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Item 8. Financial Statements and Supplementary Data

2025-02-28 compared with 2024-02-16 · 230 added, 264 removed, 1144 unchanged (30% of the section changed)

9 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of Tempur Sealy International, Inc.

To the Stockholders and Board of Directors of Somnigroup International Inc.

and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Tempur Sealy International, Inc.

We have audited the accompanying consolidated balance sheets of Somnigroup International Inc.

and Subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial statements").

35 unchanged sentences

February 28, 2025

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

13 unchanged sentences

Loss on extinguishment of debt — 3.2 —

Other expense (income), net — 0.4 ( 1.0 )

Other (income) expense, net ( 4.9 ) — 0.4

Total other expense, net 129.9 133.1 103.4

5 unchanged sentences

Net income attributable to non-controlling interest 1.4 2.6 2.1

Net income attributable to Tempur Sealy International, Inc.

Net income attributable to Somnigroup International Inc.

$ 384.3 $ 368.1 $ 455.7

10 unchanged sentences

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

4 unchanged sentences

Net income before non-controlling interest $ 385.7 $ 370.7 $ 457.8

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 51.7 ) 39.8 ( 80.1 )

Net change in pension benefits, net of tax 1.6 0.4 2.4

Other comprehensive income (loss), net of tax 40.2 ( 77.7 ) ( 33.7 )

Other comprehensive (loss) income, net of tax ( 50.1 ) 40.2 ( 77.7 )

Comprehensive income 335.6 410.9 380.1

Comprehensive income attributable to non-controlling interest 1.4 2.6 2.1

Comprehensive income attributable to Tempur Sealy International, Inc.

Comprehensive income attributable to Somnigroup International Inc.

$ 334.2 $ 408.3 $ 378.0

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

8 unchanged sentences

Total Current Assets 1,065.4 1,103.2

Restricted cash 1,592.3 —

Property, plant and equipment, net 811.1 878.3

5 unchanged sentences

Total Assets $ 5,980.4 $ 4,553.9

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

11 unchanged sentences

Redeemable non-controlling interest 9.3 10.0

Stockholders' Equity (Deficit):

Stockholders' Equity:

Common stock, $ 0.01 par value, 500.0 million shares authorized;

6 unchanged sentences

( 3,330.0 ) ( 3,380.6 )

Total Stockholders' Equity (Deficit) 323.4 ( 22.1 )

Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity (Deficit) $ 4,553.9 $ 4,359.8

Total Stockholders' Equity 559.0 323.4

Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity $ 5,980.4 $ 4,553.9

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

1 unchanged sentence

(in millions)

Tempur Sealy International, Inc.

Somnigroup International Inc.

Stockholders' Equity (Deficit)

Non-controlling Interest Common Stock Treasury Stock Accumulated Other Comprehensive (Loss) Income Non-controlling Interest in Subsidiaries Total Stockholders' Equity (Deficit)

Non-controlling Interest Common Stock Treasury Stock Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity (Deficit)

Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings

1 unchanged sentence

Net income 455.7 455.7

Net income attributable to non-controlling interests 0.3 0.2 0.2

Purchase of remaining interest in subsidiary ( 3.4 ) ( 1.2 ) ( 4.6 )

Net income attributable to non-controlling interest 2.1 —

Dividend paid to non-controlling interest in subsidiary ( 1.5 ) —

Adjustment to pension liability, net of tax of $ 0.8

31 unchanged sentences

( 2.2 ) 92.1 ( 92.1 ) —

Treasury stock repurchased

0.1 ( 5.0 ) ( 5.0 )

Treasury stock repurchased - PRSU/RSU releases

3 unchanged sentences

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

8 unchanged sentences

Amortization of stock-based compensation 36.4 47.7 53.1

Amortization of deferred financing costs 3.9 3.9 2.8

Amortization of deferred financing costs and discounts 4.3 3.9 3.9

Bad debt expense 22.5 8.2 6.7

4 unchanged sentences

Foreign currency adjustments and other 1.7 ( 0.9 ) 0.3

Changes in operating assets and liabilities, net of effect of business acquisitions:

Changes in operating assets and liabilities:

Accounts receivable ( 7.3 ) ( 11.5 ) ( 14.8 )

8 unchanged sentences

Purchases of property, plant and equipment ( 97.3 ) ( 185.4 ) ( 306.5 )

Acquisitions, net of cash acquired — — ( 432.8 )

Other 0.6 ( 2.4 ) ( 8.8 )

8 unchanged sentences

Repayments of finance lease obligations and other ( 19.3 ) ( 16.2 ) ( 16.2 )

Net cash (used in) provided by financing activities from continuing operations ( 384.3 ) ( 279.1 ) 76.5

Net cash (used in) provided by continuing operations ( 1.8 ) ( 215.6 ) 244.8

Net cash provided by (used in) financing activities from continuing operations 1,077.4 ( 384.3 ) ( 279.1 )

Net cash provided by (used in) continuing operations 1,647.2 ( 1.8 ) ( 215.6 )

Net operating cash flows used in discontinued operations — — ( 0.3 )

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 7.3 ( 15.4 ) ( 8.2 )

Increase (decrease) in cash and cash equivalents 5.5 ( 231.3 ) 235.7

CASH AND CASH EQUIVALENTS, beginning of period 69.4 300.7 65.0

CASH AND CASH EQUIVALENTS, end of period $ 74.9 $ 69.4 $ 300.7

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 12.4 ) 7.3 ( 15.4 )

Increase (decrease) in cash, cash equivalents and restricted cash 1,634.8 5.5 ( 231.3 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 74.9 69.4 300.7

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 1,709.7 $ 74.9 $ 69.4

Supplemental cash flow information:

3 unchanged sentences

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

2 unchanged sentences

(a) Basis of Presentation and Description of Business.

Tempur Sealy International, Inc., a Delaware corporation, together with its subsidiaries, is a U.S.

Somnigroup 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 term "Somnigroup" refers to Somnigroup International Inc.

only, and the term "Company" refers to Somnigroup International Inc.

and its consolidated subsidiaries, as of December 31, 2024.

Certain prior period amounts have been reclassified in the accompanying consolidated financial statements and notes thereto to conform to the current period presentation.

4 unchanged sentences

(b) Basis of Consolidation.

The accompanying financial statements include the accounts of Tempur Sealy International and its controlled subsidiaries.

The accompanying financial statements include the accounts of Somnigroup and its controlled subsidiaries.

Intercompany balances and transactions have been eliminated.

19 unchanged sentences

Entities are afforded these relief options until December 31, 2024, after which time they will no longer be permitted.

In May 2023, the Company amended its 2019 Credit Agreement to transition the applicable reference rate from LIBOR to SOFR.

In October 2023, the Company entered into the 2023 Credit Agreement, which uses SOFR as the applicable reference rate.

1 unchanged sentence

The results of this guidance did not have a material impact on the consolidated financial statements.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(e) Accounting Pronouncements Not Yet Adopted

Segments Reporting Disclosures.

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280):

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure", which improves reportable segment disclosure requirements for public business entities primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit (referred to as the "significant expense principle").

ASU 2023-07 is effective for annual periods beginning after December 15, 2023 (year ending December 31, 2024 for the Company) and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

Early adoption is permitted.

The Company expects the adoption of the standard to result in additional segment footnote disclosures.

See Note 15, "Business Segment Information," for additional details on new disclosures.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(e) Accounting Pronouncements Not Yet Adopted

Income Tax Disclosures.

3 unchanged sentences

The Company expects the adoption of the standard to result in additional disaggregation in the income tax footnote disclosures.

Disaggregation of Income Statement Expenses.

In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses", which requires public entities to disclose disaggregated information about certain income statement expense line items annually and in interim periods.

ASU 2024-03 is effective for the Company beginning in the December 31, 2026 Form 10-K and for interim periods beginning in the March 31, 2027 Form 10-Q.

(f) Foreign Currency.

6 unchanged sentences

These amounts are not considered material to the Consolidated Financial Statements.

(g) Cash and Cash Equivalents.

(g) Cash, Cash Equivalents and Restricted Cash.

Cash and cash equivalents consist of all highly liquid investments with initial maturities of three months or less.

The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of those instruments.

Restricted cash consists of proceeds from the Term B Loan which were funded into escrow and released upon the closing of the Mattress Firm acquisition.

The carrying value of restricted cash approximates fair value because of the short-term maturity of those instruments.

Total cash, cash equivalents and restricted cash consisted of the following:

(in millions) 2024 2023

Cash and cash equivalents $ 117.4 $ 74.9

Restricted cash 1,592.3 —

Cash, cash equivalents and restricted cash $ 1,709.7 $ 74.9

(h) Inventories.

5 unchanged sentences

$ 447.0 $ 483.1

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

35 unchanged sentences

However, the loss recognized cannot exceed the carrying amount of goodwill.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

9 unchanged sentences

Significant assumptions inherent in the methodologies are employed and include such estimates as royalty and discount rates.

The Company performed its annual impairment test of goodwill and indefinite-lived intangible assets quantitatively in 2023, and qualitatively in 2022 and 2021, none of which resulted in the recognition of impairment charges.

The Company performed its annual impairment test of goodwill and indefinite-lived intangible assets quantitatively in 2024 and 2023, and qualitatively in 2022, none of which resulted in the recognition of impairment charges.

For further information on goodwill and other intangible assets, refer to Note 4, "Goodwill and Other Intangible Assets."

16 unchanged sentences

As of December 31, 2024 and 2023, $ 30.3 million and $ 30.4 million of accrued sales returns is included as a component of accrued expenses and other current liabilities and $ 13.9 million and $ 13.3 million of accrued sales returns is included in other non-current liabilities on the Company’s accompanying Consolidated Balance Sheets, respectively.

(m) Warranties.

(n) Warranties.

The Company provides warranties on certain products, which vary by segment, product and brand.

6 unchanged sentences

Tempur-Pedic pillows have a warranty term of 3 years, non-prorated.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

35 unchanged sentences

2031 Senior Notes 698.2 677.6

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

24 unchanged sentences

Subsequent revisions to the estimates are recorded and charged to earnings in the period in which they are identified.

Rebates and cooperative advertising are classified as a reduction of revenue and presented within net sales in the accompanying Consolidated Statements of Income.

Certain cooperative advertising expenses are reported as components of selling and marketing expenses in the accompanying Consolidated Statements of Income because the Company receives an identifiable benefit and the fair value of the advertising benefit can be reasonably estimated.

Cooperative advertising costs are classified as advertising expense and presented within selling and marketing expenses in the accompanying Consolidated Statements of Income.

These cooperative advertising expenses are reported as components of selling and marketing expenses because the Company receives an identifiable benefit and the fair value of the advertising benefit can be reasonably estimated.

Any benefits not recognized from the retailers will be reclassified and presented within net sales.

(s) Advertising Costs.

8 unchanged sentences

Research and development costs charged to expense were $ 30.8 million, $ 30.6 million and $ 29.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

14 unchanged sentences

Shares repurchased under such authorizations are held in treasury for general corporate purposes, including issuances under various employee stock-based award plans.

On February 1, 2016, the Board of Directors authorized a share repurchase program pursuant to which the Company was permitted to repurchase shares of Tempur Sealy International's common stock.

On February 1, 2016, the Board of Directors authorized a share repurchase program pursuant to which the Company was permitted to repurchase shares of Somnigroup's common stock.

Treasury stock is accounted for under the cost method and reported as a reduction of stockholders' equity.

15 unchanged sentences

The Company recognizes the funded status of each applicable plan within the Consolidated Balance Sheets as either an asset or liability based on its funded status measured as the difference between the fair value of plan assets and the PBO, which was not material as of December 31, 2024 or 2023.

(2) Net Sales

The following table presents the Company's disaggregated revenue by channel, product and geographical region, including a reconciliation of disaggregated revenue by segment, for the years ended December 31.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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 years ended December 31.

Twelve Months Ended December 31, 2024

4 unchanged sentences

North America International Consolidated

Bedding $ 3,585.2 $ 879.2 $ 4,464.4

Other 270.3 190.7 461.0

Net sales $ 3,855.5 $ 1,069.9 $ 4,925.4

North America International Consolidated

Geographical region

8 unchanged sentences

North America International Consolidated

Bedding $ 3,618.7 $ 859.1 $ 4,477.8

Other 267.4 176.0 443.4

Net sales $ 3,886.1 $ 1,035.1 $ 4,921.2

North America International Consolidated

Geographical region

2 unchanged sentences

Net sales $ 3,855.5 $ 1,069.9 $ 4,925.4

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Twelve Months Ended December 31, 2022

4 unchanged sentences

North America International Consolidated

Bedding $ 3,825.9 $ 687.0 $ 4,512.9

Other 253.3 164.6 417.9

Net sales $ 4,079.2 $ 851.6 $ 4,930.8

North America International Consolidated

Geographical region

2 unchanged sentences

Net sales $ 3,886.1 $ 1,035.1 $ 4,921.2

Substantially all revenue is associated with bedding product sales.

The North America and International segments sell product through two channels:

2 unchanged sentences

The Direct channel includes product sales through company-owned stores, e-commerce and call centers.

The North America and International segments classify products into two major categories:

Bedding and Other.

Bedding products include mattresses, foundations and adjustable foundations.

Other products include pillows, mattress covers, sheets, cushions and various other comfort products.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Wholesale channel also includes income from royalties derived by licensing Sealy®, Stearns & Foster® and Tempur® brands, technology and trademarks to other manufacturers.

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As such, the Company does not adjust its consideration for financing arrangements.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In certain jurisdictions, the Company is subject to certain non-income taxes including, but not limited to, sales tax, value added tax, excise tax and other taxes.

3 unchanged sentences

Amounts included in net sales for shipping and handling were $ 11.1 million, $ 8.6 million and $ 8.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(3) Acquisitions

(3) Acquisitions and Divestitures

Acquisition of Mattress Firm Group Inc.

On May 9, 2023, Tempur Sealy International and Mattress Firm entered into the Merger Agreement for a pending 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 the Company's 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.

Acquisition of Dreams Topco Limited

On August 2, 2021, the Company completed the acquisition of Dreams Topco Limited and its direct and indirect subsidiaries ("Dreams"), for a cash purchase price of $ 476.7 million, which includes $ 49.5 million of cash acquired.

The transaction was funded using cash on hand and bank financing.

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

The financial results of Dreams subsequent to the date of acquisition are included in the consolidated financial statements of the Company.

The Company accounted for this transaction as a business combination.

The final allocation of the purchase price is based on the fair values of the assets acquired and liabilities assumed as of August 2, 2021, which included the following:

(in millions)

Accounts receivable, net $ 3.5

Inventory 51.2

Property, plant and equipment 33.9

Goodwill 357.1

Indefinite-lived intangible asset 141.9

Operating lease right-of-use assets 158.2

Other current and non-current assets 4.4

Accounts payable ( 55.2 )

Accrued expenses and other current liabilities ( 69.7 )

Operating lease liabilities ( 165.1 )

Other liabilities ( 26.9 )

Purchase price, net of cash acquired $ 427.2

The indefinite-lived intangible asset represents Dreams' portfolio of trade names as marketed through Dreams.

The Company applied the income approach through a relief from royalty method to fair value the trade name asset using level 2 inputs.

The indefinite-lived intangible asset is not deductible for income tax purposes.

Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the expansion of retail competency and online capabilities, and expected synergistic manufacturing and distribution benefits to be realized from the acquisition.

The goodwill is not deductible for income tax purposes and is included within the International business segment.

On February 5, 2025, the Company completed the acquisition of Mattress Firm for an aggregate purchase price of approximately $ 5.1 billion, net of cash acquired of $ 0.3 billion.

The aggregate purchase price consisted of $ 2.8 billion in cash and approximately 34.2 million shares of the Company's common stock valued at $ 65.65 per share, which represents the simple average of the opening and closing price per share of the Company's common stock on the New York Stock Exchange (the "NYSE") on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.

In connection with the consummation of the merger, the Company borrowed $ 625.0 million of its Delayed Draw Term A Loan and $ 679.5 million of revolving commitments under its senior credit facility.

In addition, approximately $ 1,592.0 million of proceeds in respect of the Term B Loan were released from escrow.

The proceeds of this financing were collectively used to fund a portion of the cash consideration, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the merger.

The Company incurred $ 47.8 million and $ 49.0 million in transaction expenses related to the acquisition for the years ended December 31, 2024 and 2023, respectively, which were recorded in general, administrative and other expenses in the accompanying Consolidated Statements of Income.

In the year ended December 31, 2024, the Company also incurred $ 9.8 million of transaction related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow.

The Company did not incur transaction expenses related to the acquisition for the year ended December 31, 2022.

The Company is currently in the process of finalizing the accounting for this transaction and expects to complete its preliminary allocation of the purchase price during the first half of 2025.

Mattress Firm is expected to operate as a separate business segment within the Company.

The Company expects to complete the previously announced divestiture of 73 Mattress Firm retail locations and the Company's Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers, to MW SO Holdings Company, LLC ("Mattress Warehouse") in the second quarter of 2025.

The divestiture of Sleep Outfitters was not classified as assets and liabilities held for sale in the Company’s accompanying Consolidated Balance Sheets as of December 31, 2024 due to the Mattress Firm acquisition being contingent upon regulatory approval and the potential for the Company’s plan of divestiture to change.

(4) Goodwill and Other Intangible Assets

29 unchanged sentences

No impairments of goodwill or other intangible assets have adjusted the gross carrying amount of these assets in any period.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Estimated annual amortization of intangible assets is expected to be as follows for the years ending December 31:

1 unchanged sentence

Thereafter 1.1

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) Unconsolidated Affiliate Companies

12 unchanged sentences

2023 Credit Agreement:

Term A Facility $ 500.0 (1) $ — N/A October 10, 2028

Revolver 183.0 (1) — N/A October 10, 2028

2019 Credit Agreement:

Term A Facility — N/A 638.8 (2) October 16, 2024

Revolver — N/A 337.0 (2) October 16, 2024

Term A Facility $ 475.0 (1) $ 500.0 (2) October 10, 2028

Term B Facility 1,600.0 (3) — October 24, 2031

Revolver — 183.0 (2) 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 157.6 (3) 139.3 (4) April 7, 2025

Securitized debt — 157.6 (4) October 8, 2026

Finance lease obligations (5)

2 unchanged sentences

Total debt 3,844.5 2,593.6

Deferred financing costs 21.7 20.5

Deferred financing costs and discounts 34.6 21.7

Total debt, net 3,809.9 2,571.9

2 unchanged sentences

(1) Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.250 % as of December 31, 2024.

(2) Interest at LIBOR plus applicable margin of 1.250 % as of December 31, 2022.

(2) Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.625 % as of December 31, 2023.

(3) Interest at SOFR index plus applicable margin of 2.500 % as of December 31, 2024.

(4) Interest at one month SOFR index plus 10 basis points of credit spread adjustment, plus 85 basis points.

(4) Interest at one month LIBOR index plus 70 basis points.

(5) Finance lease obligations are a non-cash financing activity.

3 unchanged sentences

The 2023 Credit Agreement replaced the Company's 2019 Credit Agreement.

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 provides for a $ 1.15 billion revolving credit facility ("Revolving Credit Facility"), a $ 500.0 million term loan facility ("Initial 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.

Borrowings under the 2023 Credit Agreement will generally bear interest, at the election of Tempur Sealy International and the other subsidiary borrowers, at either (i) base rate plus the applicable margin, (ii) "Eurocurrency" rate plus the applicable margin, (iii) "RFR" Daily SOFR rate plus the applicable margin or (iv) a "Term Benchmark" Term SOFR rate plus the applicable margin.

For the revolving credit facility and the term loan facility (a) the initial applicable margin for base rate advances was 0.625 % per annum and the initial applicable margin for Eurocurrency rate, RFR rate and Term Benchmark rate advances was 1.625 % per annum, and (b) following the delivery of financial statements for the fiscal quarter ending March 31, 2024 and for subsequent fiscal quarters, such applicable margins will be determined by a pricing grid based on the consolidated total net leverage ratio of the Company.

Obligations under the 2023 Credit Agreement are guaranteed by the Company's existing and future direct and indirect wholly-owned domestic subsidiaries, subject to certain exceptions and are secured by a security interest in substantially all of Tempur Sealy International’s and the other subsidiary borrowers' domestic assets and the domestic assets of each subsidiary guarantor, whether owned as of the closing or thereafter acquired, including a pledge of 100.0 % of the equity interests of each subsidiary owned by the Company or a subsidiary guarantor that is a domestic entity (subject to certain limited exceptions) and 65.0 % of the voting equity interests of any direct first tier foreign entity owned by the Company or a subsidiary guarantor.

The 2023 Credit Agreement requires compliance with certain financial covenants providing for maintenance of a minimum consolidated interest coverage ratio, maintenance of a maximum consolidated total net leverage ratio, and maintenance of a maximum consolidated secured net leverage ratio.

On February 6, 2024, the Company entered into Amendment No.

1 ("Amendment No.

1") to the 2023 Credit Agreement, which provided for a $ 625.0 million Delayed Draw Term A Loan commitment and a $ 40.0 million increase in availability on the existing revolving loan.

This amendment was executed in connection with the Company's financing strategy for the acquisition of Mattress Firm.

On October 24, 2024, the Company entered into an Amendment No.

2 ("Amendment No.

2") and an Amendment No.

3 ("Amendment No.

3") to the 2023 Credit Agreement.

Amendment No.

2 extended the termination date for $ 605.0 million of the Delayed Draw Term A Loan commitments until October 24, 2025, among other changes.

Amendment No.

3 provided for an incremental Term B Loan in the aggregate principal amount of $ 1.6 billion, which will mature on October 24, 2031.

The proceeds of the Term B Loan were funded into escrow, net of an original issue discount, on the closing of Amendment No.

On February 5, 2025, upon the consummation of the Mattress Firm acquisition, the Company borrowed $ 625.0 million under our Delayed Draw Term A Loan and $ 679.5 million under the Revolving Credit Facility.

In addition, approximately $ 1,592.0 million of proceeds in respect of the Term B Loan were released from escrow.

The proceeds of these financings were collectively used to fund a portion of the cash consideration for the acquisition, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the acquisition.

Borrowings under the Revolving Credit Facility, the Term A Loans and Term B Loan will generally bear interest, at the election of the Company's and the other subsidiary borrowers, at either (i) base rate plus the applicable margin (solely with respect to any borrowings under the Revolving Credit Facility), (ii) "Eurocurrency" rate plus the applicable margin, (iii) "RFR" Daily SOFR rate plus the applicable margin or (iv) a "Term Benchmark" Term SOFR rate plus the applicable margin.

For the Revolving Credit Facility and the Term A Loans the applicable margin is determined by a pricing grid based on the consolidated total net leverage ratio of the Company.

For the Term B Loan, the applicable margin is 1.50 % (for base rate) and 2.50 % (for "Term Benchmark" Term SOFR and "RFR" Daily SOFR).

The 2023 Credit Agreement (other than with respect to the Term B Loan) requires compliance with certain financial covenants providing for maintenance of a minimum consolidated interest coverage ratio, maintenance of a maximum consolidated total net leverage ratio, and maintenance of a maximum consolidated secured net leverage ratio.

The consolidated total net leverage ratio is calculated using consolidated indebtedness less netted cash (as defined below).

4 unchanged sentences

The 2023 Credit Agreement also contains certain customary affirmative covenants and events of default, including upon a change of control.

The Company is required to pay a commitment fee on the unused portion of the revolving credit facility, which initially is 0.25 % per annum and following the delivery of financial statements for the fiscal quarter ending March 31, 2024 and for subsequent fiscal quarters, such fees will be determined by a pricing grid based on the consolidated total net leverage ratio of the Company.

This unused commitment fee is payable quarterly in arrears and on the date of termination or expiration of the commitments under the revolving credit facility.

The Company and the other borrowers also pay customary letter of credit issuance and other fees under the 2023 Credit Agreement.

The maturity date of the 2023 Credit Agreement is October 10, 2028.

Obligations under the 2023 Credit Agreement are guaranteed by the Company's existing and future direct and indirect wholly-owned domestic subsidiaries, subject to certain exceptions and are secured by a security interest in substantially all of the Company’s and the other subsidiary borrowers' domestic assets and the domestic assets of each subsidiary guarantor, whether owned as of the closing or thereafter acquired, including a pledge of 100.0 % of the equity interests of each subsidiary owned by the Company or a subsidiary guarantor that is a domestic entity (subject to certain limited exceptions) and 65.0 % of the voting equity interests of any direct first tier foreign entity owned by the Company or a subsidiary guarantor.

The maturity date of the Revolving Credit Facility and Term A Loans is October 10, 2028 and the maturity date of the Term B Loan is October 24, 2031.

Amounts under the Revolving Credit Facility may be borrowed, repaid and re-borrowed from time to time until the maturity date.

The term loan facility is subject to quarterly amortization as set forth in the 2023 Credit Agreement.

The Term Loan Facility, Delayed Draw Term A Loan and Term B Loan are each subject to quarterly amortization as set forth in the 2023 Credit Agreement.

In addition, the term loan facility is subject to mandatory prepayment in connection with certain debt issuances, asset sales and casualty events, subject to certain reinvestment rights.

Voluntary prepayments and commitment reductions under the 2023 Credit Agreement are permitted at any time without payment of any prepayment premiums.

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 incremental 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 $ 183.0 million in outstanding borrowings under the revolving credit facility as of December 31, 2023.

Additionally, the Term B Loan benefits from (i) mandatory prepayments with respect to certain cash that constitutes excess cash flow under the 2023 Credit Agreement and (ii) additional protections, including a prepayment premium in connection with certain repricing transactions that occur on or prior to April 24, 2025.

Voluntary prepayments and commitment reductions under the 2023 Credit Agreement are otherwise permitted at any time without payment of any prepayment premiums.

The Company had no outstanding borrowings under the revolving credit facility as of December 31, 2024.

Total availability under the revolving facility was $ 1,189.2 million, after a $ 0.8 million reduction for outstanding letters of credit, as of December 31, 2024.

On February 5, 2025, the Company borrowed $ 679.5 million on our revolving senior secured credit facility to fund the acquisition of Mattress Firm.

The Company was in compliance with all applicable covenants in the 2023 Credit Agreement at December 31, 2024.

2019 Credit Agreement

The Company used the proceeds from the 2023 Credit Agreement to refinance outstanding borrowings under the 2019 Credit Agreement and terminated the existing revolving credit commitments.

The 2019 Credit Agreement provided for a $ 725.0 million revolving credit facility and a $ 725.0 million term loan facility.

Securitized Debt

4 unchanged sentences

The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to April 7, 2025.

On October 8, 2024, the Company and certain of its subsidiaries entered into a new amendment to the Accounts Receivable Securitization.

The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to October 8, 2026.

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.

Borrowings under this facility are classified as long-term debt within the Consolidated Balance Sheets at December 31, 2023.

The Company had $ 157.6 million in outstanding borrowings under the Accounts Receivable Securitization as of December 31, 2023.

The Company did not have availability under the Accounts Receivable Securitization as of December 31, 2023.

As of December 31, 2024, total availability under the Accounts Receivable Securitization was $ 140.9 million.

The obligations of the Company and its relevant subsidiaries under the Accounts Receivable Securitization are secured by the accounts receivable and certain related rights and the facility agreements contain customary events of default.

1 unchanged sentence

2031 Senior Notes

On September 24, 2021, Tempur Sealy International issued $ 800.0 million in aggregate principal amount of 3.875 % senior notes due 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S.

On September 24, 2021, Somnigroup International issued $ 800.0 million in aggregate principal amount of 3.875 % senior notes due 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

The 2031 Senior Notes were issued pursuant to an indenture, dated as of September 24, 2021 (the "2031 Indenture"), among Tempur Sealy International, certain subsidiaries of Tempur Sealy International as guarantors (the "Guarantors"), and The Bank of New York Mellon Trust Company, N.A., as trustee.

The 2031 Senior Notes are general unsecured senior obligations of Tempur Sealy International and are guaranteed on a senior unsecured basis by the Guarantors.

The 2031 Senior Notes are general unsecured senior obligations of Somnigroup International and are guaranteed on a senior unsecured basis by the Guarantors.

The 2031 Senior Notes mature on October 15, 2031, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on April 15, 2022.

Tempur Sealy International has the option to redeem all or a portion of the 2031 Senior Notes at any time on or after October 15, 2026.

Somnigroup International has the option to redeem all or a portion of the 2031 Senior Notes at any time on or after October 15, 2026.

The initial redemption price is 101.938 % of the principal amount, plus accrued and unpaid interest, if any.

The redemption price will decline each year after 2026 until it becomes 100.0 % of the principal amount beginning on October 15, 2029.

In addition, Tempur Sealy International has the option at any time prior to October 15, 2026 to redeem some or all of the 2031 Senior Notes at 100.0 % of the original principal amount plus a "make-whole" premium and accrued and unpaid interest, if any.

Tempur Sealy International may also redeem up to 40.0 % of the 2031 Senior Notes prior to October 15, 2024, under certain circumstances with the net cash proceeds from certain equity offerings, at 103.875 % of the principal amount plus

accrued and unpaid interest, if any.

Tempur Sealy International may make such redemptions as described in the preceding sentence only if, after any such redemption, at least 60.0 % of the original aggregate principal amount of the 2031 Senior Notes issued remains outstanding.

The 2031 Indenture restricts the ability of Tempur Sealy International and the ability of certain of its subsidiaries to, among other things:

(i) incur, directly or indirectly, debt;

(ii) make, directly or indirectly, certain investments and restricted payments;

(iii) incur or suffer to exist, directly or indirectly, liens on its properties or assets;

(iv) sell or otherwise dispose of, directly or indirectly, assets;

(v) create or otherwise cause or suffer to exist any consensual restriction on the right of certain of the subsidiaries of Tempur Sealy International to pay dividends or make any other distributions on or in respect of their capital stock;

and (vi) enter into transactions with affiliates.

These covenants are subject to a number of exceptions and qualifications.

In addition, Somnigroup International has the option at any time prior to October 15, 2026 to redeem some or all of the 2031 Senior Notes at 100.0 % of the original principal amount plus a "make-whole" premium and accrued and unpaid interest, if any.

2029 Senior Notes

On March 25, 2021, Tempur Sealy International issued $ 800.0 million in aggregate principal amount of 4.00 % senior notes due 2029 (the "2029 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act, and to certain non-U.S.

On March 25, 2021, Somnigroup International issued $ 800.0 million in aggregate principal amount of 4.00 % senior notes due 2029 (the "2029 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act, and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

The 2029 Senior Notes were issued pursuant to an indenture, dated as of March 25, 2021 (the "2029 Indenture"), among Tempur Sealy International, the Guarantors, and The Bank of New York Mellon Trust Company, N.A., as trustee.

The 2029 Senior Notes are general unsecured senior obligations of Tempur Sealy International and are guaranteed on a senior unsecured basis by the Guarantors.

The 2029 Senior Notes are general unsecured senior obligations of Somnigroup International and are guaranteed on a senior unsecured basis by the Guarantors.

The 2029 Senior Notes mature on April 15, 2029, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on October 15, 2021.

Tempur Sealy International has the option to redeem all or a portion of the 2029 Senior Notes at any time on or after April 15, 2024.

Somnigroup International has the option to redeem all or a portion of the 2029 Senior Notes at any time on or after April 15, 2024.

The initial redemption price is 102.0 % of the principal amount, plus accrued and unpaid interest, if any.

The redemption price will decline each year after 2024 until it becomes 100.0 % of the principal amount beginning on April 15, 2026.

In addition, Tempur Sealy International has the option at any time prior to April 15, 2024 to redeem some or all of the 2029 Senior Notes at 100.0 % of the original principal amount plus a "make-whole" premium and accrued and unpaid interest, if any.

Tempur Sealy International may also redeem up to 40.0 % of the 2029 Senior Notes prior to April 15, 2024, under certain circumstances with the net cash proceeds from certain equity offerings, at 104.00 % of the principal amount plus accrued and unpaid interest, if any.

The 2029 Indenture restricts the ability of Tempur Sealy International and the ability of certain of its subsidiaries to, among other things:

(i) incur, directly or indirectly, debt;

(ii) make, directly or indirectly, certain investments and restricted payments;

(iii) incur or suffer to exist, directly or indirectly, liens on its properties or assets;

(iv) sell or otherwise dispose of, directly or indirectly, assets;

and (vi) enter into transactions with affiliates.

These covenants are subject to a number of exceptions and qualifications.

Deferred Financing Costs

The Company capitalizes costs associated with the issuance of debt and amortizes these costs as additional interest expense over the lives of the debt instruments using the effective interest method.

Deferred Financing Costs and Original Issue Discounts

The Company capitalizes costs associated with the issuance of debt and related original issue discounts ("OIDs") and amortizes these costs as additional interest expense over the lives of the debt instruments using the effective interest method.

These costs are recorded as deferred financing costs as a direct reduction from the carrying amount of the corresponding debt liability in the accompanying Consolidated Balance Sheets and the related amortization is included in interest expense, net in the accompanying Consolidated Statements of Income.

5 unchanged sentences

(1) Total future obligations excludes $ 28.5 million of outstanding letters of credit issued by various financial institutions, including $ 0.8 million associated with the 2023 Credit Facility.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company leases retail stores, manufacturing and distribution facilities, office space and equipment under operating and finance lease agreements.

24 unchanged sentences

Total lease expense $ 236.8 $ 216.2 $ 195.0

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

31 unchanged sentences

(a) Operating cash flows paid for operating leases are included within the change in other assets and liabilities within the Consolidated Statement of Cash Flows offset by non-cash right-of-use asset amortization and lease liability accretion.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

14 unchanged sentences

The Company's cost associated with these plans consists of periodic contributions to these plans based upon employee participation.

The expense recognized by the Company for such contributions for the years ended December 31 was follows:

The expense recognized by the Company for such contributions for the years ended December 31, 2024, 2023 and 2022 was as follows:

(in millions)

27 unchanged sentences

36-6044243-001 12/31/23 Red Implemented $ 1.0 Yes, 10.0 %

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

19 unchanged sentences

36-6044243-001 12/31/22 Red Implemented $ 0.8 Yes, 10.0 %

2024, 2025 N/A

(1) The Pension Protection Act of 2006 ranks the funded status of multi-employer pension plans depending upon a plan's current and projected funding.

9 unchanged sentences

(a) Common and Preferred Stock.

Tempur Sealy International has 500.0 million authorized shares of common stock with $ 0.01 per share par value and 10.0 million authorized shares of preferred stock with $ 0.01 per share par value.

Somnigroup has 500.0 million authorized shares of common stock with $ 0.01 per share par value and 10.0 million authorized shares of preferred stock with $ 0.01 per share par value.

The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.

5 unchanged sentences

As of December 31, 2024, the Company had approximately $ 774.5 million remaining under an existing share repurchase program initially authorized by the Board of Directors in 2016.

The Company repurchased 0.1 million shares, 18.6 million shares and 19.5 million shares under the program, for approximately $ 5.0 million, $ 621.2 million and $ 801.4 million during the years ended December 31, 2023, 2022 and 2021, respectively.

Upon the announcement of our pending acquisition of Mattress Firm, the Company suspended its share repurchase program.

While the Mattress Firm acquisition was pending, the Company temporarily suspended its share repurchase program and did not repurchase any shares under this program in the year ended December 31, 2024.

The Company repurchased 0.1 million shares and 18.6 million shares under the program, for approximately $ 5.0 million and $ 621.2 million during the years ended December 31, 2023 and 2022, respectively.

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 the years ended December 31, 2024, 2023 and 2022, 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 approximately $ 43.8 million, $ 31.0 million and $ 46.2 million in treasury stock acquired during the years ended December 31, 2024, 2023 and 2022, respectively.

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

32 unchanged sentences

$ 393.9 $ 427.1

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

1 unchanged sentence

(11) Stock-based Compensation

Tempur Sealy International has two stock-based compensation plans which provide for grants of non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock unit awards, performance shares, stock grants and performance based awards to employees, non-employee directors, consultants and Company advisors.

Somnigroup has a stock-based compensation plan which provides for grants of non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock unit awards, performance shares, stock grants and performance based awards to employees, non-employee directors, consultants and Company advisors.

The plan under which equity awards may be granted in the future is the Amended and Restated 2013 Equity Incentive Plan (the "2013 Plan").

It is the policy of the Company to issue stock out of treasury shares upon issuance or exercise of share-based awards.

The Company believes that awards and purchases made under these plans better align the interests of the plan participants with those of its stockholders.

The Company believes that awards and purchases made under this plan better align the interests of the plan participants with those of its stockholders.

On May 5, 2022, the Company's stockholders approved the amendment and restatement of the 2013 Plan, which had been previously amended and restated on May 11, 2017.

The 2013 Plan provides for grants of stock options to purchase shares of common stock to employees and directors of the Company.

The 2013 Plan may be administered by the Compensation Committee of the Board of Directors, by the Board of Directors directly, or, in certain cases, by an executive officer or officers of the Company designated by the Compensation Committee.

The 2013 Plan may be administered by the Human Resources/Capital and Talent Committee of the Board of Directors, by the Board of Directors directly or, in certain cases, by an executive officer or officers of the Company designated by the Human Resources/Capital and Talent Committee.

The shares issued or to be issued under the 2013 Plan may be either authorized but unissued shares of the Company's common stock or shares held by the Company in its treasury.

Tempur Sealy International may issue a maximum of 44.7 million shares of common stock under the 2013 Plan, subject to certain adjustment provisions.

The Amended and Restated 2003 Equity Incentive Plan, as amended (the "2003 Plan"), was administered by the Compensation Committee of the Board of Directors, which, together with the Board of Directors, had the exclusive authority to administer the 2003 Plan, including the power to determine eligibility to receive awards, the types and number of shares of stock subject to the awards, the price and timing of awards and the acceleration or waiver of any vesting and performance of forfeiture restrictions, in each case subject to the terms of the 2003 Plan.

Any of the Company's employees, non-employee directors, consultants and Company advisors, as determined by the Compensation Committee, were eligible to be selected to participate in the 2003 Plan.

Tempur Sealy International allowed a maximum of 46.0 million shares of its common stock under the 2003 Plan to be issued.

In May 2013, the Company's Board of Directors adopted a resolution that prohibited further grants under the 2003 Plan.

In 2010, the Board of Directors approved the terms of a Long-Term Incentive Plan established under the 2003 Plan.

Somnigroup may issue a maximum of 44.7 million shares of common stock under the 2013 Plan, subject to certain adjustment provisions.

In 2013, the Board of Directors approved the terms of another Long-Term Incentive Plan established under the 2013 Plan.

Awards under both Long-Term Incentive Plans have typically consisted primarily of a mix of stock options, RSUs and PRSUs.

Shares with respect to the PRSUs will be granted and vest following the end of the applicable performance period and achievement of applicable performance metrics, market and environmental, social and corporate governance ("ESG") conditions as determined by the Compensation Committee of the Board of Directors.

Awards under the Long-Term Incentive Plan have typically consisted primarily of a mix of stock options, RSUs and PRSUs.

Shares with respect to the PRSUs will be granted and vest following the end of the applicable performance period and achievement of applicable performance metrics and strategic initiatives as determined by the Human Resources/Capital and Talent Committee of the Board of Directors.

The Company's stock-based compensation expense for the year ended December 31, 2024, 2023 and 2022 included PRSUs, RSUs and stock options.

2 unchanged sentences

(in millions) 2024 2023 2022

PRSU expense $ 24.9 $ 31.0 $ 39.4

RSU expense $ 17.9 $ 20.6 $ 21.0

PRSU expense 16.3 24.9 31.0

Stock option expense 2.2 2.2 1.1

5 unchanged sentences

A summary of the Company's PRSU activity and related information for the years ended December 31, 2024 and 2023 is presented below:

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

33 unchanged sentences

Expected dividend yield on stock N/A N/A 2.0 %

A summary of the Company's stock option activity under the 2003 Plan and 2013 Plan for the years ended December 31, 2023 and 2022 is presented below:

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A summary of the Company's stock option activity under the 2013 Plan for the years ended December 31, 2024 and 2023 is presented below:

(in millions, except per share amounts and years) Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value

Options outstanding at December 31, 2022

Granted 1.2 30.00

Exercised ( 0.2 ) 15.89

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Options unvested at December 31, 2022

Granted 1.2 30.00

Vested ( 0.3 ) 30.00

4 unchanged sentences

Options unvested at December 31, 2024

TEMPUR SEALY INTERNATIONAL, INC.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

23 unchanged sentences

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 pending proceedings in the aggregate will not have a material adverse effect on its business, financial condition, liquidity or operating results.

Except as disclosed, 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.

Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable potential losses.

Accordingly, the Company has not established material reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable.

Although the Company believes that it has strong defenses for the litigation and regulatory proceedings in which it is involved, it could, in the future, enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows.

Mattress Firm Acquisition

On July 2, 2024, the FTC filed a complaint for temporary restraining order and preliminary injunction in the United States District Court for the Southern District of Texas (the "Court") and an administrative complaint to challenge our acquisition of Mattress Firm.

On July 16, 2024, the Court entered a temporary restraining order enjoining the completion of the merger until the Court ruled on the FTC's motion for a preliminary injunction.

On October 4, 2024, the Company filed a complaint in the Court seeking an injunction against the FTC's administrative proceeding.

On January 31, 2025, the Court denied the FTC's motion for a preliminary injunction and declined to enjoin the Company’s acquisition of Mattress Firm.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

February 5, 2025, the transaction was closed.

The FTC may appeal the Court's decision through April 1, 2025.

Further, the FTC’s administrative proceeding has not been conclusively terminated.

(13) Income Taxes

73 unchanged sentences

State net operating losses ("SNOLs") $ 103.4 $ 134.0

federal foreign tax credits ("FTCs") — 10.6

state income tax credits ("SITCs") 2.8 3.2

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Deferred Tax Liability for Undistributed Foreign Earnings

As it relates to stock of the Company's top tier foreign subsidiaries in the hands of each such subsidiary's U.S.

shareholder, at December 31, 2023, the book basis of each such subsidiary exceeds the tax basis in each such subsidiary.

No income taxes have been provided for the book to tax basis differences (including undistributed foreign earnings) inherent in these entities except to the extent of certain earnings that have been previously subject to U.S.

income tax ("PTEP").

During the three month period ended December 31, 2023, the Company revalued the deferred income tax liability associated with the PTEP resulting in a tax benefit of approximately $ 2.0 million.

The revaluation is primarily attributable to a reduction in PTEP during 2023.

As it relates to the book to tax basis difference with respect to the stock of each of the Company's second and lower tier foreign subsidiaries, as a general matter, the book basis exceeds the tax basis in the hands of such foreign subsidiaries' shareholders.

By operation of the tax laws of the various countries in which these subsidiaries are domiciled, earnings of lower tier foreign subsidiaries are not subject to tax, in all material respects, when distributed to a foreign shareholder.

It is the Company's intent that the earnings of each lower tier foreign subsidiary, with the exception of its Danish subsidiary, its two Canadian subsidiaries and its Mexican subsidiary, will be permanently reinvested in each such foreign subsidiaries' own operations.

As it relates to the Danish subsidiary, its earnings may be distributed without any income tax impact.

With respect to the Canadian and Mexican subsidiaries, Canadian and Mexican income tax withholding applies, respectively, to any distribution each such subsidiary makes to its foreign parent company.

The Company concluded that at December 31, 2023 it is likely that the Canadian subsidiaries and the Mexican subsidiary will each make dividend distributions in the next twelve months.

In each case, local country income tax withholding, i.e., Canada and Mexico, applies.

Consequently at December 31, 2023 the Company has accrued approximately $ 1.6 million for such withholding tax.

As it relates to the book to tax basis difference with respect to the stock of each of the Company's foreign subsidiaries, at December 31, 2024, the book basis of each exceeds the tax basis in the hands of such foreign subsidiaries' shareholders.

The Company maintains such cumulative stock basis differences are indefinitely reinvested.

However, the Company has provided for income taxes on the amount of estimated near-term distributions from each foreign subsidiary, measured by each such subsidiary's free cash flow to be generated.

The income taxes provided for consist of the recipient's local country income taxes on the distributions, as well as local country income tax withholding on such distributions.

Earnings in excess of the estimated near-term distributions are indefinitely reinvested by each foreign subsidiary in its own operations.

Consequently at December 31, 2024 the Company has accrued approximately $ 1.4 million for such income and withholding taxes.

Uncertain Income Tax Positions

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Balance as of December 31, 2022

Additions based on tax positions related to 2022

Additions for tax positions of prior years 0.2

Expiration of statutes of limitations ( 0.2 )

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Balance as of December 31, 2023

Additions based on tax positions related to 2023

Additions for tax positions of prior years 0.2

Expiration of statutes of limitations ( 2.6 )

Reduction for tax positions of prior years ( 0.3 )

Settlements of uncertain tax positions with tax authorities ( 34.0 )

Balance as of December 31, 2024

2 unchanged sentences

The Company had $ 0.3 million and $ 1.0 million of accrued interest and penalties at December 31, 2024 and 2023, respectively.

As discussed below, in the three months ended December 31, 2023, the Company settled the Danish Tax Matter related to 2012 to 2022.

Such settlement resulted in a reduction of the Company’s liability for uncertain tax positions of approximately $ 34.0 million, which is reflected in “Settlements of uncertain tax positions with tax authorities” in the table above.

The Company anticipates it is reasonably possible an increase or decrease in the amount of unrecognized tax benefits could be made in the next twelve months as a result of the statute of limitations expiring and/or the examinations being concluded on these returns.

3 unchanged sentences

The Company is currently under examination by various tax authorities around the world.

The OECD (Organization for Economic Co-operation and Development) has proposed a global minimum effective tax of 15.0% on income arising in each jurisdiction ("Pillar 2") that has been agreed upon in principle by over 140 countries.

During 2024 and 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, the Company is evaluating the potential consequences of Pillar 2 on its longer-term financial position.

The Company does not expect Pillar 2 to have a material impact on its financial results.

The Danish Tax Matter

The Company has been involved in a dispute with the SKAT regarding the royalty paid by a U.S.

The Company was involved in a dispute with the Danish tax authority ("SKAT") regarding the royalty paid by a U.S.

subsidiary to a Danish subsidiary for tax years 2012 through 2022.

The royalty is paid by the U.S.

The issues involved the royalty paid by the U.S.

subsidiary for the right to utilize certain intangible assets owned by the Danish subsidiary in the U.S.

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In the year ended December 31, 2022, the Company remeasured the uncertain tax position and associated deferred tax asset to reflect the terms of the Framework, which resulted in a net income tax benefit for the year ended December 31, 2022 of $ 14.7 million.

The Framework was not a binding agreement, but its terms provided definitive data for the Company to determine both the Danish and U.S.

tax impacts at December 31, 2022.

As it relates to the year ended December 31, 2023, in January 2023 the Company implemented the terms of the Framework.

Consequently, there is neither Danish income tax exposure nor a correlative U.S.

benefit for the year December 31, 2023.

On October 12, 2023, the IRS Advanced Pricing and Mutual Agreement ("APMA") team and SKAT formally agreed on final terms of a bilateral advance pricing agreement ("BAPA") with respect to the ongoing royalty matter for the periods 2012 through 2024 (the "Settlement").

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The Company offset the income tax reserves in the fourth quarter of 2023 against the previous amounts on deposit with SKAT and recorded a net income tax benefit in the Company's consolidated financial statements of approximately $ 4.8 million (largely interest to be paid by SKAT on the overpayment of tax).

The assessments reflect a net refund of deposits previously paid to SKAT of approximately $ 24.8 million, which the Company has recorded as an income tax receivable included in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets.

In addition, the Company has approximately $ 7.6 million remaining on deposit with SKAT for an unrelated matter recorded in other non-current assets.

The assessments reflected a net refund of deposits previously paid to SKAT of approximately $ 24.8 million, which the Company recorded as an income tax receivable included in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets.

In addition, at December 31, 2024 and 2023 the Company had approximately $ 10.7 million and $ 7.6 million remaining on deposit with SKAT for an unrelated matter recorded in other non-current assets.

With respect to the impact of the Settlement on the Company’s U.S.

tax position, on November 9, 2023, the Company formally agreed on a Mutual Agreement Procedure (“MAP”) and Advance Pricing Agreement (“APA”) with APMA related to the implementation of the terms of the BAPA for U.S.

tax position, on November 9, 2023, the Company formally agreed on a Mutual Agreement Procedure ("MAP") and APA with APMA related to the implementation of the terms of the BAPA for U.S.

income tax purposes, which included reporting the U.S.

result of the Settlement for all years 2012 through 2022 in an amended 2022 income tax return.

As a result, the Company released the deferred tax asset associated with its U.S.

position of $ 21.6 million in the year ended December 31, 2023 and recorded a net income tax benefit and incremental receivable in the Company’s consolidated financial statements at December 31, 2023.

The net income tax benefit is approximately $ 8.9 million (consisting of a gross benefit of $ 10.5 million, offset by U.S.

result of the Settlement for all years 2012 through 2022 in an amended 2022 income tax return, which the Company filed in February 2024.

As a result, in the year ended December 31, 2023, the Company released the deferred tax asset associated with its U.S.

income tax positions of $ 21.6 million and recorded a net income tax benefit and incremental receivable in the Company's consolidated financial statements at December 31, 2023.

Further, for the year ended December 31, 2023, the net income tax benefit recorded was approximately $ 8.9 million (consisting of a gross benefit of $ 10.5 million, offset by U.S.

tax of approximately $ 1.6 million related to subpart F income resulting from the interest paid by SKAT on the Danish overpayment of tax).

The incremental U.S.

income tax receivable at December 31, 2023 is approximately $ 30.1 million and is included in other non-current assets in the accompanying Consolidated Balance Sheets.

TEMPUR SEALY INTERNATIONAL, INC.

income tax receivable at December 31, 2024 and 2023 is approximately $ 31.1 million and $ 30.1 million, respectively, and is included in other non-current assets in the accompanying Consolidated Balance Sheets.

SOMNIGROUP INTERNATIONAL INC.

AND CONSOLIDATED SUBSIDIARIES

1 unchanged sentence

(14) 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.

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 Somnigroup:

Year Ended December 31,

7 unchanged sentences

Diluted earnings per common share for continuing operations $ 2.16 $ 2.08 $ 2.53

For the years ended December 31, 2023 and 2021, the Company excluded an insignificant number of shares 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.

For the year ended December 31, 2022, the Company excluded 1.2 million shares 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, respectively.

For the years ended December 31, 2024 and 2023, the Company excluded an insignificant number of shares from the diluted earnings per common share computation because their exercise price was greater than the average market price of Somnigroup's common stock or they were otherwise anti-dilutive.

For the year ended December 31, 2022, the Company excluded 1.2 million shares from the diluted earnings per common share computation because their exercise price was greater than the average market price of Somnigroup's common stock or they were otherwise anti-dilutive, respectively.

Holders of non-vested stock-based compensation awards do not have voting rights but do participate in dividend equivalents distributed upon award vesting.

(15) Business Segment Information

The Company operates in two segments:

In 2024, the Company operated in two segments:

North America and International.

4 unchanged sentences

The Company evaluates segment performance based on net sales, gross profit and operating income.

Following the acquisition of Mattress Firm and beginning in the first quarter of 2025, the Company will operate in three segments:

Tempur Sealy North America, Tempur Sealy International and Mattress Firm.

The Company sells its products in over 100 countries to over 10,000 wholesale customers.

The Company's Direct channel represents 24.9 % of the Company's consolidated net sales in 2024, as compared to 23.9 % of the Company's consolidated net sales in 2023.

One wholesale customer contributed over 15 % of the Company’s consolidated net sales in the years ended 2023 and 2022, respectively.

Mattress Firm contributed approximately 18 % of the Company's consolidated net sales in the years ended 2024 and 2023, respectively.

The Company’s North America and International segment assets include investments in subsidiaries that are appropriately eliminated in the Company's accompanying Consolidated Financial Statements.

The remaining inter-segment eliminations are comprised of intercompany accounts receivable and payable.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

The Company considers its Chairman, President and Chief Executive Officer to be its chief operating decision maker ("CODM").

The Company’s CODM manages business operations, evaluates segment performance and allocates resources based on metrics such as net sales, gross profit, operating income and other key financial indicators, guiding strategic decisions to align with company-wide goals.

SOMNIGROUP INTERNATIONAL INC.

AND CONSOLIDATED SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23 unchanged sentences

(in millions) North America International Corporate Eliminations Consolidated

Bedding sales $ 3,585.2 $ 879.2 $ — $ — $ 4,464.4

Other sales 270.3 190.7 — — 461.0

Net sales $ 3,788.9 $ 1,142.0 $ — $ — $ 4,930.9

2 unchanged sentences

Gross profit 1,530.8 649.3 — — 2,180.1

Advertising expense 382.0 88.9 — — 470.9

Other selling and marketing expense 334.7 269.8 16.2 — 620.7

General, administrative and other expenses 202.0 114.6 156.6 — 473.2

Equity income in earnings of unconsolidated affiliates — ( 18.9 ) — — ( 18.9 )

Operating income (loss) 612.1 194.9 ( 172.8 ) — 634.2

Income (loss) from continuing operations before income taxes 634.2 171.4 ( 331.5 ) — 474.1

Interest expense, net 134.8

Other (income) expense ( 4.9 )

Income (loss) before income taxes 542.5 208.1 ( 246.3 ) — 504.3

Depreciation and amortization (1)

2 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

SOMNIGROUP INTERNATIONAL INC.

AND CONSOLIDATED SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1 unchanged sentence

(in millions) North America International Corporate Eliminations Consolidated

Bedding sales $ 3,618.7 $ 859.1 $ — $ — $ 4,477.8

Other sales 267.4 176.0 — — 443.4

Net sales $ 3,855.5 $ 1,069.9 $ — $ — $ 4,925.4

2 unchanged sentences

Gross profit 1,537.5 591.2 — — 2,128.7

Advertising expense 389.9 79.1 — — 469.0

Other selling and marketing expense 319.9 254.0 20.5 — 594.4

General, administrative and other expenses 184.6 110.2 186.3 — 481.1

Equity income in earnings of unconsolidated affiliates — ( 23.0 ) — — ( 23.0 )

Operating income (loss) 643.1 170.9 ( 206.8 ) — 607.2

Income (loss) from continuing operations before income taxes 638.6 183.4 ( 244.8 ) — 577.2

Interest expense, net 129.9

Loss on extinguishment of debt 3.2

Income (loss) before income taxes 634.2 171.4 ( 331.5 ) — 474.1

Depreciation and amortization (1)

4 unchanged sentences

(in millions) North America International Corporate Eliminations Consolidated

Bedding sales $ 3,825.9 $ 687.0 $ — $ — $ 4,512.9

Other sales 253.3 164.6 — — 417.9

Net sales $ 3,886.1 $ 1,035.1 $ — $ — $ 4,921.2

2 unchanged sentences

Gross profit 1,487.3 562.3 — — 2,049.6

Advertising expense 375.1 72.9 — — 448.0

Other selling and marketing expense 288.6 234.8 21.1 — 544.5

General, administrative and other expenses 181.2 88.5 127.9 — 397.6

Equity income in earnings of unconsolidated affiliates — ( 21.1 ) — — ( 21.1 )

Operating income (loss) 642.4 187.2 ( 149.0 ) — 680.6

Interest expense, net 103.0

Other (income) expense 0.4

Income (loss) from continuing operations before income taxes 638.6 183.4 ( 244.8 ) — 577.2

3 unchanged sentences

(1) Depreciation and amortization includes stock-based compensation amortization expense.

SOMNIGROUP INTERNATIONAL INC.

AND CONSOLIDATED SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes property, plant and equipment, net, by geographic region:

5 unchanged sentences

$ 811.1 $ 878.3

TEMPUR SEALY INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes operating lease right-of-use assets by geographic region:

14 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 8. Financial Statements and Supplementary Data