negative publicity that could damage our reputation and credibility.

Deterioration in labor relations could disrupt our business operations and increase our costs, which could decrease our liquidity and profitability.

35 unchanged sentences

Furthermore, our patents may not provide meaningful protection and patents may never issue from pending applications.

It is also possible that others could bring claims of infringement against us, as our principal product formula and

manufacturing processes are not patented, and that any licenses protecting our intellectual property could be terminated.

It is also possible that others could bring claims of infringement against us, as our principal product formula and manufacturing processes are not patented, and that any licenses protecting our intellectual property could be terminated.

If we were unable to maintain the proprietary nature of our intellectual property and our significant current or proposed products, this loss of a competitive advantage could result in decreased sales or increased operating costs, either of which would decrease our liquidity and profitability.

4 unchanged sentences

The loss of the services of any members of our executive management team could impair our ability to execute our business strategy and as a result, reduce our sales and profitability.

We depend on the continued services of our executive management team.

We depend on the continued services of our executive management team, whose average tenure with the Company is 15 years.

Our executive team's leadership experience provides us with a competitive advantage, as the team sets clear initiatives for the organization and enhances high-performing teams by empowering them to act quickly, especially during challenging periods.

The loss of key personnel could have a material adverse effect on our ability to execute our business strategy and on our financial condition and results of operations.

1 unchanged sentence

Regulatory, Legal and Financial Risks

We entered into the Advance Pricing Agreement Program to resolve a tax matter in Denmark, and a failure to resolve the matter or a change in factors or circumstances could adversely impact our income tax expense, effective tax rate and cash flows.

We are a participant in the Advance Pricing Agreement Program (the "APA Program") for the tax years 2012 through 2022, under which the U.S.

Internal Revenue Service ("IRS"), on our behalf, will negotiate directly with the Danish Tax Authority ("SKAT") with respect to the royalty to be paid by a U.S.

subsidiary of the Company to the Company's Danish subsidiary for the right to utilize certain intangible assets owned by the Danish subsidiary.

If this matter is not resolved successfully or there is a change in facts or circumstances, we may be required to further increase our uncertain income tax provision or decrease our deferred tax asset related to this matter, which could have a material impact on the Company's reported earnings.

For a description of these matters and additional information please refer to Note 13, "Income Taxes," to the accompanying Consolidated Financial Statements.

We may be adversely affected by fluctuations in exchange rates, which could affect our results of operations, the costs of our products and our ability to sell our products in foreign markets.

2 unchanged sentences

dollar strengthens relative to the Euro or other foreign currencies where we have operations, for example, there will be a negative impact on our operating results upon translation of those foreign operating results into the U.S.

In 2021, foreign currency exchange rate changes positively impacted our net income by approximately 1.8% and positively impacted adjusted EBITDA, which is a non-GAAP financial measure, by approximately 1.4%.

In 2022, foreign currency exchange rate changes negatively impacted our net income by approximately 2.5% and negatively impacted adjusted EBITDA, which is a non-GAAP financial measure, by approximately 0.8%.

Changes in foreign currency exchange rates could have an adverse impact on our financial condition, results of operations and cash flows.

18 unchanged sentences

For further discussion regarding our debt covenants and compliance, refer to "Management's Discussion and Analysis" included in Part II, ITEM 7 of this Report and Note 6, "Debt," in our Consolidated Financial Statements included in Part II, ITEM 8 of this Report.

Our variable rate debt agreements, including our 2019 Credit Agreement, use LIBOR, which is subject to uncertainty.

In March 2021, the United Kingdom’s Financial Conduct Authority (the "FCA"), which regulates LIBOR, confirmed that all of the LIBOR settings for Euro and Swiss Franc and some of the LIBOR settings for Japanese Yen, Sterling and US dollars will cease in December 2021 and the remainder of the LIBOR settings for U.S.

dollars will cease in June 2023.

When LIBOR ceases to exist or is no longer representative of the underlying market, our variable rate debt agreements with interest rates that are indexed to LIBOR will use various alternative methods to calculate the applicable interest rate, which could result in increases in interest rates on such debt and adversely impact our interest expense, results of operations and cash flows.

Further, we may need to amend our variable rate debt agreements to replace LIBOR with a new reference rate.

As of December 31, 2021, we do not utilize any derivatives or hedging strategies that have a LIBOR component.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, may replace U.S.

Dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities called the Secured Overnight Financing Rate ("SOFR").

Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR and any successor rates for LIBOR is uncertain.

For information regarding our sensitivity to changes in interest rates, refer to "Quantitative and Qualitative Disclosures About Market Risk" included in Part II, ITEM 7A of this Report.

We are a participant in the Advance Pricing Agreement Program (the "APA Program") for the tax years 2012 through 2024, under which the U.S.

Internal Revenue Service ("IRS"), on our behalf, will negotiate directly with the Danish Tax Authority ("SKAT") with respect to the royalty to be paid by a U.S.

subsidiary of the Company to the Company's Danish subsidiary for the right to utilize certain intangible assets owned by the Danish subsidiary.

In December 2022, SKAT and the IRS agreed on a preliminary framework to conclude the Company's Danish tax matter for the years 2012 through 2024, which resulted in an income tax benefit recorded in the fourth quarter of 2022.

The preliminary framework is expected to be finalized during 2023.

For a description of these matters and additional information please refer to Note 13, "Income Taxes," to the accompanying Consolidated Financial Statements.

We are subject to risks from our international operations, such as complying with U.S.

9 unchanged sentences

and the potential imposition of trade or foreign exchange restrictions, tariffs and other tax increases, inflation and unstable political situations and labor issues.

We are also limited in our ability to independently expand in certain international markets where we have granted licenses to

manufacture and sell Sealy® bedding products.

We are also limited in our ability to independently expand in certain international markets where we have granted licenses to manufacture and sell Sealy® bedding products.

Fluctuations in the rate of exchange between currencies in which we do business may affect our financial condition or results of operations.

1 unchanged sentence

and abroad, could materially impact our business.

Regulatory requirements, including, but not limited to, trade, environmental, health and safety requirements, may require costly expenditures and expose us to liability.

Our products and our marketing and advertising programs are subject to regulation in the U.S.

by various federal, state and local regulatory authorities, including the Federal Trade Commission, the Consumer Product Safety Commission and the U.S.

Food and Drug Administration.

In addition, other governments and agencies in other jurisdictions regulate the sale and distribution of our products.

These rules and regulations may change from time to time, or may conflict.

There may be continuing costs of regulatory compliance including continuous testing, additional quality control processes and appropriate auditing of design and process compliance.

For example, the CPSC and many foreign jurisdictions have adopted rules relating to fire retardancy standards for the mattress industry.

Further, some cities, states and the U.S.

Congress continue to consider fire retardancy regulations that may be different or more stringent than the CPSC standard.

Adoption of multi-layered regulatory regimes, particularly if they conflict with each other, could increase our costs, alter our manufacturing processes and impair the performance of our products which may have an adverse effect on our business.

We are also subject to various health and environmental provisions, such as California Proposition 65 (the Safe Drinking Water and Toxic Enforcement Act of 1986) and 16 CFR Part 1633 (Standard for the Flammability (Open Flame) of Mattress Sets) and in our international jurisdictions we are subject to the medical devices regulatory authorities such as the Medicines and Healthcare products Regulatory Agency (MHRA) in the UK and the International Chamber of Commerce Advertising and Marketing Communications Code.

Our marketing and advertising practices could also become the subject of proceedings before regulatory authorities or the subject of claims by other parties and could require us to alter or end these practices or adopt new practices that are not as effective or are more expensive.

In addition, we are subject to laws and regulations both in the U.S.

and internationally, relating to pollution, environmental protection and occupational health and safety.

We may not be in complete compliance with all such requirements at all times.

We have made and will continue to make capital and other expenditures to comply with environmental and health and safety requirements.

If a release of hazardous substances occurs on or from our properties or any associated offsite disposal location, or if contamination from prior activities is discovered at any of our properties, we may be held liable and the amount of such liability could be material.

As a manufacturer of bedding and related products, we use and dispose of a number of substances, such as glue, lubricating oil and solvents, as well as certain foam ingredients, that may subject us to regulation under numerous foreign, federal and state laws and regulations governing the environment.

Among other laws and regulations, we are subject in the U.S.

to the Federal Water Pollution Control Act, the Resource Conservation and Recovery Act, the Clean Air Act and related state and local statutes and regulations in our international jurisdictions we are subject to the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), the Waste from Electrical and Electronic Equipment Directive (WEEE) and the General Product Safety Directive amongst others.

Our operations could also be impacted by a number of pending legislative and regulatory proposals to address greenhouse gas emissions in the U.S.

and other countries.

Certain countries have adopted the Kyoto Protocol.

New greenhouse gas reduction targets have been established under the Kyoto Protocol, as amended, and certain countries, including Denmark, have adopted the new reduction targets.

This and other international initiatives under consideration could affect our International operations.

These actions could increase costs associated with our operations, including costs for raw materials, pollution control equipment and transportation.

Because it is uncertain what laws will be enacted, we cannot predict the potential impact of such laws on our future consolidated financial condition, results of operations, or cash flows.

We have made and will continue to make expenditures to comply with environmental and health and safety requirements.

In the event contamination is discovered with respect to one or more of our current or former properties, government authorities or third parties may bring claims related to these properties, which could have a material effect on our profitability.

We are subject to various regulatory requirements, including, but not limited to, trade, environmental, health and safety requirements, any violation of which may require costly expenditures and expose us to liability.

We, and our products, are subject to extensive regulation in the U.S.

by various federal, state and local regulatory authorities, including the Federal Trade Commission, the Consumer Product Safety Commission ("CSPC") and the U.S.

Food and Drug Administration, and by similar international regulatory regimes.

We are subject to various health and environmental provisions, such as California Proposition 65 (the Safe Drinking Water and Toxic Enforcement Act of 1986) and in our international jurisdictions we are subject to the medical devices regulatory authorities such as the Medicines and Healthcare products Regulatory Agency ("MHRA") and the International Chamber of Commerce Advertising and Marketing Communications Code.

We are subject to laws and regulations both in the U.S.

and internationally, relating to pollution, environmental protection and occupational health and safety, such as the Federal Water Pollution Control Act, and Registration, Evaluation, Authorization and Restriction of Chemicals ("REACH"), amongst others.

As a manufacturer of bedding and related products, we are subject to regulations governing the environment.

Failure to comply with any of these regulatory requirements may result in liability exposure and costly expenditures to remediate or pay for liabilities.

For example, if a release of hazardous substances occurs on or from our properties or any associated offsite disposal location, or if contamination from prior activities is discovered at any of our properties, we may be held liable if there has been a violation of the regulatory requirement, and the amount of such liability could be material.

Further, any of the rules and regulatory requirements we are subject to may change from time to time, or may conflict.

For example, our operations could be impacted by a number of pending legislative and regulatory proposals to address greenhouse gas emissions in the U.S.

and other countries, including the Kyoto Protocol.

We may not be in complete compliance with any such requirements, or at all times, and though we have made and will continue to make expenditures to comply these regulatory requirements, violation of any of them or failure to comply could expose us to liability, subject us to monetary liabilities and could harm our business, reputation and financial condition.

Our pension plans are currently underfunded and we may be required to make cash payments to the plans, reducing our available cash.

We maintain certain single employer defined benefit pension plans at certain of our manufacturing facilities.

These plans cover both active employees and retirees.

The plans are currently underfunded, and under certain circumstances, including the decision to close or sell a facility, we could be required to pay amounts with respect to this underfunding.

Such events may significantly impair our profitability and liquidity and the possibility of having to make these payments could affect our decision on whether to close or sell a particular facility.

We also contribute to multi-employer pension plans according to collective bargaining agreements that cover certain union-represented employees.

We contribute to multi-employer pension plans according to collective bargaining agreements that cover certain union-represented employees.

Participating in these multi-employer plans exposes us to potential liabilities if the multi-employer plan is unable to pay its underfunded obligations or we trigger a withdrawal event.

13 unchanged sentences

An antitrust or consumer protection class action or individual suit against us could result in potential liabilities, substantial costs, treble damages, and the diversion of our management’s attention and resources, regardless of the outcome.

Climate change and related environmental issues could have a material adverse impact on us.

Climate-related events, such as an increase in frequency and severity of storms, floods, wildfires, droughts, hurricanes, freezing conditions and other natural disasters, may have a long-term impact on our business, financial condition and results of operations.

For example, such climate-related events could result in, among other things, physical damage to and complete or partial closure of one or more of our facilities, temporary or long-term disruption in the supply of products, increased insurance costs or loss of coverage, legal liability and reputational harm.

While we seek to mitigate our business risks associated with climate events, we recognize that there are inherent climate-related risks regardless of where we conduct our business.

Current or future insurance arrangements may not provide protection for costs that may arise from such events, particularly if such events are catastrophic in nature or occur in combination.

Further, the long-term effects of climate change on general economic conditions and the mattress and pillow industries in particular are unclear, and changes in the supply, demand or available sources of energy and the regulatory and other costs associated with energy production and other impacts of climate-related events may affect the availability or cost of goods and services, including natural resources and raw materials, necessary to run our business.

While we continue to focus on strategies and systems to address the long-term risks posed by climate change, such as reducing our greenhouse gas emissions and packaging waste, there can be no assurance that such strategies and systems will adequately protect against such risks.

Any disruption in our operations or additional expenses caused by the long-term effects of climate change could have a material adverse effect on our operations.

Changes in tax laws could have an adverse effect on us, the mattress and pillow industries, our customers, and the value of collateral securing our loans.

The Inflation Reduction Act of 2022 was signed into law by President Biden on August 16, 2022 which makes significant changes to the U.S.

tax law, including the introduction of a corporate alternative minimum tax of 15% of the "adjusted financial statement income" of certain domestic corporations as well as a 1% excise tax on the fair market value of stock repurchases by certain domestic corporations, effective for tax years beginning in 2023.

We currently do not expect the tax-related provision of the Inflation Reduction Act to have a material impact on our financial results.

Risks Related to Ownership of Our Common Stock

14 unchanged sentences

Shares may be repurchased from time to time, in the open market or through private transactions, subject to market conditions, in compliance with applicable state and federal securities laws.

It is uncertain how the Inflation Reduction Act of 2022 and the imposition of a 1% excise tax on the fair market value of share repurchases by certain domestic corporations, effective for tax years beginning in 2023, will affect our share repurchase program.

The timing and amount of repurchases, if any, will depend upon several factors, including market and business conditions, restrictions in our debt agreements, the trading price of our common stock and the nature of other investment opportunities.

12 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-K

Item 1A. Risk Factors