What changed in this filing

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Item 1. Business

2024-02-16 compared with 2023-02-17 · 54 added, 64 removed, 183 unchanged (39% of the section changed)

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

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 marked our entrance into the private label category.

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

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

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 proprietary Tempur material precisely adapts to the shape, weight and temperature of the consumer and creates fewer pressure points, reduces motion transfer and provides personalized comfort and support.

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

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.

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

Power 2023 Mattress Satisfaction Report.

This is the third consecutive year winning the online mattress category and the fifth consecutive year winning at least one J.D.

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

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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 2021 Top 20 U.S.

Sealy was also the #1 best-selling mattress brand according to Furniture Today's 2021 Top 20 U.S.

Bedding Producers methodology, which includes Stearns & Foster®.

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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 , Dreams®, 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®, Dreams®, SOVA and a variety of other retail brands internationally, which operate in various countries.

The retail brands named above are described below:

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

• Sleep Solutions Outlet TM - Sleep Solutions Outlet stores serve as a channel of high-quality comfort returns, as well as discontinued or factory close-out mattresses and bases.

• Sleep Solutions Outlet ® - Sleep Solutions Outlet stores serve as a channel of high-quality comfort returns, as well as discontinued or factory close-out mattresses and bases.

There are a limited number of stores across the U.S.

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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 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 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.

In 2024, we are launching a new portfolio of Tempur-Pedic® Adapt mattresses in our North America segment.

This next-generation technology sets the standard for support, pressure relief and motion cancellation with Tempur material precisely responding to your body's weight, shape, and temperature in a way no other mattress does.

This collection was designed to complement the Tempur-Pedic® Breeze collection and Tempur-Ergo® Smart Bases launched in 2023 and finishes the complete reset of our core Tempur lineup.

In our International segment in 2024, we plan to complete the rollout of the new line of Tempur® products in over 90 markets through our wholly-owned subsidiaries and third-party distributors.

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.

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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 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.

In 2023, we continued to drive this initiative, as we increased the number of wholesale doors retailing our products 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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For consumers that prefer to purchase directly from the manufacturer and are seeking a more personalized and educational sales experience, we have over 750 retail stores worldwide, including our retail stores owned through our international joint venture operations.

As of December 31, 2022, we had 98 Tempur-Pedic® retail stores throughout the U.S.

As of December 31, 2023, we had over 100 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, 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 107 stores in 2022.

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

Going forward, we expect our strategy for opening additional locations of Tempur-Pedic® retail stores to continue targeting high traffic, premium locations that complement our existing distribution.

In addition to our high-end Tempur-Pedic® retail stores, we operate Sleep Outfitters®, a regional bedding retailer that had over 100 stores in 2023.

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.

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As such, having an omni-channel presence is more important than ever, with most customers completing research and shopping both online and in-stores before making their purchase decision.

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.

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.

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Manufacturing and Distribution

In 2023, we opened our newest and largest state-of-the-art manufacturing facility in Crawfordsville, Indiana.

The new facility has the capabilities to manufacture a wide variety of bedding products and components for branded and non-branded operations.

The facility's Midwest location enables us to balance manufacturing and distribution in the region, allowing us to more efficiently service our customers and capture the projected long-term demand to support our rapidly growing OEM business.

Our products are currently manufactured and distributed through our global network of facilities.

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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 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.

Raw materials for Sealy® and non-branded products consist mainly of polyurethane 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.

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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.

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

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, 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.

As of December 31, 2023, we held hundreds of trademark registrations worldwide, which we believe have significant value and are important to the marketing of our products to retailers and consumers.

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

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

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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.

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.

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

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

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These regulations vary among the states, countries and localities in which we do business.

The regulations generally impose requirements as to the proper labeling of bedding merchandise, restrictions regarding the identification of merchandise as "new" or otherwise, controls as to hygiene and other aspects of product handling and sale and penalties for violations.

The regulations generally impose requirements as to the proper labeling of bedding merchandise, restrictions regarding the identification of merchandise as "new" or otherwise, controls as to chemical and other substances, hygiene and other aspects of product safety, handling, marketing and sale and penalties for violations.

Consumer Product Safety Commission ("CPSC") has adopted rules relating to fire retardancy standards for the mattress industry.

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Future changes to these standards may require modifications to our products to comply with such changes.

For example, the UK is seeking to implement new regulations in October 2024, which will include measures to reduce the use of chemical fire retardants.

We are also subject to environmental and health and safety requirements with regard to the manufacture of our products and the conduct of our operations and facilities.

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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 are subject to similar requirements in Canada, the EU and other jurisdictions, with further waste management and prevention, and other environmental protection regulations coming into effect both this year and over the next few years.

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

We do not expect that compliance with international, federal, state or local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, will have a material effect upon our capital expenditures, earnings or competitive position.

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.

We are not aware of any pending international or 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 or other regulatory requirements in the foreseeable future.

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 ("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 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.

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

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

The GDPR imposed ongoing compliance requirements on companies, including us, that process personal data from citizens resident in the EU.

In addition, there are country-specific data privacy laws in Europe that impose additional requirements on data controllers and several of these laws are more stringent than the GDPR.

In recent years, several U.S.

states have adopted legislation offering similar protections for resident citizens, such as the California Privacy Rights Act (which amends the California Consumer Privacy Act ("CCPA")), the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Connecticut Data Privacy Act and the Utah Consumer Privacy Act (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.

Several other states have recently introduced similar state privacy laws.

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

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

For example, the People's Republic of China consolidated its 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 personal data protection laws in the world, with significant restrictions placed on the transfer of personal information outside of China or use without separate citizen consent.

In response, we have implemented a global compliance system, appointed dedicated resources and have put measures in place to facilitate adherence to the continuing compliance requirements of applicable worldwide data privacy laws.

Environmental, Social and Corporate Governance ("ESG")

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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.

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Below are some highlights of the progress we made on certain of our ESG initiatives in 2023:

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

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

• Achieved zero waste to landfill status at our Canadian and Mexican manufacturing operations and maintained our zero waste to landfill status at our U.S.

and European manufacturing operations

• Achieved zero waste to landfill status at 75% of our corporate offices and R&D labs, in line with our goal to achieve zero landfill waste at our corporate offices and R&D labs by 2025

• Progressed towards our goal of achieving carbon neutrality by 2040 through reducing greenhouse gas emissions at our wholly owned manufacturing and logistics operations by 4%* compared to the prior year

• Summarized and published our approach to comprehensive chemical supply management in a Chemical Safety Policy

*This excludes the impact of new facilities opened in the trailing twelve-month period.

Including the impact of new facilities, we reduced greenhouse gas emissions at our wholly owned manufacturing and logistics operations by 1% compared to the prior year.

• Continued to bring industry-leading innovation to market that provides consumers with access to higher quality sleep at a variety of price points, including the new U.S.

product launches of Tempur-Breeze®, Tempur-Ergo® Smart Base, and Stearns & Foster®, and the new international launches of Tempur® products

• Contributed approximately $0.8 million through the Tempur Sealy Foundation and donated more than 12,100 mattresses worth approximately $16.9 million, bringing our ten-year donation total to over $100 million

• Increased transparency and expanded disclosures around Employee Health & Safety, Ethics Line, and Employee Satisfaction & Engagement

• Embedded ESG performance as a factor in executive leadership's 2023 compensation program

Human Capital Management

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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