Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in millions, except per common share amounts)
(unaudited)
Three Months Ended
March 31,
2024 2023
Net sales $ 1,189.4 $ 1,208.1
Cost of sales 676.8 708.2
Gross profit 512.6 499.9
Selling and marketing expenses 265.0 256.7
General, administrative and other expenses 121.0 104.5
Equity income in earnings of unconsolidated affiliates ( 4.9 ) ( 4.6 )
Operating income 131.5 143.3
Other expense, net:
Interest expense, net 34.3 32.8
Other (income) expense, net ( 0.3 ) 0.1
Total other expense, net 34.0 32.9
Income before income taxes 97.5 110.4
Income tax provision ( 20.7 ) ( 24.5 )
Net income before non-controlling interest 76.8 85.9
Less: Net income attributable to non-controlling interest 0.5 0.6
Net income attributable to Tempur Sealy International, Inc. $ 76.3 $ 85.3
Earnings per common share:
Basic $ 0.44 $ 0.50
Diluted $ 0.43 $ 0.48
Weighted average common shares outstanding:
Basic 173.6 172.0
Diluted 178.0 176.8
See accompanying Notes to Condensed Consolidated Financial Statements.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(unaudited)
Three Months Ended
March 31,
2024 2023
Net income before non-controlling interest $ 76.8 $ 85.9
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments ( 15.5 ) 14.9
Pension benefits loss, net of tax ( 0.3 ) —
Other comprehensive (loss) income, net of tax ( 15.8 ) 14.9
Comprehensive income 61.0 100.8
Less: Comprehensive income attributable to non-controlling interest 0.5 0.6
Comprehensive income attributable to Tempur Sealy International, Inc. $ 60.5 $ 100.2
See accompanying Notes to Condensed Consolidated Financial Statements .
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
March 31, 2024 December 31, 2023
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 92.5 $ 74.9
Accounts receivable, net 483.6 431.4
Inventories 489.6 483.1
Prepaid expenses and other current assets 96.2 113.8
Total Current Assets 1,161.9 1,103.2
Property, plant and equipment, net 875.8 878.3
Goodwill 1,077.2 1,083.3
Other intangible assets, net 710.3 714.8
Operating lease right-of-use assets 619.7 636.5
Deferred income taxes 15.4 15.6
Other non-current assets 125.5 122.2
Total Assets $ 4,585.8 $ 4,553.9
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 345.2 $ 311.3
Accrued expenses and other current liabilities 434.2 427.1
Short-term operating lease obligations 121.5 119.6
Current portion of long-term debt 47.3 44.9
Income taxes payable 10.0 5.3
Total Current Liabilities 958.2 908.2
Long-term debt, net 2,526.4 2,527.0
Long-term operating lease obligations 558.0 574.8
Deferred income taxes 127.2 127.9
Other non-current liabilities 80.6 82.6
Total Liabilities 4,250.4 4,220.5
Redeemable non-controlling interest 8.8 10.0
Total Stockholders' Equity 326.6 323.4
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity $ 4,585.8 $ 4,553.9
See accompanying Notes to Condensed Consolidated Financial Statements.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
($ in millions)
(unaudited)
Three Months Ended March 31, 2024
Tempur Sealy International, Inc. Stockholders' Equity
Redeemable
Non-controlling Interest Common Stock Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders'
Equity
Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings
Balance, December 31, 2023
$ 10.0 283.8 $ 2.8 111.5 $ ( 3,380.6 ) $ 558.7 $ 3,279.2 $ ( 136.7 ) $ 323.4
Net income 76.3 76.3
Net income attributable to non-controlling interest 0.5 —
Dividend paid to non-controlling interest in subsidiary ( 1.7 ) —
Adjustment to Pension Liability, net of tax ( 0.3 ) ( 0.3 )
Foreign currency adjustments, net of tax ( 15.5 ) ( 15.5 )
Exercise of stock options 1.3 ( 1.0 ) 0.3
Dividends declared on common stock ($ 0.13 per share)
( 23.0 ) ( 23.0 )
Issuances of PRSUs and RSUs
( 2.2 ) 90.5 ( 90.5 ) —
Treasury stock repurchased - PRSU/RSU releases 0.9 ( 43.8 ) ( 43.8 )
Amortization of unearned stock-based compensation
9.2 9.2
Balance, March 31, 2024
$ 8.8 283.8 $ 2.8 110.2 $ ( 3,332.6 ) $ 476.4 $ 3,332.5 $ ( 152.5 ) $ 326.6
Three Months Ended March 31, 2023
Tempur Sealy International, Inc. Stockholders' (Deficit) Equity
Redeemable
Non-controlling Interest Common Stock Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders'
(Deficit) Equity
Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings
Balance, December 31, 2022
$ 9.8 283.8 $ 2.8 113.4 $ ( 3,434.7 ) $ 598.2 $ 2,988.5 $ ( 176.9 ) $ ( 22.1 )
Net income 85.3 85.3
Net income attributable to non-controlling interest 0.6 —
Dividend paid to non-controlling interest in subsidiary ( 1.5 ) —
Foreign currency adjustments, net of tax 14.9 14.9
Exercise of stock options ( 0.1 ) 1.5 ( 0.7 ) 0.8
Dividends declared on common stock ($ 0.11 per share)
( 19.3 ) ( 19.3 )
Issuances of PRSUs and RSUs
( 2.6 ) 82.6 ( 82.6 ) —
Treasury stock repurchased
0.1 ( 5.0 ) ( 5.0 )
Treasury stock repurchased - PRSU/RSU releases 0.9 ( 30.7 ) ( 30.7 )
Amortization of unearned stock-based compensation
10.8 10.8
Balance, March 31, 2023
$ 8.9 283.8 $ 2.8 111.7 $ ( 3,386.3 ) $ 525.7 $ 3,054.5 $ ( 162.0 ) $ 34.7
See accompanying Notes to Condensed Consolidated Financial Statements .
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(unaudited)
Three Months Ended
March 31,
2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income before non-controlling interest $ 76.8 $ 85.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 39.2 33.8
Amortization of stock-based compensation 9.2 10.8
Amortization of deferred financing costs 0.9 1.0
Bad debt expense 3.8 1.7
Deferred income taxes 0.1 0.7
Dividends received from unconsolidated affiliates 4.9 1.5
Equity income in earnings of unconsolidated affiliates ( 4.9 ) ( 4.6 )
Foreign currency adjustments and other 0.1 ( 0.8 )
Changes in operating assets and liabilities 0.1 ( 30.2 )
Net cash provided by operating activities 130.2 99.8
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ( 31.5 ) ( 52.1 )
Other 0.3 0.1
Net cash used in investing activities ( 31.2 ) ( 52.0 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long-term debt obligations 478.1 509.8
Repayments of borrowings under long-term debt obligations ( 481.8 ) ( 477.4 )
Proceeds from exercise of stock options 0.3 0.8
Treasury stock repurchased ( 43.8 ) ( 35.7 )
Dividends paid ( 24.9 ) ( 20.8 )
Repayments of finance lease obligations and other ( 5.8 ) ( 5.1 )
Net cash used in financing activities ( 77.9 ) ( 28.4 )
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ( 3.5 ) 2.2
Increase in cash and cash equivalents 17.6 21.6
CASH AND CASH EQUIVALENTS, beginning of period 74.9 69.4
CASH AND CASH EQUIVALENTS, end of period $ 92.5 $ 91.0
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 20.3 $ 19.5
Income taxes, net of refunds $ 13.2 $ 11.3
See accompanying Notes to Condensed Consolidated Financial Statements.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation and Description of Business. Tempur Sealy International, Inc., a Delaware corporation, together with its subsidiaries, is a U.S. based, multinational company. The term "Tempur Sealy International" refers to Tempur Sealy International, Inc. only, and the term "Company" refers to Tempur Sealy International, Inc. and its consolidated subsidiaries.
The Company designs, manufactures and distributes bedding products, which include mattresses, foundations and adjustable bases, and other products, which include pillows and other accessories. The Company also derives income from royalties by licensing Sealy® and Stearns & Foster® brands, technology and trademarks to other manufacturers. The Company sells its products through two sales channels: Wholesale and Direct.
The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market, and distribute Sealy® and Stearns & Foster® branded products. The Company's ownership interests in each of these joint ventures is 50.0 %. The equity method of accounting is used for these joint ventures, over which the Company has significant influence but does not have control, and consolidation is not otherwise required. The Company's equity in the net income and losses of these investments is reported in equity income in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Income.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States ("GAAP") for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended December 31, 2023, included in the 2023 Annual Report filed with the Securities and Exchange Commission on February 16, 2024.
The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.
(b) Inventories . Inventories are stated at the lower of cost or net realizable value, determined by the first-in, first-out method , and consist of the following:
March 31, December 31,
(in millions) 2024 2023
Finished goods $ 350.7 $ 335.4
Work-in-process 14.8 16.5
Raw materials and supplies 124.1 131.2
$ 489.6 $ 483.1
(c) Warranties . The Company provides warranties on certain products, which vary by segment, product and brand. Estimates of warranty expenses are based primarily on historical claims experience and product testing. Estimated future obligations related to these products are charged to cost of sales in the period in which the related revenue is recognized. The Company considers the impact of recoverable salvage value on warranty costs in determining its estimate of future warranty obligations.
The Company provides warranties on mattresses with varying warranty terms. Tempur-Pedic mattresses sold in the North America segment and all Sealy mattresses have warranty terms ranging from 10 to 25 years, generally non-prorated for the first 10 to 15 years and then prorated for the balance of the warranty term. Tempur-Pedic mattresses sold in the International segment have warranty terms ranging from 5 to 15 years, non-prorated for the first 5 years and then prorated on a straight-line basis for the last 10 years of the warranty term. Tempur-Pedic pillows have a warranty term of 3 years, non-prorated.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The Company had the following activity for its accrued warranty expense from December 31, 2023 to March 31, 2024:
(in millions)
Balance as of December 31, 2023 $ 40.8
Amounts accrued 3.9
Warranties charged to accrual ( 3.1 )
Balance as of March 31, 2024 $ 41.6
As of March 31, 2024 and December 31, 2023, $ 19.4 million and $ 18.9 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $ 22.2 million and $ 21.9 million of accrued warranty expense is included in other non-current liabilities on the Company's accompanying Condensed Consolidated Balance Sheets, respectively.
(d) Allowance for Credit Losses . The allowance for credit losses is the Company's best estimate of the amount of expected lifetime credit losses in the Company's accounts receivable. The Company regularly reviews the adequacy of its allowance for credit losses. The Company estimates losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding. As of March 31, 2024, the Company's accounts receivable were substantially current. Account balances are charged off against the allowance for credit losses after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. The allowance for credit losses is included in accounts receivable, net in the accompanying Condensed Consolidated Balance Sheets.
The Company had the following activity for its allowance for credit losses from December 31, 2023 to March 31, 2024:
(in millions)
Balance as of December 31, 2023
$ 66.9
Amounts accrued 3.8
Write-offs charged against the allowance ( 1.8 )
Balance as of March 31, 2024
$ 68.9
(e) Fair Value. Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of those instruments. Borrowings under the 2023 Credit Agreement (as defined in Note 4, "Debt") and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair value of the following material financial instruments were based on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments. The fair values of these material financial instruments are as follows:
Fair Value
(in millions) March 31, 2024 December 31, 2023
2029 Senior Notes $ 726.3 $ 724.2
2031 Senior Notes $ 679.9 $ 677.6
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(f) Definitive Agreement with Mattress Firm. On May 9, 2023, Tempur Sealy International and Mattress Firm entered into a definitive agreement and plan of merger (the "Merger Agreement") for a proposed business acquisition in which Tempur Sealy International, through a wholly-owned subsidiary, will acquire Mattress Firm in a transaction valued at approximately $ 4.0 billion. The transaction is expected to be funded by approximately $ 2.7 billion of cash consideration and the issuance of 34.2 million shares of common stock resulting in a total stock consideration value of $ 1.3 billion based on a closing share price of $ 37.62 as of May 8, 2023.
The Company expects the transaction to close in the second half of 2024, subject to the satisfaction of customary closing conditions, including applicable regulatory approvals. Following the close of the transaction, Mattress Firm is expected to operate as a separate business unit within the Company.
(2) Net Sales
The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31, 2024 Three Months Ended March 31, 2023
(in millions) North America International Consolidated North America International Consolidated
Channel
Wholesale $ 776.9 $ 108.9 $ 885.8 $ 804.3 $ 108.3 $ 912.6
Direct 124.2 179.4 303.6 115.3 180.2 295.5
Net sales $ 901.1 $ 288.3 $ 1,189.4 $ 919.6 $ 288.5 $ 1,208.1
North America International Consolidated North America International Consolidated
Geographical region
United States $ 833.2 $ — $ 833.2 $ 854.9 $ — $ 854.9
All Other 67.9 288.3 356.2 64.7 288.5 353.2
Net sales $ 901.1 $ 288.3 $ 1,189.4 $ 919.6 $ 288.5 $ 1,208.1
Substantially all revenue is associated with bedding product sales.
(3) Goodwill
The following summarizes changes to the Company's goodwill, by segment:
(in millions) North America International Consolidated
Balance as of December 31, 2023 $ 609.7 $ 473.6 $ 1,083.3
Foreign currency translation and other ( 1.2 ) ( 4.9 ) ( 6.1 )
Balance as of March 31, 2024 $ 608.5 $ 468.7 $ 1,077.2
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(4) Debt
Debt for the Company consists of the following:
March 31, 2024 December 31, 2023
(in millions, except percentages) Amount Rate Amount Rate Maturity Date
2023 Credit Agreement:
Term A Facility $ 493.8 (1) $ 500.0 (1) October 10, 2028
Revolver 177.0 (1) 183.0 (1) October 10, 2028
2031 Senior Notes 800.0 3.875 % 800.0 3.875 % October 15, 2031
2029 Senior Notes 800.0 4.000 % 800.0 4.000 % April 15, 2029
Securitized debt 165.0 (2) 157.6 (2) April 7, 2025
Finance lease obligations (3)
96.8 92.1 Various
Other 61.8 60.9 Various
Total debt 2,594.4 2,593.6
Less: Deferred financing costs 20.7 21.7
Total debt, net 2,573.7 2,571.9
Less: Current portion 47.3 44.9
Total long-term debt, net $ 2,526.4 $ 2,527.0
(1) Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.625 %.
(2) Interest at one month SOFR index plus 10 basis points of credit spread adjustment, plus 85 basis points.
(3) New finance lease obligations are a non-cash financing activity.
As of March 31, 2024, the Company was in compliance with all applicable debt covenants.
2023 Credit Agreement
On October 10, 2023, the Company entered into the 2023 Credit Agreement with a syndicate of banks. The 2023 Credit Agreement provides for a $ 1.15 billion revolving credit facility, a $ 500.0 million term loan facility, and an incremental facility in an aggregate amount of up to the greater of $ 850.0 million and additional amounts subject to the conditions set forth in the 2023 Credit Agreement, plus the amount of certain prepayments, plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test. The 2023 Credit Agreement has a $ 60.0 million sub-facility for the issuance of letters of credit.
On February 6, 2024, the Company and certain other parties thereto entered into an amendment to the 2023 Credit Agreement which provides for a $ 625.0 million delayed draw term loan and a $ 40.0 million increase in availability on the existing revolving loan. Once drawn, the instruments will have the same terms and conditions as the Company's existing term loans and revolving loans, respectively, under the 2023 Credit Agreement. This amendment was executed in connection with the Company's financing strategy for the pending acquisition of Mattress Firm expected to close in the second half of 2024.
The Company had $ 177.0 million in outstanding borrowings under the revolving credit facility as of March 31, 2024. Total availability under the revolving facility was $ 1,012.4 million, after a $ 0.6 million reduction for outstanding letters of credit, as of March 31, 2024.
Securitized Debt
The Company and certain of its subsidiaries are party to a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization"). As of March 31, 2024, the Company did not have availability under the Accounts Receivable Securitization. While subject to a $ 200.0 million overall limit, the availability of revolving loans varies over the course of the year based on the seasonality of the Company's accounts receivable.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(5) Stockholders' Equity
(a) Treasury Stock. As of March 31, 2024, the Company had approximately $ 774.5 million remaining under its share repurchase authorization. The Company did not repurchase shares under the program during the three months ended March 31, 2024. The Company repurchased 0.1 million shares under the program for approximately $ 5.0 million during the three months ended March 31, 2023.
In addition, the Company acquired shares upon the vesting of certain restricted stock units ("RSUs") and performance restricted stock units ("PRSUs"), which were withheld to satisfy tax withholding obligations during each of the three months ended March 31, 2024 and 2023, respectively. The shares withheld were valued at the closing price of the stock on the New York Stock Exchange on the vesting date or first business day prior to vesting, resulting in $ 43.8 million and $ 30.7 million in treasury stock acquired during the three months ended March 31, 2024 and 2023, respectively.
(b) Accumulated Other Comprehensive Loss ("AOCL"). AOCL consisted of the following:
Three Months Ended
March 31,
(in millions) 2024 2023
Foreign Currency Translation
Balance at beginning of period $ ( 135.5 ) $ ( 175.3 )
Other comprehensive loss:
Foreign currency translation adjustments (1)
( 15.5 ) 14.9
Balance at end of period $ ( 151.0 ) $ ( 160.4 )
Pensions
Balance at beginning of period $ ( 1.2 ) $ ( 1.6 )
Other comprehensive loss:
Net change from period revaluations (2)
( 0.3 ) —
Balance at end of period $ ( 1.5 ) $ ( 1.6 )
(1) In 2024 and 2023, there were no tax impacts related to foreign currency translation adjustments and no amounts were reclassified to earnings.
(2) In 2024, there were no tax impacts related to pension adjustments.
(6) Other Items
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
(in millions) March 31, 2024 December 31, 2023
Wages and benefits $ 81.1 $ 102.1
Unearned revenue 74.9 53.3
Advertising 45.0 62.6
Taxes 24.4 15.4
Other 208.8 193.7
$ 434.2 $ 427.1
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(7) Stock-Based Compensation
The Company's stock-based compensation expense for the three months ended March 31, 2024 and 2023 included PRSUs, non-qualified stock options and RSUs. A summary of the Company's stock-based compensation expense is presented in the following table:
Three Months Ended March 31,
(in millions) 2024 2023
PRSU expense $ 4.1 $ 5.1
Option expense 0.6 0.6
RSU expense 4.5 5.1
Total stock-based compensation expense $ 9.2 $ 10.8
The Company grants PRSUs to executive officers and certain members of management. Actual payout under the PRSUs is dependent upon the achievement of certain financial goals. During the first quarter of 2024, the Company granted PRSUs as a component of the long-term incentive plan ("2024 PRSUs"). The Company has recorded stock-based compensation expense related to the 2024 PRSUs during the three months ended March 31, 2024, as it was probable that the Company would achieve the specified performance targets for the performance period.
(8) Commitments and Contingencies
The Company is involved in various legal and administrative proceedings incidental to the operations of its business. The Company believes that the outcome of all such pending proceedings in the aggregate will not have a material adverse effect on its business, financial condition, liquidity or operating results.
(9) Income Taxes
The Company's effective tax rates for the three months ended March 31, 2024 and 2023 were 21.2 % and 22.2 %, respectively. The Company's effective tax rates for the three months ended March 31, 2024 and 2023 differed from the U.S. federal statutory rate of 21.0% principally due to subpart F income (i.e., global intangible low-taxed income, or "GILTI," earned by the Company's foreign subsidiaries), foreign income tax rate differentials, state and local taxes, changes in the Company's uncertain tax positions, the excess tax benefit related to stock-based compensation and certain other permanent items.
The OECD (Organization for Economic Co-operation and Development) has proposed a global minimum effective tax of 15% on income arising in each jurisdiction ("Pillar 2") that has been agreed upon in principle by over 140 countries. During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. Accordingly, we still are evaluating the potential consequences of Pillar 2 on our longer-term financial position. In 2024, we do not expect Pillar 2 to have a material impact on our financial results.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(10) Earnings Per Common Share
The following table sets forth the components of the numerator and denominator for the computation of basic and diluted earnings per share for net income attributable to Tempur Sealy International:
Three Months Ended
March 31,
(in millions, except per common share amounts) 2024 2023
Numerator:
Net income attributable to Tempur Sealy International, Inc. $ 76.3 $ 85.3
Denominator:
Denominator for basic earnings per common share-weighted average shares 173.6 172.0
Effect of dilutive securities 4.4 4.8
Denominator for diluted earnings per common share-adjusted weighted average shares 178.0 176.8
Basic earnings per common share $ 0.44 $ 0.50
Diluted earnings per common share $ 0.43 $ 0.48
The Company excludes shares issuable upon exercise of outstanding stock options from the diluted earnings per common share computation because their exercise price was greater than the average market price of Tempur Sealy International's common stock or they were otherwise anti-dilutive.
As a result, the Company excluded an immaterial amount of shares for the three months ended March 31, 2024 and excluded 0.6 million shares for the three months ended March 31, 2023 . Holders of non-vested stock-based compensation awards do not have voting rights but do participate in dividend equivalents distributed upon the award vesting.
(11) Business Segment Information
The Company operates in two segments: North America and International. These segments are strategic business units that are managed separately based on geography. The North America segment consists of manufacturing and distribution subsidiaries and licensees located in the U.S., Canada and Mexico. The International segment consists of manufacturing and distribution subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). The Company evaluates segment performance based on net sales, gross profit and operating income.
The Company's North America and International segment assets include investments in subsidiaries that are appropriately eliminated in the Company's accompanying Condensed Consolidated Financial Statements. The remaining inter-segment eliminations are comprised of intercompany accounts receivable and payable.
The following table summarizes total assets by segment:
(in millions) March 31, 2024 December 31, 2023
North America $ 5,491.1 $ 5,291.0
International 1,437.9 1,405.2
Corporate 1,379.8 1,269.5
Inter-segment eliminations ( 3,723.0 ) ( 3,411.8 )
Total assets $ 4,585.8 $ 4,553.9
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes property, plant and equipment, net, by segment:
(in millions) March 31, 2024 December 31, 2023
North America $ 750.2 $ 753.8
International 89.7 91.3
Corporate 35.9 33.2
Total property, plant and equipment, net $ 875.8 $ 878.3
The following table summarizes operating lease right-of-use assets by segment:
(in millions) March 31, 2024 December 31, 2023
North America $ 446.5 $ 453.5
International 170.7 180.2
Corporate 2.5 2.8
Total operating lease right-of-use assets $ 619.7 $ 636.5
The following table summarizes segment information for the three months ended March 31, 2024:
(in millions) North America International Corporate Eliminations Consolidated
Net sales $ 901.1 $ 288.3 $ — $ — $ 1,189.4
Inter-segment sales $ 0.3 $ 0.1 $ — $ ( 0.4 ) $ —
Inter-segment royalty expense (income) 7.4 ( 7.4 ) — — —
Gross profit 352.8 159.8 — — 512.6
Operating income (loss) 134.4 44.8 ( 47.7 ) — 131.5
Income (loss) before income taxes 131.4 47.7 ( 81.6 ) — 97.5
Depreciation and amortization (1)
$ 30.7 $ 6.5 $ 11.2 $ — $ 48.4
Capital expenditures 20.7 6.2 4.6 — 31.5
(1) Depreciation and amortization includes stock-based compensation amortization expense.
The following table summarizes segment information for the three months ended March 31, 2023:
(in millions) North America International Corporate Eliminations Consolidated
Net sales $ 919.6 $ 288.5 $ — $ — $ 1,208.1
Inter-segment sales $ 0.3 $ — $ — $ ( 0.3 ) $ —
Inter-segment royalty expense (income) 7.4 ( 7.4 ) — — —
Gross profit 344.0 155.9 — — 499.9
Operating income (loss) 136.0 44.2 ( 36.9 ) — 143.3
Income (loss) before income taxes 134.2 43.0 ( 66.8 ) — 110.4
Depreciation and amortization (1)
$ 25.5 $ 6.5 $ 12.6 $ — $ 44.6
Capital expenditures 45.8 4.7 1.6 — 52.1
(1) Depreciation and amortization includes stock-based compensation amortization expense.
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TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes property, plant and equipment, net by geographic region:
(in millions)
March 31, 2024 December 31, 2023
United States
$ 763.7 $ 764.1
All other 112.1 114.2
Total property, plant and equipment, net
$ 875.8 $ 878.3
The following table summarizes operating lease right-of-use assets by geographic region:
(in millions) March 31, 2024 December 31, 2023
United States $ 437.5 $ 444.2
United Kingdom 137.5 146.5
All other 44.7 45.8
Total operating lease right-of-use assets $ 619.7 $ 636.5
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.