What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-02-28 · 391 added, 251 removed, 1123 unchanged (36% of the section changed)

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Consolidated Balance Sheets as of December 31, 2025 and 2024

Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2024, 2023 and 2022

Consolidated Statements of Stockholders' (Deficit) Equity for the years ended December 31, 2025, 2024 and 2023

Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023

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Report of Independent Registered Public Accounting Firm

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

and Subsidiaries

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

Opinion on the Financial Statements

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").

(the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders' (deficit) equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S.

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Impairment analysis of goodwill for the Dreams reporting unit

Description of the Matter At December 31, 2024, the Company had $318.7 million of goodwill related to its Dreams reporting unit, which was included in the International reportable segment.

As discussed in Note 1 to the consolidated financial statements, the Company performs its annual impairment test on goodwill as of the first day of the fourth quarter, and more frequently if the Company believes indicators of impairment exist.

Management performed its impairment test by comparing the fair value of the Dreams reporting unit to its carrying amount to determine if there is a potential indicator of impairment.

Management used an income approach (a discounted cash flow analysis) and a market approach (guideline public company analysis) in its quantitative impairment tests.

Auditing the annual goodwill impairment test for the Dreams reporting unit was especially challenging due to the judgments required in determining the fair value.

In particular, the discounted cash flow model involved judgmental assumptions, including projected business results, long-term growth factors and the weighted-average cost of capital, which all include inherent uncertainties as they are affected by expectations about future market or economic conditions and reporting unit specific risk factors.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s goodwill impairment process, including controls over management’s review of significant inputs and assumptions used in determining the fair value of the Dreams reporting unit.

To test the estimated fair value of the Dreams reporting unit, we performed audit procedures that included, among others, assessing the fair value methodologies and testing the significant assumptions used in the discounted cash flow models, including projected business results, long-term growth factors and the weighted-average cost of capital.

As it pertains to the projected business results, we assessed the reasonableness of the Company’s assumptions by comparing those assumptions to recent historical performance, current economic and industry trends, and financial forecasts.

We also assessed the reasonableness of estimates of the projected business results and the long-term growth factors by evaluating how such assumptions compared to economic, industry, and peer expectations.

We performed various sensitivity analyses around these significant assumptions to understand the impact on the fair value calculation.

In addition, we involved our valuation specialists to assist with our evaluation of the fair value methodologies used by the Company and significant assumptions, including, the weighted average cost of capital based on the projected business results.

Specifically, we evaluated the components of the weighted average cost of capital assumptions by performing an independent corroborative calculation with the involvement of our valuation specialists.

Accounting for the Acquisition of Mattress Firm Group Inc.

(Mattress Firm)

Description of the Matter As described in Note 3 of the consolidated financial statements, on February 5, 2025, the Company completed its acquisition of Mattress Firm Group Inc.

(Mattress Firm) for a total purchase price of $ 5,141.4 million .

The acquisition was accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations.

The consideration paid in the acquisition must be allocated to the acquired assets and liabilities assumed, generally based on their fair value with the excess of the purchase price over those fair values allocated to goodwill.

Auditing the Company’s accounting for its acquisition of Mattress Firm was complex primarily due to the significant estimation uncertainty involved in estimating the fair value of the trade name intangible asset and significant judgment regarding the recognition of the deferred tax liability for stock basis recapture stemming from Mattress Firm’s 2018 debt restructuring.

The significant assumptions used to estimate the fair value of the trade name intangible asset included the forecasted revenue, revenue growth, royalty rate, and discount rate assumptions.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s accounting for business combinations, including internal controls over the Company’s determination of the fair value of the acquired trade name and internal controls over the recognition of deferred tax liabilities acquired.

To test the estimated fair value of the acquired trade name intangible asset, we performed audit procedures that included, among others, assessing the valuation methodology used and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

For the forecasted revenue and revenue growth, we compared the financial projections to current industry and economic trends, the historic financial performance of the acquired business, the Company’s history with other acquisitions, and forecasted performance of guideline public companies.

In addition, we involved our internal valuation specialists to assist in assessing the methodology used in determining the royalty rate and discount rate and testing these assumptions.

We also performed a sensitivity analysis on certain of the significant assumptions to evaluate the change in the fair value estimate that would result from changes in these significant assumptions.

To test the recognition of the deferred tax liability for stock basis recapture, we performed audit procedures that included, among others, reading and evaluating the Company’s analysis that detailed the basis and technical merits of their tax position.

We involved our tax subject matter resources in assessing the technical merits of the Company’s tax position based on our knowledge of relevant tax laws.

/s/ Ernst & Young LLP

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General, administrative and other expenses 695.0 473.2 481.1

Loss on disposal of business 13.9 — —

Equity income in earnings of unconsolidated affiliates ( 19.6 ) ( 18.9 ) ( 23.0 )

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Loss on extinguishment of debt — — 3.2

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

Other expense (income), net 6.0 ( 4.9 ) —

Total other expense, net 273.9 129.9 133.1

Income from continuing operations before income taxes 504.3 474.1 577.2

Income before income taxes 481.0 504.3 474.1

Income tax provision ( 95.7 ) ( 118.6 ) ( 103.4 )

Income from continuing operations 385.7 370.7 458.2

Loss from discontinued operations, net of tax — — ( 0.4 )

Net income before non-controlling interest 385.3 385.7 370.7

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Earnings per common share:

Earnings per share for continuing operations $ 2.21 $ 2.14 $ 2.61

Loss per share for discontinued operations — — —

Earnings per share $ 2.21 $ 2.14 $ 2.61

Earnings per share for continuing operations $ 2.16 $ 2.08 $ 2.53

Loss per share for discontinued operations — — —

Earnings per share $ 2.16 $ 2.08 $ 2.53

Basic $ 1.86 $ 2.21 $ 2.14

Diluted $ 1.84 $ 2.16 $ 2.08

Weighted average common shares outstanding:

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Net income before non-controlling interest $ 385.3 $ 385.7 $ 370.7

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 87.8 ( 51.7 ) 39.8

Net change in pension benefits, net of tax 0.6 1.6 0.4

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

Other comprehensive income (loss), net of tax 88.4 ( 50.1 ) 40.2

Comprehensive income 473.7 335.6 410.9

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Goodwill 4,595.9 1,066.7

Other intangible assets, net 700.5 714.8

Trade name and other intangible assets, net 2,587.1 700.5

Operating lease right-of-use assets 1,878.8 598.8

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(in millions)

Somnigroup International Inc.

Stockholders' Equity (Deficit)

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

Stockholders' (Deficit) Equity

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, 2021 $ 9.2 283.8 $ 2.8 96.4 $ ( 2,844.7 ) $ 622.0 $ 2,604.9 $ ( 99.2 ) $ 285.8

Balance as of 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 368.1 368.1

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Issuance of PRSUs and RSUs ( 2.7 ) 85.2 ( 85.2 ) —

Treasury stock repurchased 18.6 ( 621.2 ) ( 621.2 )

Treasury stock repurchased - open market purchases 0.1 ( 5.0 ) ( 5.0 )

Treasury stock repurchased - PRSU/RSU releases 0.9 ( 31.0 ) ( 31.0 )

Amortization of unearned stock-based compensation 47.7 47.7

Balance, December 31, 2022 $ 9.8 283.8 $ 2.8 113.4 $ ( 3,434.7 ) $ 598.2 $ 2,988.5 $ ( 176.9 ) $ ( 22.1 )

Balance as of 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 384.3 384.3

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Issuance of PRSUs and RSUs ( 2.2 ) 92.1 ( 92.1 ) —

Treasury stock repurchased 0.1 ( 5.0 ) ( 5.0 )

Treasury stock repurchased - PRSU/RSU releases 0.9 ( 43.8 ) ( 43.8 )

Amortization of unearned stock-based compensation 36.4 36.4

Balance, December 31, 2023 $ 10.0 283.8 $ 2.8 111.5 $ ( 3,380.6 ) $ 558.7 $ 3,279.2 $ ( 136.7 ) $ 323.4

Balance as of December 31, 2024 $ 9.3 283.8 $ 2.8 110.2 $ ( 3,330.0 ) $ 501.2 $ 3,571.8 $ ( 186.8 ) $ 559.0

Net income 384.1 384.1

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( 126.7 ) ( 126.7 )

Shares issued in connection with Mattress Firm Acquisition ( 34.2 ) 1,609.9 635.2 2,245.1

Exercise of stock options ( 2.8 ) 107.1 ( 57.6 ) 49.5

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( 1.3 ) 81.1 ( 81.1 ) —

Treasury stock repurchased - PRSU/RSU releases

Treasury stock repurchased - PRSU/RSU releases and options exercises

1.9 ( 125.0 ) ( 125.0 )

Treasury stock repurchased - merger consideration

0.1 ( 7.4 ) ( 7.4 )

Amortization of unearned stock-based compensation

Balance, December 31, 2024 $ 9.3 283.8 $ 2.8 110.2 $ ( 3,330.0 ) $ 501.2 $ 3,571.8 $ ( 186.8 ) $ 559.0

Balance as of December 31, 2025 $ 8.9 283.8 $ 2.8 73.9 $ ( 1,664.3 ) $ 1,038.7 $ 3,829.2 $ ( 98.4 ) $ 3,108.0

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

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2025 2024 2023

CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS:

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income before non-controlling interest $ 385.3 $ 385.7 $ 370.7

Loss from discontinued operations, net of tax — — 0.4

Adjustments to reconcile net income to net cash provided by operating activities:

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Loss on extinguishment of debt — — 1.4

Loss on disposal of business 13.9 — —

Foreign currency adjustments and other 16.9 1.7 ( 0.9 )

Changes in operating assets and liabilities:

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

Accounts receivable 72.6 ( 7.3 ) ( 11.5 )

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Income taxes receivable and payable 24.1 29.2 ( 59.8 )

Net cash provided by operating activities from continuing operations 666.5 570.3 378.8

CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:

Net cash provided by operating activities 800.1 666.5 570.3

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment ( 166.9 ) ( 97.3 ) ( 185.4 )

Acquisitions, net of cash acquired ( 2,824.5 ) — ( 3.0 )

Purchases of investments ( 41.7 ) — —

Other 8.8 0.6 0.6

Net cash used in investing activities from continuing operations ( 96.7 ) ( 187.8 ) ( 315.3 )

CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:

Net cash used in investing activities ( 3,024.3 ) ( 96.7 ) ( 187.8 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from borrowings under long-term debt obligations 4,364.1 3,007.0 2,667.6

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Repayments of finance lease obligations and other ( 22.6 ) ( 19.3 ) ( 16.2 )

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 cash provided by (used in) financing activities 616.9 1,077.4 ( 384.3 )

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH 32.5 ( 12.4 ) 7.3

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

(Decrease) increase in cash, cash equivalents and restricted cash ( 1,574.8 ) 1,634.8 5.5

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 1,709.7 74.9 69.4

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Interest $ 278.3 $ 157.7 $ 144.6

Income taxes, net of refunds $ 134.0 $ 133.0 $ 138.0

Non-cash investing activities:

Treasury stock issued in connection with Mattress Firm Acquisition $ 2,245.1 $ — $ —

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

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

The Company designs, manufactures and distributes bedding products, which includes 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.

On February 5, 2025, the Company completed the previously announced acquisition of Mattress Firm, the largest mattress specialty retailer in the U.S.

Mattress Firm was founded in 1986 and operates over 2,100 brick and mortar retail locations and a growing e-commerce platform.

Mattress Firm's highly trained retail sales associates provide personalized service to help consumers choose the ideal bedding products across their robust assortment of market-leading brands.

The Company designs, manufactures, distributes and retails bedding products, which includes 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, as well as licensing the Mattress Firm® trademark to retail franchisees.

The Company sells its products through two sales channels:

Wholesale and Direct.

Direct and Wholesale.

(b) Basis of Consolidation .

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(d) Adoption of New Accounting Standards .

Reference Rate Reform.

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which provides guidance on the accounting impacts due to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate ("SOFR").

The FASB continued to refine its guidance with the January 2021 ASU 2021-01 issued update, "Reference Rate Reform (Topic 848):

Scope" and the December 2022 ASU 2022-06 issued update, "Reference Rate Reform ("Topic 848"):

Deferral of the Sunset Date of Topic 848", of which all were effective upon issuance.

These updates provide entities with certain optional relief expedients and exceptions for applying GAAP to contract modifications, hedge accounting and other transactions affected by reference rate reform if certain criteria are met.

An entity that makes this election would present and account for a modified contract as a continuation of the existing contract.

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

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

See Note 6, "Debt," for additional details.

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

Segments Reporting Disclosures.

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.

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

Income Tax Disclosures.

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, "Improvements to Income Tax Disclosures", which enhances income tax disclosure requirements for all entities by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction and providing clarification on uncertain tax positions and related financial statement impacts.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (year ending December 31, 2025 for the Company).

The Company adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis.

See Note 13, "Income Taxes," for additional details on new disclosures.

Financial Instruments - Credit Losses.

In July 2025, the FASB issued ASU 2025-05, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets", which provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606.

ASU 2025-05 is effective for the Company for fiscal year ending December 31, 2026.

The Company adopted the practical expedient of ASU No.

2025-05 on October 1, 2025.

The adoption did not have a material impact on its consolidated financial statements.

See Note 1(n), "Allowance for Credit Losses," for additional details on new disclosures.

SOMNIGROUP INTERNATIONAL INC.

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(e) Accounting Pronouncements Not Yet Adopted

Income Tax Disclosures.

In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures", which enhances income tax disclosure requirements for all entities by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction and providing clarification on uncertain tax positions and related financial statement impacts.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (year ending December 31, 2025 for the Company).

Early adoption is permitted.

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

Disaggregation of Income Statement Expenses.

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ASU 2024-03 is effective for the Company beginning in the December 31, 2027 Form 10-K and for interim periods beginning in the March 31, 2028 Form 10-Q.

Targeted Improvements to the Accounting for Internal Use Software.

In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2025-06, "Intangibles, Goodwill and Other Internal-Use Software" (Subtopic 350-40), which removes all references to prescriptive and sequential software development stages (referred to as "project stages") throughout Subtopic 350-40 and specifies new requirements for determining when to begin capitalization of capitalizable project costs.

ASU 2025-06 is effective for the Company beginning in December 31, 2027 Form 10-K and for interim periods beginning in the March 31, 2028 Form 10-Q.

Early adoption is permitted as of the beginning of an annual reporting period.

The Company is currently evaluating this ASU to determine the impact it will have on the Company's Condensed Consolidated Financial Statements.

(f) Foreign Currency .

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(h) Inventories .

Inventories are stated at the lower of cost and net realizable value, determined by the first-in, first-out method and consist of the following:

Inventories are stated at the lower of cost and net realizable value, determined by the first-in, first-out or the weighted average cost method, depending on reportable segment, and consist of the following:

(in millions) 2025 2024

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Property, plant and equipment are carried at cost at acquisition date and are depreciated using the straight-line method over their estimated useful lives as follows:

Estimated Useful Lives

Buildings 25 - 30

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The Company records depreciation and amortization in cost of sales for long-lived assets used in the manufacturing process, and within each line item of operating expenses for all other long-lived assets.

Leasehold improvements are amortized over the shorter of the life of the lease or seven years .

Leasehold improvements are amortized over the shorter of the life of the lease or their estimated useful lives.

Assets under finance leases are included within property, plant and equipment and represent non-cash investing activities.

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Land and buildings 489.6 453.3

Leasehold improvements 305.6 182.0

Computer equipment and software 293.1 256.0

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Fair value generally is determined from estimated discounted future net cash flows (for assets held for use) or net realizable value (for assets held for sale).

The Company did not identify any impairments for the years ended December 31, 2024, 2023 and 2022.

The Company did not identify any impairments for long-lived assets for the years ended December 31, 2025, 2024 and 2023.

(k) Goodwill and Other Intangible Assets .

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This assessment may be performed quantitatively or qualitatively.

In conducting the impairment test for the North America, International and Dreams reporting units, the fair value of each is compared to its respective carrying amount including goodwill.

In conducting the impairment test for the Mattress Firm, Tempur Sealy North America, Tempur Sealy International and Dreams reporting units, the fair value of each is compared to its respective carrying amount including goodwill.

If the fair value exceeds the carrying amount, then no impairment exists.

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Using the qualitative approach, the Company reviews macroeconomic conditions, industry and market conditions and entity specific factors, including strategies and financial performance for potential indicators of impairment.

The Company also tests its indefinite-lived intangible assets for impairment, principally the Tempur, Sealy and Dreams trade names.

The Company also tests its indefinite-lived intangible assets for impairment, principally the Mattress Firm, Tempur, Sealy and Dreams trade names.

Under a quantitative approach, the Company uses a "relief-from-royalty" method.

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 2024 and 2023, and qualitatively in 2022, none of which resulted in the recognition of impairment charges.

The Company performed its annual impairment test of goodwill and indefinite-lived intangible assets qualitatively in 2025 and quantitatively in 2024 and 2023 for Tempur Sealy and Dreams, 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."

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The Company considers the impact of recoverable salvage value on sales returns by product in determining its estimate of future sales returns.

The Company recognizes a return asset for the right to recover the goods returned by the customer.

The right of return asset is recognized on a gross basis outside of the accrued sales returns and is not material to the Company's Consolidated Balance Sheets.

The Company recognizes a return asset for the right to recover the goods returned by the customer on a gross basis outside of the accrued sales returns on the Company's accompanying Consolidated Balance Sheets.

As of December 31, 2025 and 2024, $ 26.7 million and $ 2.1 million of right of return assets is included on the Company’s accompanying Consolidated Balance Sheets, respectively.

The Company had the following activity for accrued sales returns from December 31, 2023 to December 31, 2025:

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Amounts accrued 661.4

Liabilities assumed as a result of acquisition 57.2

Returns charged to accrual ( 655.9 )

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As of December 31, 2025 and 2024, $ 91.7 million and $ 30.3 million of accrued sales returns is included as a component of accrued expenses and other current liabilities and $ 15.2 million and $ 13.9 million of accrued sales returns is included in other non-current liabilities on the Company’s accompanying Consolidated Balance Sheets, respectively.

(n) 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.

(m) Warranties .

The Company provides product warranties on both manufactured and sourced products and service warranties, which vary by segment, product and brand.

Estimates of warranty expenses are based primarily on historical claims experience, product testing and recent trends.

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.

SOMNIGROUP INTERNATIONAL INC.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company provides warranties on mattresses with varying warranty terms.

Tempur-Pedic mattresses sold in the Tempur Sealy 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 pillows have a warranty term of 3 years, non-prorated.

The Company had the following activity for its accrued warranty expense from December 31, 2023 to December 31, 2025:

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Amounts accrued 15.8

Liabilities assumed as a result of acquisition 25.3

Warranties charged to accrual ( 20.7 )

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Balance as of December 31, 2025

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(o) Fair Value .

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2031 Senior Notes 748.8 698.2

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(p) Income Taxes .

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Cost of sales includes the costs of receiving, producing, inspecting, warehousing, insuring and shipping goods during the period, as well as depreciation and amortization of long-lived assets used in these processes.

Cost of sales also includes shipping and handling costs associated with the delivery of goods to customers and costs associated with internal transfers between plant locations.

Amounts included in cost of sales for shipping and handling were $ 306.5 million, $ 322.2 million and $ 330.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Cost of sales also includes retail store occupancy costs such as rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.

The Company believes the classification of occupancy costs could vary widely throughout the industry.

Because of this, the Company's gross profit and gross profit as a percentage of net sales may not be comparable to others in the industry which may include occupancy costs in total operating expenses.

Additionally, cost of sales include royalties that the Company pays to other entities for the use of their names on products produced by the Company.

Royalty expense is not material to the Company's Consolidated Statements of Income.

(r) Cooperative Advertising, Rebate and Other Promotional Programs.

Prior to the Mattress Firm Acquisition, the Company recorded retail store occupancy costs in selling and marketing expenses.

For the years ended December 31, 2024 and 2023, retail store occupancy costs of $ 152.2 million and $ 145.2 million, respectively, were reclassified to cost of sales in the accompanying consolidated financial statements and notes thereto to conform to the current period presentation.

(r) Vendor Incentives .

The Company's Mattress Firm segment earns various types of incentives from its suppliers related to purchase volume rebates, sales, reimbursements of certain sales and marketing expenses, long-term supply agreements and other ordinary course transactions, collectively referred to as vendor incentives.

Amounts earned for vendor incentives are recorded within accounts payable until realized and are not material to the Company's Condensed Consolidated Balance Sheets.

Vendor incentives are generally recorded as a reduction of inventory at the time of purchase and, subsequently, as a reduction to cost of sales when the product is sold.

Vendor incentives earned for long-term supply agreements are deferred and ratably recorded as a reduction to cost of sales over the life of the supply agreement.

Vendor incentives which represent the reimbursement of certain sales and marketing expenses for the vendor's products are recorded as a reduction of sales and marketing expenses.

Certain vendor incentives include product purchase estimates and assumptions which may result in subsequent period adjustments if actual results differ from the estimates and assumptions used at the time of recognition.

Vendor incentives earned

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

for expense reimbursements also include estimates for sales and marketing expenses incurred at the time of recognition.

If vendor incentives exceed our sales and marketing expenses, the excess amount is recorded as a reduction to cost of sales.

The Company regularly reviews the adequacy of its estimates and assumptions used in the recognition of vendor incentives.

(s) Cooperative Advertising, Rebate and Other Promotional Programs .

The Company enters into programs with customers to provide funds for advertising and promotions.

4 unchanged sentences

Some of these agreements extend over several years.

Significant estimates are required at any point in time with regard to the ultimate reimbursement to be claimed by the customers.

Estimates may be required at any point in time with regard to the ultimate reimbursement to be claimed by the customers.

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

2 unchanged sentences

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

(s) Advertising Costs.

(t) Advertising Costs .

The Company expenses advertising costs as incurred except for production costs and advance payments, which are deferred and expensed when advertisements run for the first time.

3 unchanged sentences

Advertising costs include expenditures for shared advertising costs that the Company reimburses to customers under its integrated and cooperative advertising programs.

Advertising costs deferred and included in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets were $ 10.0 million and $ 10.2 million as of December 31, 2024 and 2023, respectively.

(t) Research and Development Expenses.

Advertising costs deferred and included in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets were $ 8.6 million, $ 10.0 million and $ 10.2 million as of December 31, 2025, 2024 and 2023, respectively.

(u) Research and Development Expenses .

Research and development expenses for new products are expensed as they are incurred and are included in general, administrative and other expenses in the accompanying Consolidated Statements of Income.

Research and development costs charged to expense were $ 32.9 million, $ 30.8 million and $ 30.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(u) Stock-based Compensation.

(v) Stock-based Compensation .

The Company accounts for stock-based payment transactions in which the Company receives employee services in exchange for equity instruments of the Company.

1 unchanged sentence

Stock-based compensation cost for stock options is estimated at the grant date based on each option's fair value as calculated by the Black-Scholes option-pricing model.

Stock-based compensation cost for equity instruments that include a market performance condition are determined using a Monte Carlo simulation valuation model.

The Company recognizes stock-based compensation cost as expense for awards other than its PRSUs ratably on a straight-line basis over the requisite service period.

3 unchanged sentences

Further information regarding stock-based compensation can be found in Note 11, "Stock-based Compensation."

(v) Treasury Stock.

(w) Treasury Stock .

Subject to Delaware law, and the limitations in the 2023 Credit Agreement (as defined in Note 6, "Debt") and the Company's other debt agreements, the Board of Directors may authorize share repurchases of the Company's common stock.

5 unchanged sentences

Please refer to Note 9, "Stockholders' Equity", for additional information.

(w) Pension Obligations.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(x) Pension Obligations .

The Company has a noncontributory, defined benefit pension plan covering current and former hourly employees at two of its active Sealy plants and ten previously-closed Sealy U.S.

11 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, 2025 or 2024.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) Net Sales

1 unchanged sentence

Twelve Months Ended December 31, 2025

(in millions) North America International Consolidated

Wholesale $ 3,275.2 $ 426.4 $ 3,701.6

(in millions) Mattress Firm Tempur Sealy North America Tempur Sealy International Consolidated

Direct $ 3,505.4 $ 437.6 $ 802.9 $ 4,745.9

Wholesale — 2,263.6 467.0 2,730.6

Net sales $ 3,505.4 $ 2,701.2 $ 1,269.9 $ 7,476.5

North America International Consolidated

Mattress Firm Tempur Sealy North America Tempur Sealy International Consolidated

Geographical region

3 unchanged sentences

Twelve Months Ended December 31, 2024

(in millions) North America International Consolidated

Wholesale $ 3,348.2 $ 397.9 $ 3,746.1

(in millions) Tempur Sealy North America Tempur Sealy International Consolidated

Direct $ 513.7 $ 715.6 $ 1,229.3

Wholesale 3,275.2 426.4 3,701.6

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

North America International Consolidated

Tempur Sealy North America Tempur Sealy International Consolidated

Geographical region

2 unchanged sentences

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

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Twelve Months Ended December 31, 2023

(in millions) North America International Consolidated

Wholesale $ 3,390.1 $ 382.4 $ 3,772.5

(in millions) Tempur Sealy North America Tempur Sealy International Consolidated

Direct $ 507.3 $ 672.0 $ 1,179.3

Wholesale 3,348.2 397.9 3,746.1

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

North America International Consolidated

Tempur Sealy North America Tempur Sealy International Consolidated

Geographical region

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Substantially all revenue is associated with bedding product sales.

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

Wholesale and Direct.

The Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare.

The Mattress Firm segment sells products through one channel:

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

Direct and Wholesale.

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

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare.

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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The Company recognizes royalty income based on the occurrence of sales of Sealy®, Stearns & Foster® and Tempur® branded products by various licensees.

Royalty income was $ 31.5 million, $ 32.3 million and $ 31.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Royalty income in the Wholesale channel was $ 31.0 million, $ 31.5 million and $ 32.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Royalty income and franchise revenue in the Direct channel was $ 7.2 million for the year ended December 31, 2025.

For product sales in each of the Company's channels, the Company recognizes a sale when the performance obligations under the terms of the contract with the customer are satisfied, which is generally when control of the product has transferred to the customer.

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The transaction price is measured as the amount of consideration the Company expects to receive in exchange for transferring goods.

The amount of consideration the Company receives, and correspondingly, the revenue that is recognized, varies due to sales incentives and returns the Company offers to its Wholesale and Direct channel customers.

The amount of consideration the Company receives, and correspondingly, the revenue that is recognized, varies due to sales incentives and returns the Company offers to its Direct and Wholesale channel customers.

Specifically, the Company extends volume discounts, as well as promotional allowances, floor sample discounts, commissions paid to retail associates and slotting fees to its Wholesale channel customers and reflects these amounts as a reduction of sales at the time revenue is recognized based on historical experience.

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Accordingly, the Company reflects all amounts billed to customers for shipping and handling in revenue and the costs of fulfillment in cost of sales.

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.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) Acquisitions and Divestitures

Acquisition of Mattress Firm Group Inc.

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.

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

The aggregate purchase price consisted of $ 3.1 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.

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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.

The Mattress Firm Acquisition enhances the Company's global omni-channel strategy and enables a seamless consumer experience, among other things.

Mattress Firm operates as a separate business segment within the Company.

The Company accounted for this transaction as a business combination in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations .

Mattress Firm's financial results for the period from February 5, 2025 through December 31, 2025 (the "stub period") are included in the Company's Condensed Consolidated Financial Statements for the year ended December 31, 2025, respectively.

On May 1, 2025, the Company completed 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 year ended December 31, 2025, the Company recorded a $ 13.9 million loss on disposal of business associated with the divestiture, net of proceeds of $ 9.0 million.

The divestiture did not have a material impact on the results of operations for the year ended December 31, 2025.

The divestiture of Sleep Outfitters was not classified as assets and liabilities held for sale in the Company's 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.

Purchase Price Consideration

The final purchase price of Mattress Firm as of February 5, 2025 consists of the following items:

(in millions)

Cash $ 3,091.5

Common stock of the Company (1)

Effective settlement of pre-existing relationships (2)

Total consideration $ 5,408.4

Cash acquired ( 267.0 )

Net consideration transferred $ 5,141.4

(1) The stock consideration of 34.2 million shares of Somnigroup common stock represents a value of $ 65.65 per share, which is the simple average of the opening and closing price per share of the Company's common stock on the NYSE on the business day immediately prior to the date of acquisition.

This amount includes stock consideration to Mattress Firm employees for equity awards converted into the right to receive merger consideration.

(2) Represents the effective settlement of Mattress Firm outstanding payables to Somnigroup, net of incentives receivable.

No gain or loss was recognized on this settlement.

Final Purchase Price Allocation

The final allocation of the purchase price is based on the fair values of the assets acquired and liabilities assumed as of February 5, 2025.

The components of the final purchase price allocation are as follows:

(in millions) Initial Allocation of Consideration Measurement

Adjustments Final Allocation

Accounts receivable, net $ 43.1 $ ( 21.6 ) $ 21.5

Inventories 313.1 — 313.1

Prepaid expenses and other current assets 66.7 ( 1.1 ) 65.6

Assets held for sale 37.6 ( 1.7 ) 35.9

Property and equipment 193.1 59.7 (1) 252.8

Operating lease right-of-use assets 1,254.1 16.8 (1) 1,270.9

Other non-current assets 66.6 ( 12.6 ) 54.0

Indefinite-lived trade names 1,660.0 220.0 (1) 1,880.0

Goodwill 3,473.0 20.9 3,493.9

Fair value of assets acquired $ 7,107.3 $ 280.4 $ 7,387.7

Accounts payable ( 113.7 ) 20.1 ( 93.6 )

Accrued expenses and other current liabilities ( 255.7 ) ( 3.7 ) ( 259.4 )

Income taxes payable ( 2.4 ) 1.8 ( 0.6 )

Liabilities held for sale ( 32.7 ) — ( 32.7 )

Long-term operating lease obligations ( 1,287.2 ) ( 19.3 ) (1) ( 1,306.5 )

Deferred tax liability ( 194.2 ) ( 291.8 ) (2) ( 486.0 )

Other non-current liabilities ( 59.6 ) 3.1 ( 56.5 )

Long-term debt ( 10.1 ) ( 0.9 ) ( 11.0 )

Fair value of liabilities assumed ( 1,955.6 ) ( 290.7 ) ( 2,246.3 )

Net consideration transferred 5,151.7 ( 10.3 ) 5,141.4

Cash acquired 267.0 — 267.0

Total consideration transferred $ 5,418.7 $ ( 10.3 ) $ 5,408.4

(1) Represents valuation adjustments to indefinite-lived trade names, operating leases and property and equipment during the measurement period.

(2) Represents the income tax effect for the purchase price allocation adjustments.

The indefinite-lived intangible asset represents the Mattress Firm trade name.

The Company applied the income approach through a relief from royalty method to fair value the trade name asset using Level 3 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 future economic benefits expected from the expansion of consumer touchpoints, the assembled workforce acquired and operating efficiencies.

Due to carryover tax basis, approximately $ 164.6 million of the goodwill is deductible for income tax purposes and approximately $ 3,329.3 million is non-deductible for income tax purposes.

Combined total goodwill of $ 3,493.9 million is included within the Mattress Firm segment.

Transaction Costs

The Company incurred $ 50.2 million, $ 47.8 million and $ 49.0 million in transaction expenses related to the acquisition for the years ended December 31, 2025, 2024 and 2023, respectively, which were recorded in general, administrative and other expenses in the accompanying Consolidated Statements of Income.

In the years ended December 31, 2025 and 2024, the Company also incurred $ 6.8 million and $ 9.8 million, respectively, 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-related interest expense, net of interest income, for the year ended December 31, 2023.

Consolidated Results of Operations

The business acquired in the Mattress Firm Acquisition contributed revenue of $ 3,505.4 million for the year ended December 31, 2025, and contributed net income of $ 166.5 million for the year ended December 31, 2025.

Unaudited Pro Forma Financial Information

The following represents the unaudited consolidated pro forma financial information for the periods as if Mattress Firm had been included in the consolidated results of the Company since January 1, 2024.

Pro forma results do not include the effect of any future synergies anticipated to be achieved from the acquisition, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.

Twelve Months Ended December 31,

(in millions) 2025 2024

Pro forma net sales $ 7,743.6 $ 7,940.2

Pro forma net income $ 174.4 $ 276.9

The pro forma amounts have been calculated after applying the Company's accounting policies and by including the results of Mattress Firm, and adjusting the combined results to give effect to the following, as if the acquisition had been consummated on January 1, 2024, together with the consequential tax effects thereon:

(unaudited) Twelve months ended

(in millions) December 31, 2025 December 31, 2024

Pro Forma Adjustments to Net Sales, as Reported:

Mattress Firm pre-acquisition net revenue $ 345.1 $ 3,928.9

Elimination of intercompany sales to Mattress Firm (7)

( 78.0 ) ( 919.6 )

Total adjustments to net sales $ 267.1 $ 3,009.3

Pro Forma Adjustments to Net Loss, as Reported:

Mattress Firm pre-acquisition (loss) earnings (1)

$ ( 332.7 ) $ 73.9

Transaction costs (2)

50.2 ( 50.2 )

Intercompany profit elimination (3)

78.5 ( 78.5 )

Purchase price allocation adjustments (4)

16.7 ( 17.5 )

Interest expense adjustments (5)

( 1.9 ) ( 73.0 )

Tax effect of pro forma adjustments (6)

( 20.5 ) 37.9

Total adjustments to net loss $ ( 209.7 ) $ ( 107.4 )

(1) For the twelve months ended December 31, 2025, Mattress Firm pre-acquisition loss included a one-time charge of $ 340.5 million related to stock-based compensation expense recognized when the Mattress Firm Acquisition became probable.

(2) Represents $ 50.2 million of transaction costs for professional fees incurred by the Company in connection with the Mattress Firm Acquisition, which were reclassified to the prior year presented in accordance with ASC 805.

(3) Represents the intercompany profit elimination, which was reclassified to the prior year presented in accordance with ASC 805.

(4) Represents purchase price allocation adjustments, primarily related to the fair value adjustment of Mattress Firm's finished goods, which were reclassified to the prior year presented in accordance with ASC 805.

(5) Represents the net effect of interest expense on borrowings associated with the Mattress Firm Acquisition.

(6) Represents the income tax benefit (provision) for the above pro forma adjustments, which applies an estimated blended statutory income tax rate of 25.0 %.

(7) For the twelve months ended December 31, 2024, intercompany sales to Mattress Firm of $ 919.6 million were comprised of $ 220.7 million , $ 233.5 million, $ 244.7 million and $ 220.7 million of sales in the first, second, third and fourth quarters, respectively.

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4) Goodwill and Other Intangible Assets

The following summarizes the Company's goodwill by segment:

(in millions) North America International Consolidated

(in millions) Mattress Firm Tempur Sealy North America Tempur Sealy International Consolidated

Balance as of December 31, 2023 $ — $ 609.7 $ 473.6 $ 1,083.3

1 unchanged sentence

Balance as of December 31, 2024 $ — $ 603.1 $ 463.6 $ 1,066.7

Net goodwill resulting from acquisition 3,493.9 — — 3,493.9

Foreign currency translation adjustments and other — 3.9 31.4 35.3

23 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 1.6

SOMNIGROUP INTERNATIONAL INC.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) Unconsolidated Affiliate Companies

7 unchanged sentences

$ 318.9 $ 303.7 $ 333.3

203.3 191.1 213.2

Income from operations 55.9 52.3 65.5

38.6 36.2 45.7

Debt for the Company consists of the following:

18 unchanged sentences

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

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

(3) Term B Interest at SOFR index plus applicable margin of 2.250 % as of December 31, 2025.

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

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

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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.

On June 24, 2025, the Company and certain other parties thereto entered into an Amendment No.

4 ("Amendment No.

4") to the Company's 2023 Credit Agreement.

Amendment No.

4 repriced the Company's existing Term B Loan due October 2031 by reducing the applicable margin on the Term B Loan by 0.25 % to (i) a base rate plus an applicable margin of 1.25 %, (ii) a Term SOFR rate plus an applicable margin of 2.25 % or (iii) a Daily Simple SOFR rate plus an applicable margin of 2.25 %, subject, in each case, to an additional 0.25 % rate reduction based on the Company's consolidated total leverage ratio.

In connection with the repricing, the Company prepaid $ 100.0 million of the outstanding Term B Loan (including accrued and unpaid interest in respect thereof) with cash proceeds from a borrowing under the revolving credit facility under the 2023 Credit Agreement.

The repriced Term B Loan is subject to a prepayment premium in connection with certain repricing transactions that may occur on or prior to the six-month anniversary of Amendment No.

On August 26, 2025, the Company prepaid $ 100.0 million of the outstanding Term B Loan (including accrued and unpaid interest in respect thereof).

The Company also prepaid $ 150.0 million of the outstanding Term B Loan on October 3, 2025.

These prepayments were funded with operating cash flows.

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).

For the Term B Loan, the applicable margin is 1.25 % (for base rate) and 2.25 % (for "Term Benchmark" Term SOFR and "RFR" Daily SOFR) after Amendment No.

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.

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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.

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.

The Company had $ 550.5 million of outstanding borrowings under the revolving credit facility as of December 31, 2025.

Total availability under the revolving facility was $ 638.7 million, after a $ 0.8 million reduction for outstanding letters of credit, as of December 31, 2025.

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, 2025.

8 unchanged sentences

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.

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

As of December 31, 2025, there was no availability under the Accounts Receivable Securitization.

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.

131 unchanged sentences

United Furniture Workers Pension Fund A (4)

13-5511877-001 2/29/24 Red Implemented $ 1.6 No 2026 2020, 2021, 2022, 2023

Pension Plan of the National Retirement Fund

13-5511877-001 2/28/25 Red Implemented $ 1.4 Yes, 10.0 %

2026 2020, 2021, 2022, 2023, 2024

Central States, Southeast & Southwest Areas Pension Plan

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United Furniture Workers Pension Fund A (4)

13-5511877-001 2/28/23 Red Implemented $ 1.5 No 2026 2020, 2021, 2022, 2023

Pension Plan of the National Retirement Fund

13-5511877-001 2/29/24 Red Implemented $ 1.6 Yes, 10.0 %

2026 2020, 2021, 2022, 2023

Central States, Southeast & Southwest Areas Pension Plan

19 unchanged sentences

As of December 31, 2025, the Company had approximately $ 774.5 million remaining under an existing share repurchase program initially authorized by the Board of Directors in 2016.

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.

During the years ended December 31, 2025 and 2024, the Company did not repurchase any shares under this program.

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, 2025, 2024 and 2023, respectively.

10 unchanged sentences

$ ( 187.2 ) $ ( 135.5 ) $ ( 175.3 )

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustments (1)

20 unchanged sentences

Unearned revenue

Advertising 92.8 59.3

Sales returns 91.7 30.3

Taxes 43.3 18.4

5 unchanged sentences

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").

The plan under which equity awards may be granted in the future is the Amended and Restated 2013 Equity Incentive Plan, as amended and restated on May 11, 2017 and on May 5, 2022 (as amended and restated, 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 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.

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The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options granted.

During the year ended December 31, 2024 and 2023, no stock options were granted.

During the years ended December 31, 2024 and 2023, no stock options were granted.

The assumptions used in the Black-Scholes option-pricing model for the year ended December 31, 2025 are set forth in the following table.

11 unchanged sentences

Expected dividend yield on stock 0.9 % N/A N/A

A summary of the Company's stock option activity under the 2013 Plan for the years ended December 31, 2025 and 2024 is presented below:

SOMNIGROUP INTERNATIONAL INC.

1 unchanged sentence

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

3 unchanged sentences

Options outstanding at December 31, 2024

Granted 1.2 72.00

Exercised ( 2.8 ) 17.54

11 unchanged sentences

Options unvested at December 31, 2024

Granted 1.2 72.00

Vested ( 0.2 ) 30.00

31 unchanged sentences

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

8 unchanged sentences

Reconciliation of Statutory Tax Rate to Effective Tax Rate

The table below provides the updated requirements of ASU 2023-09 for 2025.

For additional details on the adoption of ASU 2023-09, see Note 1, "Summary of Significant Accounting Policies - Recent Accounting Pronouncements," in our Consolidated Financial Statements included in Part II, ITEM 8 of this report.

The Company's effective income tax provision differs from the amount calculated using the statutory U.S.

1 unchanged sentence

Year Ended December 31,

2024 2023 2022

(dollars in millions) Amount Percentage of Income

Before Income Taxes Amount Percentage of Income

(in millions, except percentages) Amount Percentage of Income

Before Income Taxes

Statutory U.S.

federal income tax $ 101.0 21.0 %

State income taxes, net of federal benefit (1)

Foreign tax effects 9.7 2.0 %

Effect of cross-border tax laws ( 1.0 ) ( 0.2 ) %

Changes in valuation allowances ( 0.9 ) ( 0.2 ) %

Non-taxable or non-deductible items:

Stock compensation ( 29.1 ) ( 6.0 ) %

Non-deductible compensation 13.2 2.7 %

Other ( 5.3 ) ( 1.1 ) %

Changes in unrecognized tax benefits ( 4.0 ) ( 0.8 ) %

Effective income tax provision $ 95.7 19.9 %

(1) During the year ended December 31, 2025, state taxes in Florida, Georgia, Maryland and Texas contributed to the majority (greater than 50%) of the tax effect in this category.

As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:

Year Ended December 31,

(in millions, except percentages) Amount Percentage of Income

Before Income Taxes Amount Percentage of Income

11 unchanged sentences

Stock compensation ( 9.6 ) ( 1.9 ) % ( 7.8 ) ( 1.6 ) %

Nondeductible compensation 15.1 3.0 % 12.7 2.7 % 14.6 2.5 %

Non-deductible compensation 15.1 3.0 % 12.7 2.7 %

Danish Tax Matter — — % ( 13.7 ) ( 2.9 ) %

18 unchanged sentences

The income tax provision includes federal, state and foreign income taxes currently payable and those deferred or prepaid because of temporary differences between financial statement and tax bases of assets and liabilities.

Income Tax Payments

Disclosed below is a summary of income taxes paid or (refunded) by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025:

(in millions) December 31, 2025

United States - federal $ ( 24.5 )

United States - state and local other 9.7

United States - California 2.7

United Kingdom 17.3

Foreign other 5.6

Disclosed below is a summary of income taxes paid by jurisdiction for the years ended December 31, 2024 and 2023:

(in millions) 2024 2023

Federal $ 77.8 $ 79.0

State and local 19.6 15.8

Foreign 36.6 38.2

Total $ 134.0 $ 133.0

Deferred Income Tax Assets and Liabilities

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Accrued expenses and other 77.7 61.1

Interest expense carryforward 177.5 —

Net operating losses, foreign tax credits and other tax attribute carryforwards 128.7 44.5

8 unchanged sentences

Operating lease right-of-use assets ( 471.8 ) ( 153.0 )

Stock basis recapture ( 335.8 ) —

Property, plant and equipment ( 61.2 ) ( 49.2 )

2 unchanged sentences

Net deferred tax liabilities $ ( 606.4 ) $ ( 93.0 )

The Company’s overall increase in its net deferred tax liabilities is primarily due to its acquisition of Mattress Firm on February 5, 2025.

Significant deferred tax assets increased for acquired lease liabilities, federal and state net operating losses, interest expense carryforwards and other tax attributes.

Additionally, significant deferred tax liabilities increased for acquired lease assets, intangible assets and stock basis recapture stemming from Mattress Firm’s 2018 debt restructuring.

The stock basis recapture and the majority of the intangible asset deferred tax liabilities are indefinite-lived in nature.

Tax Attributes Included in Deferred Tax Assets

1 unchanged sentence

(in millions) 2025 2024

federal net operating losses ("FedNOLs") $ 157.5 $ —

State net operating losses ("SNOLs") 3,511.7 103.4

state income tax credits ("SITCs") 2.8 3.2

Foreign net operating losses ("FNOLs") 31.6 45.8

state income tax credits ("SITCs") 2.4 2.8

Notional interest deduction ("NID") 46.3 46.3

State charitable contribution carryover ("SCCCs") 0.6 0.6

The SNOLs, SITCs, FNOLs and SCCCs generally begin to expire in 2025, 2031, 2025 and 2025, respectively.

Management believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of certain of the SNOLs, SITCs, FNOLs, NID, the SCCCs and certain other deferred tax assets related to certain foreign operations (together, the "Tax Attributes").

The FedNOLs, SNOLs, FNOLs, SITCs and SCCCs generally begin to expire in 2032, 2026, 2026, 2031 and 2026, respectively.

Management believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of certain of the FedNOLs, SNOLs, FNOLs, SITCs, NID, the SCCCs and certain other deferred tax assets related to certain foreign operations (together, the "Tax Attributes").

The Company has established a valuation allowance for certain deferred tax assets (including the Tax Attributes) where it is more likely than not such deferred tax assets will not be realized.

5 unchanged sentences

Deferred Tax Liability for Undistributed Foreign Earnings

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.

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, 2025, the Company has accrued approximately $ 2.9 million and $ 1.4 million, respectively, for income and withholding taxes.

Uncertain Income Tax Positions

4 unchanged sentences

Interest and penalties related to unrecognized tax benefits are recorded in income tax expense.

Uncertain income tax liabilities reflect the Company's best judgement of the facts, circumstances and information available through December 31, 2024.

Uncertain income tax liabilities reflect the Company's best judgment of the facts, circumstances and information available through December 31, 2025.

Uncertain income tax liabilities are derived using the cumulative probability approach and applying the tax technical requirements applicable to U.S.

3 unchanged sentences

Balance as of December 31, 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

Additions based on tax positions related to 2025

Additions for tax positions of prior years 22.5

Expiration of statutes of limitations ( 5.0 )

Reduction for tax positions of prior years ( 0.4 )

Balance as of December 31, 2025

The amount of unrecognized tax benefits that would impact the effective tax rate if recognized at December 31, 2025 and 2024 would be $ 30.7 million and $ 2.1 million, respectively.

The increase in the additions for tax positions for prior years is primarily related to positions acquired during 2025.

During the years ended December 31, 2025 and 2024, the Company recognized $ 1.2 million and $ 0.7 million in interest and penalties as a benefit in the income tax provision, respectively.

The Company had $ 1.4 million and $ 0.3 million of accrued interest and penalties at December 31, 2025 and 2024, respectively.

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.

However, the Company does not presently anticipate that any increase or decrease in unrecognized tax benefits will be material to the Consolidated Financial Statements.

With few exceptions, the Company is no longer subject to tax examinations by the U.S., state and local municipalities or non-U.S.

4 unchanged sentences

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.

On July 4, 2025, the Tax Act was signed into law.

While the Tax Act has multiple provisions that are expected to impact the Company, guidance on the potentially relevant provisions is forthcoming.

As such, the Company will continue to evaluate the impact as further information becomes available.

The Danish Tax Matter

4 unchanged sentences

production process.

In October 2018, the Company initiated an Advanced Pricing Agreement ("APA") process for SKAT and the U.S.

Internal Revenue Service ("IRS") to negotiate a resolution of this dispute.

The Company had previously estimated an uncertain tax position with respect to additional Danish income tax (and interest) related to an increase in Danish taxable income resulting from the dispute.

Conversely, the Company also previously recorded a deferred tax asset for the correlative benefit for the U.S.

reduction in taxable income that would result from the dispute.

In December 2022, SKAT and the IRS reached a preliminary framework agreement (the "Framework") to resolve the dispute.

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.

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").

The terms of the BAPA are substantially identical with those preliminarily agreed upon in the Preliminary Framework in December 2022.

With respect to impact of the Settlement on the Company's Danish tax position, pursuant to the BAPA, in December 2023 SKAT issued revised or initial assessments for each of the years 2012 through 2022.

The final tax and interest assessed was materially consistent with the income tax reserves the Company previously recorded, which was $ 37.8 million as of December 31, 2022.

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 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 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, 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, 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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For Danish income tax purposes, the matter was fully resolved prior to 2024.

From the U.S.

income tax perspective, the final resolution of the matter resulted in refundable U.S.

income tax of approximately $ 31.1 million which was recorded as an income tax receivable at December 31, 2024.

Such income tax receivable was received by the Company on April 15, 2025.

As such, there is no U.S.

income tax receivable at December 31, 2025 related to this issue.

(14) Earnings Per Common Share

2 unchanged sentences

(in millions, except per common share amounts) 2025 2024 2023

Net income from continuing operations, net of income attributable to non-controlling interest $ 384.3 $ 368.1 $ 456.1

Net income attributable to Somnigroup International Inc.

$ 384.1 $ 384.3 $ 368.1

Denominator for basic earnings per common share-weighted average shares 206.0 173.6 172.2

2 unchanged sentences

Denominator for diluted earnings per common share-adjusted weighted average shares 209.2 178.2 177.3

Basic earnings per common share for continuing operations $ 2.21 $ 2.14 $ 2.61

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

Basic earnings per common share $ 1.86 $ 2.21 $ 2.14

Diluted earnings per common share $ 1.84 $ 2.16 $ 2.08

For the year ended December 31, 2025, the Company excluded 0.6 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.

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.

SOMNIGROUP INTERNATIONAL INC.

AND CONSOLIDATED SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) Business Segment Information

In 2024, the Company operated 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, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico.

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

Corporate operating expenses are not included in either of the segments and are presented separately as a reconciling item to consolidated results.

The Company operates in three segments :

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

These segments are strategic business units that are managed separately.

The Mattress Firm segment consists of retail stores and distribution centers located in the U.S.

The Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations).

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

Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results.

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 63.5 % of the Company's consolidated net sales in 2025, as compared to 24.9 % of the Company's consolidated net sales in 2024.

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.

Mattress Firm contributed approximately 46.9 % of the Company's consolidated net sales in the year ended 2025.

The Company's Tempur Sealy North America and Tempur Sealy 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.

1 unchanged sentence

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)

The following table summarizes total assets by segment:

1 unchanged sentence

(in millions) 2025 2024

North America $ 5,575.2 $ 5,291.0

International 1,477.6 1,405.2

Mattress Firm $ 7,929.7 $ —

Tempur Sealy North America 5,717.9 5,575.2

Tempur Sealy International 1,542.3 1,477.6

Corporate 2,588.7 3,580.0

4 unchanged sentences

(in millions) 2025 2024

North America $ 687.7 $ 753.8

International 89.6 91.3

Mattress Firm $ 270.7 $ —

Tempur Sealy North America 609.9 687.7

Tempur Sealy International 110.8 89.6

Corporate 27.8 33.8

Total property, plant and equipment, net $ 1,019.2 $ 811.1

SOMNIGROUP INTERNATIONAL INC.

AND CONSOLIDATED SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

1 unchanged sentence

(in millions) 2025 2024

North America $ 407.1 $ 453.5

International 188.6 180.2

Mattress Firm $ 1,344.9 $ —

Tempur Sealy North America 315.2 407.1

Tempur Sealy International 215.9 188.6

Corporate 2.8 3.1

1 unchanged sentence

The following table summarizes segment information for the year ended December 31, 2025:

(in millions) North America International Corporate Eliminations Consolidated

(in millions) Mattress Firm Tempur Sealy North America Tempur Sealy International Corporate Eliminations Consolidated

Net sales $ 3,505.4 $ 2,701.2 $ 1,269.9 $ — $ — $ 7,476.5

Inter-segment sales $ 0.6 $ 976.3 $ 0.5 $ — $ ( 977.4 ) $ —

Total net sales and inter-segment sales $ 3,506.0 $ 3,677.5 $ 1,270.4 $ — $ ( 977.4 ) $ 7,476.5

Inter-segment royalty expense (income) — 35.6 ( 35.6 ) — — —

3 unchanged sentences

General, administrative and other expenses 203.8 172.9 125.6 192.7 — 695.0

Loss on disposal of business 4.1 9.8 — — — 13.9

Equity income in earnings of unconsolidated affiliates — — ( 19.6 ) — — ( 19.6 )

1 unchanged sentence

Interest expense, net 267.9

Other (income) expense ( 4.9 )

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

Other expense, net 6.0

Income before income taxes 481.0

Depreciation and amortization (1)

6 unchanged sentences

The following table summarizes segment information for the year ended December 31, 2024:

(in millions) North America International Corporate Eliminations Consolidated

(in millions) Tempur Sealy North America Tempur Sealy International Corporate Eliminations Consolidated

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

Inter-segment sales $ 0.5 $ 0.2 $ — $ ( 0.7 ) $ —

Total net sales and inter-segment sales $ 3,789.4 $ 1,142.2 $ — $ ( 0.7 ) $ 4,930.9

Inter-segment royalty expense (income) 34.3 ( 34.3 ) — — —

6 unchanged sentences

Interest expense, net 134.8

Loss on extinguishment of debt 3.2

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

Other income, net ( 4.9 )

Income before income taxes 504.3

Depreciation and amortization (1)

3 unchanged sentences

The following table summarizes segment information for the year ended December 31, 2023:

(in millions) North America International Corporate Eliminations Consolidated

(in millions) Tempur Sealy North America Tempur Sealy International Corporate Eliminations Consolidated

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

Inter-segment sales $ 1.2 $ 0.5 $ — $ ( 1.7 ) $ —

Total net sales and inter-segment sales $ 3,856.7 $ 1,070.4 $ — $ ( 1.7 ) $ 4,925.4

Inter-segment royalty expense (income) 33.7 ( 33.7 ) — — —

6 unchanged sentences

Interest expense, net 129.9

Other (income) expense 0.4

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

Loss on extinguishment of debt 3.2

Income before income taxes 474.1

Depreciation and amortization (1)

16 unchanged sentences

United States $ 1,653.1 $ 401.0

United Kingdom 150.7 146.5

All other 225.7 197.8

9 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