SGI filing — read by section

Item 8. Financial Statements and Supplementary Data

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
 
 
 INDEX TO HISTORICAL FINANCIAL STATEMENTS 
 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID : 42 ) 
 35 
 
 Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2023 
 36 
 
 Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023 
 37 
 
 Consolidated Balance Sheets as of December 31, 2025 and 2024 
 38 
 
 Consolidated Statements of Stockholders' (Deficit) Equity for the years ended December 31, 2025, 2024 and 2023 
 39 
 
 Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 
 40 
 
 Notes to the Consolidated Financial Statements 
 41 
 

 34 

 Table of Contents 

 
 
 
 Report of Independent Registered Public Accounting Firm 
 
 
 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. (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. generally accepted accounting principles. 
 
 
 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2026, expressed an unqualified opinion thereon. 
 
 
 Basis for Opinion 
 
 
 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 
 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 
 
 
 Critical Audit Matter 
 
 
 The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (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 accounts or disclosure to which it relates. 
 
 
 
 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 
 We have served as the Company's auditor since 2002. 
 Louisville, Kentucky 
 February 27, 2026 
 
 
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 Table of Contents 

 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF INCOME 
 (in millions, except per common share amounts) 
 
 Year Ended December 31, 
 2025 2024 2023 
 Net sales $ 7,476.5 $ 4,930.9 $ 4,925.4 
 Cost of sales 4,293.3 2,903.0 2,939.2 
 Gross profit 3,183.2 2,027.9 1,986.2 
 Selling and marketing expenses 1,739.0 939.4 920.9 
 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 ) 
 Operating income 754.9 634.2 607.2 
 
 Other expense, net: 
 Interest expense, net 267.9 134.8 129.9 
 Loss on extinguishment of debt — — 3.2 
 Other expense (income), net 6.0 ( 4.9 ) — 
 Total other expense, net 273.9 129.9 133.1 
 
 Income before income taxes 481.0 504.3 474.1 
 Income tax provision ( 95.7 ) ( 118.6 ) ( 103.4 ) 
 
 
 Net income before non-controlling interest 385.3 385.7 370.7 
 Less: Net income attributable to non-controlling interest 1.2 1.4 2.6 
 Net income attributable to Somnigroup International Inc. $ 384.1 $ 384.3 $ 368.1 
 
 Earnings per common share: 
 
 
 
 Basic $ 1.86 $ 2.21 $ 2.14 
 
 
 
 
 Diluted $ 1.84 $ 2.16 $ 2.08 
 
 Weighted average common shares outstanding: 
 Basic 206.0 173.6 172.2 
 Diluted 209.2 178.2 177.3 

 
 
 The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements. 
 
 
 
 
 
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 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
 (in millions) 
 
 Year Ended December 31, 
 2025 2024 2023 
 Net income before non-controlling interest $ 385.3 $ 385.7 $ 370.7 
 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 income (loss), net of tax 88.4 ( 50.1 ) 40.2 
 Comprehensive income 473.7 335.6 410.9 
 Less: Comprehensive income attributable to non-controlling interest 1.2 1.4 2.6 
 Comprehensive income attributable to Somnigroup International Inc. $ 472.5 $ 334.2 $ 408.3 

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

 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS 
 (in millions) 
 
 December 31, 2025 December 31, 2024 
 ASSETS 
 
 Current Assets: 
 Cash and cash equivalents $ 134.9 $ 117.4 
 Accounts receivable, net 358.5 404.5 
 Inventories 630.0 447.0 
 Prepaid expenses and other current assets 170.7 96.5 
 
 
 Total Current Assets 1,294.1 1,065.4 
 Restricted cash — 1,592.3 
 Property, plant and equipment, net 1,019.2 811.1 
 Goodwill 4,595.9 1,066.7 
 Trade name and other intangible assets, net 2,587.1 700.5 
 Operating lease right-of-use assets 1,878.8 598.8 
 Deferred income taxes 18.5 15.3 
 Other non-current assets 207.1 130.3 
 Total Assets $ 11,600.7 $ 5,980.4 
 
 LIABILITIES AND STOCKHOLDERS’ EQUITY 
 
 Current Liabilities: 
 Accounts payable $ 401.6 $ 360.5 
 Accrued expenses and other current liabilities 636.5 393.9 
 Short-term operating lease obligations 399.6 126.8 
 
 Income taxes payable 15.1 9.6 
 Current portion of long-term debt 112.4 69.5 
 
 Total Current Liabilities 1,565.2 960.3 
 Long-term debt, net 4,573.3 3,740.4 
 Long-term operating lease obligations 1,589.8 532.1 
 Deferred income taxes 624.9 108.3 
 
 Other non-current liabilities 130.6 71.0 
 Total Liabilities 8,483.8 5,412.1 
 
 Redeemable non-controlling interest 8.9 9.3 
 
 Stockholders' Equity: 
 Common stock, $ 0.01 par value, 500.0 million shares authorized; 283.8 million shares issued as of December 31, 2025 and 2024 
 2.8 2.8 
 Additional paid in capital 1,038.7 501.2 
 Retained earnings 3,829.2 3,571.8 
 Accumulated other comprehensive loss ( 98.4 ) ( 186.8 ) 
 Treasury stock at cost; 73.9 million and 110.2 million shares as of December 31, 2025 and 2024, respectively 
 ( 1,664.3 ) ( 3,330.0 ) 
 Total Stockholders' Equity 3,108.0 559.0 
 Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity $ 11,600.7 $ 5,980.4 

 
 
 The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements. 
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 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY 
 (in millions) 
 
 Somnigroup International Inc. Stockholders' (Deficit) Equity 
 Redeemable
Non-controlling Interest Common Stock Treasury Stock Accumulated Other Comprehensive (Loss) Total Stockholders' (Deficit) Equity 
 Shares Issued At Par Shares Issued At Cost Additional Paid in Capital Retained Earnings 
 Balance 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 
 Net income attributable to non-controlling interest 2.6 — 
 Dividend paid to non-controlling interest in subsidiary ( 2.4 ) — 
 Adjustment to pension liability, net of tax of $( 0.1 ) 
 0.4 0.4 
 Foreign currency translation adjustments 39.8 39.8 
 Dividends declared on common stock ($ 0.44 per share) 
 ( 77.4 ) ( 77.4 ) 
 Exercise of stock options ( 0.2 ) 4.9 ( 2.0 ) 2.9 
 Issuance of PRSUs and RSUs ( 2.7 ) 85.2 ( 85.2 ) — 
 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 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 
 Net income attributable to non-controlling interest 1.4 — 
 Dividend paid to non-controlling interest in subsidiary ( 2.1 ) — 
 Adjustment to pension liability, net of tax of $ 0.5 
 1.6 1.6 
 Foreign currency translation adjustments ( 51.7 ) ( 51.7 ) 
 Dividends declared on common stock ($ 0.52 per share) 
 ( 91.7 ) ( 91.7 ) 
 Exercise of stock options — 2.3 ( 1.8 ) 0.5 
 Issuance of PRSUs and RSUs ( 2.2 ) 92.1 ( 92.1 ) — 
 
 Treasury stock repurchased - PRSU/RSU releases 0.9 ( 43.8 ) ( 43.8 ) 
 Amortization of unearned stock-based compensation 36.4 36.4 
 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 
 Net income attributable to non-controlling interest 1.2 — 
 Dividend paid to non-controlling interest in subsidiary ( 1.6 ) — 
 Adjustment to pension liability, net of tax of $ 0.2 
 0.6 0.6 
 Foreign currency translation adjustments 87.8 87.8 
 Dividends declared on common stock ($ 0.60 per share) 
 ( 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 
 Issuances of PRSUs and RSUs 
 ( 1.3 ) 81.1 ( 81.1 ) — 
 
 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 
 41.0 41.0 
 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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 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
 (in millions) Year Ended December 31, 
 2025 2024 2023 
 CASH FLOWS FROM OPERATING ACTIVITIES: 
 Net income before non-controlling interest $ 385.3 $ 385.7 $ 370.7 
 
 Adjustments to reconcile net income to net cash provided by operating activities: 
 Depreciation and amortization 249.5 165.1 135.3 
 Amortization of stock-based compensation 41.0 36.4 47.7 
 Amortization of deferred financing costs and discounts 6.7 4.3 3.9 
 Bad debt expense 5.6 22.5 8.2 
 Deferred income taxes 25.8 ( 19.2 ) 8.3 
 Dividends received from unconsolidated affiliates 20.5 24.3 20.4 
 Equity income in earnings of unconsolidated affiliates ( 19.6 ) ( 18.9 ) ( 23.0 ) 
 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, net of effect of business acquisitions: 
 Accounts receivable 72.6 ( 7.3 ) ( 11.5 ) 
 Inventories 136.5 26.8 75.8 
 Prepaid expenses and other assets ( 18.9 ) ( 23.6 ) 50.1 
 Operating leases, net 8.8 2.3 5.3 
 Accounts payable ( 133.1 ) 58.3 ( 46.9 ) 
 Accrued expenses and other liabilities ( 35.5 ) ( 21.1 ) ( 14.7 ) 
 Income taxes receivable and payable 24.1 29.2 ( 59.8 ) 
 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 ( 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 
 Repayments of borrowings under long-term debt obligations ( 3,514.3 ) ( 1,760.6 ) ( 2,918.4 ) 
 Proceeds from exercise of stock options 49.5 0.5 2.9 
 Treasury stock repurchased ( 132.4 ) ( 43.8 ) ( 36.0 ) 
 Dividends paid ( 127.4 ) ( 92.7 ) ( 77.7 ) 
 Payment of deferred financing costs — ( 13.7 ) ( 6.5 ) 
 Repayments of finance lease obligations and other ( 22.6 ) ( 19.3 ) ( 16.2 ) 
 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 
 (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 
 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 134.9 $ 1,709.7 $ 74.9 
 
 Supplemental cash flow information: 
 Cash paid during the period for: 
 Interest $ 278.3 $ 157.7 $ 144.6 
 
 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. 
 40 

 
 
 
 Table of Contents 
 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

 
 
 
 (1) Summary of Significant Accounting Policies 
 
 (a) Basis of Presentation and Description of Business . Somnigroup International Inc., a Delaware corporation, together with its subsidiaries, is a U.S. based, multinational company. The term "Somnigroup" refers to Somnigroup International Inc. only, and the term "Company" refers to Somnigroup International Inc. and its consolidated subsidiaries, as of December 31, 2025. Certain prior period amounts have been reclassified in the accompanying consolidated financial statements and notes thereto to conform to the current period presentation. 
 
 
 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: Direct and Wholesale. 
 
 
 (b) Basis of Consolidation . The accompanying financial statements include the accounts of Somnigroup and its controlled subsidiaries. Intercompany balances and transactions have been eliminated. 
 
 
 The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market and distribute Sealy® and Stearns & Foster® branded products. The Company's ownership interest in each of these joint ventures is 50.0 %. The equity method of accounting is used for these joint ventures, over which the Company has significant influence but does not have control, and consolidation is not otherwise required. The Company's equity in the net income and losses of these investments is reported in equity income in earnings of unconsolidated affiliates in the accompanying Consolidated Statements of Income. 
 
 
 (c) Use of Estimates . The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company's results are affected by economic, political, legislative, regulatory and legal actions. Economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of raw materials, can have a significant effect on operations. 
 
 
 (d) Adoption of New Accounting Standards . 
 
 
 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. 
 
 
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 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 (e) Accounting Pronouncements Not Yet Adopted 
 
 
 Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses", which requires public entities to disclose disaggregated information about certain income statement expense line items annually and in interim periods. ASU 2024-03 is effective for the Company beginning in the December 31, 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 . Assets and liabilities of non-U.S. subsidiaries, whose functional currency is the local currency, are translated into U.S. dollars at period-end exchange rates. Income and expense items are translated at the average rates of exchange prevailing during the period. The adjustments resulting from translating the financial statements of foreign subsidiaries are included in accumulated other comprehensive loss ("AOCL"), a component of stockholders' equity, and included in net earnings only upon sale or liquidation of the underlying foreign subsidiary or affiliated company. Foreign currency transaction gains and losses are recognized in net earnings based on differences between foreign exchange rates on the transaction date and on the settlement date. These amounts are not considered material to the Consolidated Financial Statements. 
 
 
 (g) Cash, Cash Equivalents and Restricted Cash . Cash and cash equivalents consist of all highly liquid investments with initial maturities of three months or less. The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of those instruments. Restricted cash consists of proceeds from the Term B Loan which were funded into escrow and released upon the closing of the Mattress Firm Acquisition. The carrying value of restricted cash approximates fair value because of the short-term maturity of those instruments. 
 
 
 Total cash, cash equivalents and restricted cash consisted of the following: 
 
 December 31, 
 (in millions) 2025 2024 
 Cash and cash equivalents $ 134.9 $ 117.4 
 Restricted cash — 1,592.3 
 Cash, cash equivalents and restricted cash $ 134.9 $ 1,709.7 

 
 
 (h) Inventories . 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: 
 
 December 31, 
 (in millions) 2025 2024 
 Finished goods $ 484.7 $ 300.5 
 Work-in-process 16.5 16.1 
 Raw materials and supplies 128.8 130.4 
 $ 630.0 $ 447.0 

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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 
 
 
 
 (i) Property, Plant and Equipment . 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
(in years) 
 Buildings 25 - 30 
 
 Computer equipment and software 3 - 7 
 
 Leasehold improvements 3 - 7 
 
 Machinery and equipment 3 - 7 
 
 Office furniture and fixtures 5 - 7 
 

 
 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 their estimated useful lives. Assets under finance leases are included within property, plant and equipment and represent non-cash investing activities. 
 
 
 Property, plant and equipment, net consisted of the following: 
 
 December 31, 
 (in millions) 2025 2024 
 Machinery and equipment $ 818.1 $ 713.0 
 Land and buildings 489.6 453.3 
 Leasehold improvements 305.6 182.0 
 Computer equipment and software 293.1 256.0 
 Furniture and fixtures 170.7 106.1 
 Construction in progress 75.4 54.0 
 Total property, plant and equipment 2,152.5 1,764.4 
 Accumulated depreciation ( 1,133.3 ) ( 953.3 ) 
 Total property, plant and equipment, net $ 1,019.2 $ 811.1 

 
 
 Depreciation expense, which includes depreciation expense for finance lease assets, for the Company was $ 236.2 million, $ 156.9 million and $ 125.1 million for the years ended December 31, 2025, 2024 and 2023, respectively. 
 
 (j) Long-Lived Assets . Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset or group of assets. If estimated future undiscounted net cash flows are less than the carrying amount of the asset or group of assets, the asset is considered impaired and an expense is recorded in an amount required to reduce the carrying amount of the asset to its then fair value. 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 long-lived assets for the years ended December 31, 2025, 2024 and 2023. 
 
 (k) Goodwill and Other Intangible Assets . Intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate impairment may have occurred. The Company performs an annual impairment test on goodwill and indefinite-lived intangible assets on October 1 of each year and whenever events or circumstances make it more likely than not that impairment may have occurred. This assessment may be performed quantitatively or qualitatively. 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. If the carrying amount exceeds the fair value, the goodwill is written down for the amount by which the carrying amount exceeds the fair value. However, the loss recognized cannot exceed the carrying amount of goodwill. 
 
 
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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 Using the quantitative approach, the Company makes various estimates and assumptions in determining the estimated fair value of each reporting unit using a combination of discounted cash flow models and valuations based on earnings multiples for guideline public companies in each reporting unit's industry peer group, when externally quoted market prices are not readily available. Discounted cash flow models are reliant on various assumptions, including projected business results, long-term growth factors and weighted-average cost of capital. Management judgment is involved in estimating these variables, and they include inherent uncertainties as they are forecasting future events. The Company performs sensitivity analyses by using a range of inputs to confirm the reasonableness of the long-term growth rate and weighted average cost of capital. Additionally, the Company compares the indicated equity value to its market capitalization and evaluates the resulting implied control premium/discount to determine if the estimated enterprise value is reasonable compared to external market indicators. 
 
 
 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 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 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." 
 
 
 (l) Accrued Sales Returns . The Company allows product returns through certain sales channels and on certain products. Estimated sales returns are provided at the time of sale based on historical sales channel return rates. Estimated future obligations related to these products are provided by a reduction of sales in the period in which the revenue is recognized. 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 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: 
 
 (in millions) 
 Balance as of December 31, 2023 $ 43.7 
 Amounts accrued 209.9 
 Returns charged to accrual ( 209.4 ) 
 Balance as of December 31, 2024 44.2 
 Amounts accrued 661.4 
 Liabilities assumed as a result of acquisition 57.2 
 Returns charged to accrual ( 655.9 ) 
 Balance as of December 31, 2025 $ 106.9 

 
 
 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. 
 
 (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. 
 
 
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 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 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. 
 
 
 The Company had the following activity for its accrued warranty expense from December 31, 2023 to December 31, 2025: 
 
 (in millions) 
 Balance as of December 31, 2023 $ 40.8 
 Amounts accrued 8.1 
 
 Warranties charged to accrual ( 15.3 ) 
 Balance as of December 31, 2024 33.6 
 Amounts accrued 15.8 
 Liabilities assumed as a result of acquisition 25.3 
 Warranties charged to accrual ( 20.7 ) 
 Balance as of December 31, 2025 $ 54.0 

 
 
 As of December 31, 2025 and 2024, $ 21.4 million and $ 15.3 million of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $ 32.6 million and $ 18.3 million of accrued warranty expense is included in other non-current liabilities on the Company's accompanying Consolidated Balance Sheets, respectively. 
 
 
 (n) Allowance for Credit Losses . The allowance for credit losses is the Company's best estimate of the amount of estimated lifetime credit losses in the Company's accounts receivable. The Company regularly reviews the adequacy of its allowance for credit losses. The Company estimates losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding. Account balances are charged off against the allowance for credit losses after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. As of December 31, 2025, the Company's accounts receivable were substantially current. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. The allowance for credit losses is included in accounts receivable, net in the accompanying Consolidated Balance Sheets. 
 
 
 The Company had the following activity for its allowance for credit losses from December 31, 2023 to December 31, 2025. 
 
 (in millions) 
 Balance as of December 31, 2023 
 $ 66.9 
 Amounts accrued 22.5 
 Write-offs charged against the allowance ( 9.0 ) 
 Balance as of December 31, 2024 
 80.4 
 Amounts accrued 5.6 
 Write-offs charged against the allowance ( 46.8 ) 
 Balance as of December 31, 2025 
 $ 39.2 

 
 
 
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 (o) Fair Value . Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of those instruments. Borrowings under the 2023 Credit Agreement (as defined in Note 6, "Debt") and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair value of the following material financial instruments were based on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments: 
 
 
 
 Fair Value 
 (in millions) December 31, 2025 December 31, 2024 
 2029 Senior Notes $ 780.1 $ 739.1 
 2031 Senior Notes 748.8 698.2 

 
 
 (p) Income Taxes . Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are also recognized for the estimated future effects of tax loss carry forwards. The effect of changes in tax rates on deferred taxes is recognized in the period in which the enactment dates change. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for uncertain foreign and domestic tax positions utilizing a proscribed recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Interest and penalties related to uncertain tax positions are recognized as part of the income tax provision and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law and until such time that the related tax benefits are recognized. 
 
 
 (q) Cost of Sales . Costs associated with net sales are recorded in cost of sales. 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 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. 
 
 
 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 
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 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. The Company also enters into volume and other rebate programs with customers. When sales are made to these customers, the Company records liabilities pursuant to these programs. The Company periodically assesses these liabilities based on actual sales and claims to determine whether all of the cooperative advertising earned will be used by the customer or whether the customer will meet the requirements to receive rebate funds. The Company generally negotiates these programs on a customer-by-customer basis. Some of these agreements extend over several years. 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. Cooperative advertising costs are classified as advertising expense and presented within selling and marketing expenses in the accompanying Consolidated Statements of Income. These cooperative advertising expenses are reported as components of selling and marketing expenses because the Company receives an identifiable benefit and the fair value of the advertising benefit can be reasonably estimated. Any benefits not recognized from the retailers will be reclassified and presented within net sales. 
 
 
 (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. Direct response advance payments are deferred and amortized over the life of the program. Advertising costs are included in selling and marketing expenses in the accompanying Consolidated Statements of Income. Advertising costs charged to expense were $ 692.2 million, $ 470.9 million and $ 469.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. 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 $ 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. 
 
 
 (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. Stock-based compensation cost for restricted stock units ("RSUs") and performance restricted stock units ("PRSUs") is measured based on the closing fair market value of the Company's common stock on the date of grant. 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. 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. The Company recognizes stock-based compensation cost associated with its PRSUs over the requisite service period if it is probable that the performance conditions will be satisfied. The Company evaluates its awards, including modifications, and will adjust the fair value if any are determined to be spring-loaded. The Company recognizes forfeitures of awards as they occur. Further information regarding stock-based compensation can be found in Note 11, "Stock-based Compensation." 
 
 
 (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. Purchases made pursuant to these authorizations may be carried out through open market transactions, negotiated purchases or otherwise, at times and in such amounts as the Company deems appropriate. Shares repurchased under such authorizations are held in treasury for general corporate purposes, including issuances under various employee stock-based award plans. On February 1, 2016, the Board of Directors authorized a share repurchase program pursuant to which the Company was permitted to repurchase shares of Somnigroup's common stock. Treasury stock is accounted for under the cost method and reported as a reduction of stockholders' equity. The authority provided under the share repurchase program may be suspended, limited or terminated at any time without notice. Please refer to Note 9, "Stockholders' Equity", for additional information. 
 
 
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 (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. facilities. Sealy Canada, Ltd. (a 100% owned subsidiary of the Company) also sponsors a noncontributory, defined benefit pension plan covering hourly employees at one of its facilities. Both plans provide retirement and survivorship benefits based on the employees' credited years of service. The Company's funding policy provides for contributions of an amount between the minimum required and maximum amount that can be deducted for federal income tax purposes. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at December 31, the measurement date. The benefit obligation is the projected benefit obligation ("PBO"). The PBO represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels. The measurement of the PBO is based on the Company's estimates and actuarial valuations. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including discount rates, expected return on plan assets, rate of compensation increases, interest crediting rates and mortality rates. The Company's PBO and fair value of plan assets were $ 33.0 million and $ 32.6 million as of December 31, 2025, respectively, and $ 31.0 million and $ 29.4 million as of December 31, 2024, respectively. 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. 
 
 
 
 (2) Net Sales 
 The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the years ended December 31. 
 
 Twelve Months Ended December 31, 2025 
 (in millions) Mattress Firm Tempur Sealy North America Tempur Sealy International Consolidated 
 Channel 
 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 
 
 
 
 
 
 
 
 Mattress Firm Tempur Sealy North America Tempur Sealy International Consolidated 
 Geographical region 
 United States $ 3,505.4 $ 2,429.3 $ — $ 5,934.7 
 All other — 271.9 1,269.9 1,541.8 
 Net sales $ 3,505.4 $ 2,701.2 $ 1,269.9 $ 7,476.5 

 
 
 
 Twelve Months Ended December 31, 2024 
 (in millions) Tempur Sealy North America Tempur Sealy International Consolidated 
 Channel 
 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 
 
 
 
 
 
 
 
 Tempur Sealy North America Tempur Sealy International Consolidated 
 Geographical region 
 United States $ 3,490.1 $ — $ 3,490.1 
 All other 298.8 1,142.0 1,440.8 
 
 Net sales $ 3,788.9 $ 1,142.0 $ 4,930.9 

 
 
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 Twelve Months Ended December 31, 2023 
 (in millions) Tempur Sealy North America Tempur Sealy International Consolidated 
 Channel 
 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 
 
 
 
 
 
 
 
 Tempur Sealy North America Tempur Sealy International Consolidated 
 Geographical region 
 United States $ 3,560.8 $ — $ 3,560.8 
 All other 294.7 1,069.9 1,364.6 
 
 Net sales $ 3,855.5 $ 1,069.9 $ 4,925.4 

 
 
 Substantially all revenue is associated with bedding product sales. 
 
 
 The Mattress Firm segment sells products through one channel: Direct. 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. 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. The licenses include rights for the licensees to use trademarks as well as current proprietary or patented technology that the Company utilizes. The Company also provides its licensees with product specifications, research and development, statistical services and marketing programs. The Company recognizes royalty income based on the occurrence of sales of Sealy®, Stearns & Foster® and Tempur® branded products by various licensees. 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. Transferring control of each product sold is considered a separate performance obligation. The Company transfers control and recognizes a sale when the customer receives the product. Each unit sold is considered an independent, unbundled performance obligation. The Company does not have any additional performance obligations other than product sales that are material in the context of the contract. The Company also offers assurance type warranties on certain of its products, which is not accounted for as separate performance obligations under the revenue model. 
 
 
 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 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. The Company allows returns following a sale, depending on the channel and promotion. The Company reduces revenue and cost of sales for its estimate of the expected returns, which is primarily based on the level of historical sales returns. The Company does not offer extended payment terms beyond one year to customers. As such, the Company does not adjust its consideration for financing arrangements. 
 
 
 In certain jurisdictions, the Company is subject to certain non-income taxes including, but not limited to, sales tax, value added tax, excise tax and other taxes. These taxes are excluded from the transaction price, and therefore, excluded from revenue. The Company has elected to account for shipping and handling activities as a fulfillment cost. Accordingly, the Company reflects all amounts billed to customers for shipping and handling in revenue and the costs of fulfillment in cost of sales. 
 
 
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 (3) Acquisitions and Divestitures 
 
 
 Acquisition of Mattress Firm Group Inc. 
 
 
 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. 
 
 
 In connection with the consummation of the merger, the Company borrowed $ 625.0 million of its Delayed Draw Term A Loan and $ 679.5 million of revolving commitments under its senior credit facility. In addition, approximately $ 1,592.0 million of proceeds in respect of the Term B Loan were released from escrow. The proceeds of this financing were collectively used to fund a portion of the cash consideration, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the merger. 
 
 
 The 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) 
 2,245.1 
 Effective settlement of pre-existing relationships (2) 
 71.8 
 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 
Period 
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. 
 
 
 
 (unaudited) 
 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. 
 

 
 
 
 
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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 (4) Goodwill and Other Intangible Assets 
 
 
 The following summarizes the Company's goodwill by segment: 
 (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 
 
 Foreign currency translation adjustments and other — ( 6.6 ) ( 10.0 ) ( 16.6 ) 
 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 
 Balance as of December 31, 2025 $ 3,493.9 $ 607.0 $ 495.0 $ 4,595.9 

 
 
 The International segment includes the Dreams and International reporting units, which had goodwill of $ 342.9 million and $ 152.1 million, respectively, as of December 31, 2025. 
 
 
 The following table summarizes information relating to the Company's other intangible assets, net: 
 
 ($ in millions) 
 December 31, 2025 December 31, 2024 
 Useful
Lives
(Years) Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount 
 Unamortized indefinite life intangible assets: 
 
 Trade names 
 $ 2,572.4 $ — $ 2,572.4 $ 680.1 $ — $ 680.1 
 Amortized intangible assets: 
 
 Contractual distributor relationships 
 15 84.8 ( 72.3 ) 12.5 84.1 ( 66.1 ) 18.0 
 Technology and other 
 4 - 10 
 90.4 ( 90.4 ) — 89.7 ( 89.7 ) — 
 Patents, other trademarks and other trade names 
 5 - 20 
 26.8 ( 24.8 ) 2.0 27.2 ( 25.1 ) 2.1 
 Customer databases, relationships and reacquired rights 
 2 - 5 
 33.3 ( 33.1 ) 0.2 33.2 ( 32.9 ) 0.3 
 Total 
 $ 2,807.7 $ ( 220.6 ) $ 2,587.1 $ 914.3 $ ( 213.8 ) $ 700.5 

 
 
 Amortization expense relating to intangible assets for the Company was $ 6.0 million, $ 6.9 million and $ 9.3 million for the years ended December 31, 2025, 2024 and 2023, respectively, and is recorded in general, administrative and other expenses in the Company's Consolidated Statements of Income. No impairments of goodwill or other intangible assets have adjusted the gross carrying amount of these assets in any period. 
 
 
 Estimated annual amortization of intangible assets is expected to be as follows for the years ending December 31: 
 
 (in millions) 
 2026 $ 5.8 
 2027 5.8 
 2028 1.3 
 2029 0.1 
 2030 0.1 
 Thereafter 1.6 
 Total $ 14.7 

 
 
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 SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 (5) Unconsolidated Affiliate Companies 
 
 
 The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market and distribute Sealy® and Stearns & Foster® branded products. The Company's ownership interest in each of these joint ventures is 50.0 % and is accounted for under the equity method. The Company's investment of $ 21.0 million and $ 21.2 million at December 31, 2025 and 2024, respectively, is recorded in other non-current assets in the accompanying Consolidated Balance Sheets. The Company's share of earnings for the years ended December 31, 2025, 2024 and 2023 respectively, is recorded in equity income in earnings of unconsolidated affiliates in the accompanying Consolidated Statements of Income. 
 
 
 The table below presents summarized financial information for the joint ventures as of and for the years ended December 31: 
 
 (in millions) 
 2025 2024 2023 
 Net sales 
 $ 318.9 $ 303.7 $ 333.3 
 Gross profit 
 203.3 191.1 213.2 
 Income from operations 55.9 52.3 65.5 
 Net income 
 38.6 36.2 45.7 

 
 (6) Debt 
 
 
 Debt for the Company consists of the following: 
 
 (in millions) December 31, 2025 December 31, 2024 
 Debt: Amount Rate Amount Rate Maturity Date 
 2023 Credit Agreement: 
 Term A Facility $ 1,043.8 (1) $ 475.0 (2) October 10, 2028 
 Term B Facility 1,234.8 (3) 1,600.0 (4) October 24, 2031 
 Revolver 550.5 (1) — October 10, 2028 
 2031 Senior Notes 800.0 3.875 % 800.0 3.875 % October 15, 2031 
 2029 Senior Notes 800.0 4.000 % 800.0 4.000 % April 15, 2029 
 Securitized debt 79.3 (5) — October 8, 2026 
 Finance lease obligations (6) 
 110.6 88.7 Various 
 Other 98.3 80.8 Various 
 Total debt 4,717.3 3,844.5 
 Less: Deferred financing costs and discounts 31.6 34.6 
 Total debt, net 4,685.7 3,809.9 
 Less: Current portion 112.4 69.5 
 Total long-term debt, net $ 4,573.3 $ 3,740.4 

 
 (1) Interest at SOFR index plus 10 basis points of credit spread adjustment, plus applicable margin of 1.375 % as of December 31, 2025. 
 
 (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) 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. 
 
 (6) Finance lease obligations are a non-cash financing activity. Refer to Note 7, "Leases." 
 

 2023 Credit Agreement 
 
 
 On October 10, 2023, the Company entered into the 2023 Credit Agreement with a syndicate of banks. The 2023 Credit Agreement replaced the Company's 2019 Credit Agreement. The 2023 Credit Agreement provides for a $ 1.15 billion revolving credit facility ("Revolving Credit Facility"), a $ 500.0 million term loan facility ("Initial Term Loan Facility"), and an incremental facility in an aggregate amount of up to the greater of $ 850.0 million and additional amounts subject to the conditions set forth in the 2023 Credit Agreement, plus the amount of certain prepayments, plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test. The 2023 Credit Agreement has a $ 60.0 million sub-facility for the issuance of letters of credit. 
 
 
 On February 6, 2024, the Company entered into Amendment No. 1 ("Amendment No. 1") to the 2023 Credit Agreement, which provided for a $ 625.0 million Delayed Draw Term A Loan commitment and a $ 40.0 million increase in availability on the existing revolving loan. This amendment was executed in connection with the Company's financing strategy for the acquisition of Mattress Firm. 
 
 
 On October 24, 2024, the Company entered into an Amendment No. 2 ("Amendment No. 2") and an Amendment No. 3 ("Amendment No. 3") to the 2023 Credit Agreement. Amendment No. 2 extended the termination date for $ 605.0 million of the Delayed Draw Term A Loan commitments until October 24, 2025, among other changes. Amendment No. 3 provided for an incremental Term B Loan in the aggregate principal amount of $ 1.6 billion, which will mature on October 24, 2031. The proceeds of the Term B Loan were funded into escrow, net of an original issue discount, on the closing of Amendment No. 3. 
 
 
 On February 5, 2025, upon the consummation of the Mattress Firm Acquisition, the Company borrowed $ 625.0 million under our Delayed Draw Term A Loan and $ 679.5 million under the Revolving Credit Facility. In addition, approximately $ 1,592.0 million of proceeds in respect of the Term B Loan were released from escrow. The proceeds of these financings were collectively used to fund a portion of the cash consideration for the acquisition, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the acquisition. 
 
 
 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. 4. 
 
 
 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 1.25 % (for base rate) and 2.25 % (for "Term Benchmark" Term SOFR and "RFR" Daily SOFR) after Amendment No. 4. 
 
 
 The 2023 Credit Agreement (other than with respect to the Term B Loan) requires compliance with certain financial covenants providing for maintenance of a minimum consolidated interest coverage ratio, maintenance of a maximum consolidated total net leverage ratio, and maintenance of a maximum consolidated secured net leverage ratio. The consolidated total net leverage ratio is calculated using consolidated indebtedness less netted cash (as defined below). Consolidated indebtedness includes debt recorded on the Consolidated Balance Sheets as of the reporting date, plus letters of credit outstanding in excess of $ 60.0 million and other short-term debt. The Company is allowed to subtract from consolidated indebtedness an amount equal to 100.0 % of the domestic and foreign unrestricted cash ("netted cash"). As of December 31, 2025, netted cash was $ 134.9 million. 
 
 
 The 2023 Credit Agreement contains certain customary negative covenants, which include limitations on liens, investments, indebtedness, dispositions, mergers and acquisitions, the making of restricted payments, changes in the nature of business, changes in fiscal year, transactions with affiliates, use of proceeds, prepayments of certain indebtedness, entry into burdensome agreements and changes to governing documents. The 2023 Credit Agreement also contains certain customary affirmative covenants and events of default, including upon a change of control. 
 
 
 Obligations under the 2023 Credit Agreement are guaranteed by the Company's existing and future direct and indirect wholly-owned domestic subsidiaries, subject to certain exceptions and are secured by a security interest in substantially all of the Company’s and the other subsidiary borrowers' domestic assets and the domestic assets of each subsidiary guarantor, whether owned as of the closing or thereafter acquired, including a pledge of 100.0 % of the equity interests of each subsidiary owned by the Company or a subsidiary guarantor that is a domestic entity (subject to certain limited exceptions) and 65.0 % of the voting equity interests of any direct first tier foreign entity owned by the Company or a subsidiary guarantor. 
 
 
 The maturity date of the Revolving Credit Facility and Term A Loans is October 10, 2028 and the maturity date of the Term B Loan is October 24, 2031. Amounts under the Revolving Credit Facility may be borrowed, repaid and re-borrowed from time to time until the maturity date. The Term Loan Facility, Delayed Draw Term A Loan and Term B Loan are each subject to quarterly amortization as set forth in the 2023 Credit Agreement. In addition, the term loan facility is subject to mandatory prepayment in connection with certain debt issuances, asset sales and casualty events, subject to certain reinvestment rights. 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 occurred on or prior to December 24, 2025 after Amendment No. 4. 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 $ 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. 
 
 
 The Company was in compliance with all applicable covenants in the 2023 Credit Agreement at December 31, 2025. 
 
 
 Securitized Debt 
 
 
 The Company and certain of its subsidiaries are party to a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization"). On April 6, 2021, the Company and certain of its subsidiaries entered into the first amendment to the Accounts Receivable Securitization. The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to April 6, 2023 and increased the overall limit from $ 120.0 million to $ 200.0 million. On April 6, 2023, the Company and certain of its subsidiaries entered into a second amendment to the Accounts Receivable Securitization. The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to April 7, 2025. On October 8, 2024, the Company and certain of its subsidiaries entered into a new amendment to the Accounts Receivable Securitization. The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to October 8, 2026. While subject to a $ 200.0 million overall limit, the availability of revolving loans varies over the course of the year based on the seasonality of the Company's accounts receivable. 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. The accounts receivable continue to be owned by the Company and its subsidiaries and continue to be reflected as assets on the Company's Consolidated Balance Sheets and represent collateral up to the amount of the borrowings under this facility. 
 
 
 2031 Senior Notes 
 
 
 On September 24, 2021, Somnigroup International issued $ 800.0 million in aggregate principal amount of 3.875 % senior notes due 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 2031 Senior Notes are general unsecured senior obligations of Somnigroup International and are guaranteed on a senior unsecured basis by the Guarantors. The 2031 Senior Notes mature on October 15, 2031, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on April 15, 2022. 
 
 
 Somnigroup International has the option to redeem all or a portion of the 2031 Senior Notes at any time on or after October 15, 2026. The initial redemption price is 101.938 % of the principal amount, plus accrued and unpaid interest, if any. The redemption price will decline each year after 2026 until it becomes 100.0 % of the principal amount beginning on October 15, 2029. In addition, Somnigroup International has the option at any time prior to October 15, 2026 to redeem some or all of the 2031 Senior Notes at 100.0 % of the original principal amount plus a "make-whole" premium and accrued and unpaid interest, if any. 
 
 
 2029 Senior Notes 
 
 
 On March 25, 2021, Somnigroup International issued $ 800.0 million in aggregate principal amount of 4.00 % senior notes due 2029 (the "2029 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The 2029 Senior Notes are general unsecured senior obligations of Somnigroup International and are guaranteed on a senior unsecured basis by the Guarantors. The 2029 Senior Notes mature on April 15, 2029, and interest is payable semi-annually in arrears on each April 15 and October 15, beginning on October 15, 2021. 
 
 
 Somnigroup International has the option to redeem all or a portion of the 2029 Senior Notes at any time on or after April 15, 2024. The initial redemption price is 102.0 % of the principal amount, plus accrued and unpaid interest, if any. The redemption price will decline each year after 2024 until it becomes 100.0 % of the principal amount beginning on April 15, 2026. 
 
 
 Deferred Financing Costs and Original Issue Discounts 
 
 
 The Company capitalizes costs associated with the issuance of debt and related original issue discounts ("OIDs") and amortizes these costs as additional interest expense over the lives of the debt instruments using the effective interest method. These costs are recorded as deferred financing costs as a direct reduction from the carrying amount of the corresponding debt liability in the accompanying Consolidated Balance Sheets and the related amortization is included in interest expense, net in the accompanying Consolidated Statements of Income. Upon the prepayment of the related debt, the Company accelerates the recognition of an appropriate amount of the costs. 
 
 
 Future Obligations 
 
 
 As of December 31, 2025, the scheduled maturities of long-term debt outstanding, excluding finance lease obligations, for each of the next five years and thereafter are as follows: 
 
 (in millions) 
 2026 $ 167.1 
 2027 82.2 
 2028 1,507.7 
 2029 826.0 
 2030 27.3 
 Thereafter 1,996.4 
 Total (1) 
 $ 4,606.7 
 (1) Total future obligations excludes $ 34.8 million of outstanding letters of credit issued by various financial institutions, including $ 0.8 million associated with the 2023 Credit Facility. 
 

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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 (7) Leases 
 
 
 The Company leases retail stores, manufacturing and distribution facilities, office space and equipment under operating and finance lease agreements. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to several years, with the longest renewal period extending through 2038. The exercise of lease renewal options are at the Company's sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. 
 
 
 The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Consolidated Balance Sheet as of December 31, 2025 and 2024: 
 
 (in millions) December 31, 2025 December 31, 2024 
 Assets 
 Operating lease assets Operating lease right-of-use assets $ 1,878.8 $ 598.8 
 Finance lease assets Property, plant and equipment, net 96.0 75.9 
 Total leased assets $ 1,974.8 $ 674.7 
 
 Liabilities 
 Short-term: 
 Operating lease obligations Short-term operating lease obligations $ 399.6 $ 126.8 
 Finance lease obligations Current portion of long-term debt 25.5 16.9 
 Long-term: 
 Operating lease obligations Long-term operating lease obligations 1,589.8 532.1 
 Finance lease obligations Long-term debt, net 85.1 71.8 
 Total lease obligations $ 2,100.0 $ 747.6 

 
 
 The following table summarizes the classification of lease expense in the Company's Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2023: 
 
 Twelve Months Ended 
 (in millions) December 31, 2025 December 31, 2024 December 31, 2023 
 Operating lease expense: 
 Operating lease expense $ 489.5 $ 164.5 $ 148.1 
 Short-term lease expense 21.9 8.8 13.5 
 Variable lease expense 126.4 40.0 36.3 
 Finance lease expense: 
 Amortization of right-of-use assets 22.1 18.1 14.4 
 Interest on lease obligations 6.4 5.4 3.9 
 Total lease expense $ 666.3 $ 236.8 $ 216.2 

 
 
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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 
 The following table sets forth the scheduled maturities of lease obligations as of December 31, 2025: 
 
 (in millions) Operating Leases Finance Leases Total 
 Year Ended December 31, 
 2026 $ 499.8 $ 30.7 $ 530.5 
 2027 450.2 27.2 477.4 
 2028 380.5 23.4 403.9 
 2029 321.1 18.3 339.4 
 2030 225.8 13.5 239.3 
 Thereafter 473.4 14.3 487.7 
 Total lease payments 2,350.8 127.4 2,478.2 
 Less: Interest ( 361.4 ) ( 16.8 ) ( 378.2 ) 
 Present value of lease obligations $ 1,989.4 $ 110.6 $ 2,100.0 

 
 
 The following table provides lease term and discount rate information related to operating and finance leases as of December 31, 2025: 
 
 December 31, 2025 
 Weighted average remaining lease term (years): 
 Operating leases 5.93 
 Finance leases 5.02 
 
 Weighted average discount rate: 
 Operating leases 5.78 % 
 Finance leases 5.66 % 

 
 
 The following table provides supplemental information related to the Company's Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023: 
 
 Twelve Months Ended December 31, 
 (in millions) 2025 2024 2023 
 Cash paid for amounts included in the measurement of lease obligations: 
 Operating cash flows paid for operating leases (a) 
 $ 477.9 $ 164.0 $ 146.8 
 Operating cash flows paid for finance leases $ 6.4 $ 5.4 $ 3.9 
 Financing cash flows paid for finance leases $ 22.1 $ 17.2 $ 14.0 
 
 Right-of-use assets obtained in exchange for new operating lease obligations $ 146.4 $ 123.3 $ 273.0 
 Right-of-use assets obtained in exchange for new finance lease obligations $ 32.5 $ 14.5 $ 26.3 

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

 (8) Retirement Plans 
 
 
 401(k) Plan 
 
 
 The Company has a defined contribution plan (the "401(k) Plan") whereby eligible employees may contribute up to 85.0 % of their pay subject to certain limitations as defined by the 401(k) Plan. Employees are eligible to participate in the 401(k) Plan upon hire and are eligible to receive matching contributions upon six months of continuous employment with the Company. The 401(k) Plan provides a 100.0 % match of the first 3.0 % and 50.0 % of the next 2.0 % of eligible employee contributions. The match for union employees is based on the applicable collective bargaining arrangement. All matching contributions vest immediately. The Company incurred $ 21.4 million, $ 7.8 million and $ 7.5 million of expenses associated with the 401(k) Plan for the years ended December 31, 2025, 2024 and 2023, respectively, which are included in the Consolidated Statements of Income. 
 
 
 Multi‑Employer Benefit Plans 
 
 
 Approximately 15 % of the Company's domestic employees are represented by various labor unions with separate collective bargaining agreements. Hourly employees working at six of the Company's domestic manufacturing facilities are covered by union sponsored retirement plans. Further, employees working at three of the Company's domestic manufacturing facilities are covered by union sponsored health and welfare plans. These plans cover both active employees and retirees. Through the health and welfare plans, employees receive medical, dental, vision, prescription and disability coverage. The Company's cost associated with these plans consists of periodic contributions to these plans based upon employee participation. The expense recognized by the Company for such contributions for the years ended December 31, 2025, 2024 and 2023 was as follows: 
 
 (in millions) 
 2025 2024 2023 
 Multi‑employer retirement plan expense 
 $ 4.1 $ 4.9 $ 4.7 
 Multi‑employer health and welfare plan expense 
 2.9 3.2 3.2 

 
 
 The risks of participating in multi‑employer pension plans are different from the risks of sponsoring single‑employer pension plans in the following respects: 1) contributions to the multi‑employer plan by one employer may be used to provide benefits to employees of other participating employers; 2) if a participating employer ceases its contributions to the plan, the unfunded obligations of the plan allocable to the withdrawing employer may be borne by the remaining participating employers; and 3) if the Company withdraws from the multi‑employer pension plans in which it participates, the Company may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan. 
 
 
 The following table presents information regarding the multi‑employer pension plans that are significant to the Company for the years ended December 31, 2025 and 2024, respectively: 
 
 Pension Fund 
 EIN/Pension Plan Number 
 Date of Plan Year-End 
 Pension Protection Act 
Zone Status (1) 2025 
 FIP/RP Status 
Pending/Implemented (2) 
 Contributions of the Company in 2025 
 Surcharge Imposed (3) 
 Expiration Date 
of Collective 
Bargaining Agreement 
 Year Contributions to Plan Exceeded More than 5 Percent of Total Contributions 
 
 
 (in millions) 
 
 United Furniture Workers Pension Fund A (4) 
 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 
 36-6044243-001 12/31/24 Red Implemented $ 0.3 Yes, 10.0 % 
 2027 N/A 

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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 
 Pension Fund 
 EIN/Pension Plan Number 
 Date of Plan Year-End 
 Pension Protection Act 
Zone Status (1) 2024 
 FIP/RP Status 
Pending/Implemented (2) 
 Contributions of the Company in 2024 
 Surcharge Imposed (3) 
 Expiration Date 
of Collective 
Bargaining Agreement 
 Year Contributions to Plan Exceeded More than 5 Percent of Total Contributions 
 
 
 (in millions) 
 
 United Furniture Workers Pension Fund A (4) 
 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 
 36-6044243-001 12/31/23 Red Implemented $ 1.0 Yes, 10.0 % 
 2025 N/A 

 
 (1) The Pension Protection Act of 2006 ranks the funded status of multi-employer pension plans depending upon a plan's current and projected funding. A plan is in the Red Zone (Critical) if it has a current funded percentage of less than 65.0 %. A plan is in the Yellow Zone (Endangered) if it has a current funded percentage of less than 80.0 %, or projects a credit balance deficit within seven years . A plan is in the Green Zone (Healthy) if it has a current funded percentage greater than 80.0 % and does not have a projected credit balance deficit within seven years . The zone status is based on the plan’s year end rather than the Company's. The zone status listed for each plan is based on information that the Company received from that plan and is certified by that plan’s actuary for the most recent year available. 
 
 (2) Funding Improvement Plan or Rehabilitation Plan as defined in the Employee Retirement Income Security Act of 1974 has been implemented or is pending. 
 
 (3) Indicates whether the Company paid a surcharge to the plan in the most current year due to funding shortfalls and the amount of the surcharge. 
 
 (4) The Company represented more than 5.0 % of the total contributions for the most recent plan year available. 
 

 
 
 
 
 
 (9) Stockholders' Equity 
 
 (a) Common and Preferred Stock. Somnigroup has 500.0 million authorized shares of common stock with $ 0.01 per share par value and 10.0 million authorized shares of preferred stock with $ 0.01 per share par value. The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, holders of common stock are entitled to receive ratably such dividends as may be declared from time to time by the Board of Directors out of funds legally available for that purpose. In the event of liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. 
 
 The Board of Directors is authorized, subject to any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of preferred stock in one or more series. Each such series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as determined by the Board of Directors, which may include, among others, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights. 
 
 
 (b) Treasury Stock. 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. 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. The shares withheld were valued at the closing price of the stock on the New York Stock Exchange on the vesting date or first business day prior to vesting, resulting in approximately $ 132.4 million, $ 43.8 million and $ 31.0 million in treasury stock acquired during the years ended December 31, 2025, 2024 and 2023, respectively. 
 
 
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 (c) AOCL. AOCL consisted of the following: 
 
 Year Ended December 31, 
 
 (in millions) 
 2025 2024 2023 
 Foreign Currency Translation 
 
 Balance at beginning of period 
 $ ( 187.2 ) $ ( 135.5 ) $ ( 175.3 ) 
 Other comprehensive income (loss): 
 
 Foreign currency translation adjustments (1) 
 87.8 ( 51.7 ) 39.8 
 
 Balance at end of period 
 $ ( 99.4 ) $ ( 187.2 ) $ ( 135.5 ) 
 
 Pension Benefits 
 
 Balance at beginning of period 
 $ 0.4 $ ( 1.2 ) $ ( 1.6 ) 
 Other comprehensive income: 
 
 Net change from period revaluation 
 0.8 2.1 0.5 
 Tax expense (2) 
 ( 0.2 ) ( 0.5 ) ( 0.1 ) 
 
 
 
 
 
 Total other comprehensive income 
 0.6 1.6 0.4 
 Balance at end of period 
 $ 1.0 $ 0.4 $ ( 1.2 ) 

 (1) In 2025, 2024 and 2023, there were no tax impacts related to foreign currency translation adjustments and no amounts were reclassified to earnings. 
 (2) These amounts were included in the income tax provision in the accompanying Consolidated Statements of Income. 
 
 
 
 (10) Other Items 
 
 
 Accrued expenses and other current liabilities consisted of the following: 
 
 December 31, 
 December 31, 
 
 (in millions) 
 2025 2024 
 Wages and benefits 
 $ 130.6 $ 81.7 
 Unearned revenue 
 105.3 56.8 
 Advertising 92.8 59.3 
 Sales returns 91.7 30.3 
 Taxes 43.3 18.4 
 Other 
 172.8 147.4 
 $ 636.5 $ 393.9 

 
 
 
 
 
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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 (11) Stock-based Compensation 
 
 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, 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. 
 
 
 The 2013 Plan provides for grants of stock options to purchase shares of common stock to employees and directors of the Company. The 2013 Plan may be administered by the Human Resources/Capital and Talent Committee of the Board of Directors, by the Board of Directors directly or, in certain cases, by an executive officer or officers of the Company designated by the Human Resources/Capital and Talent Committee. The shares issued or to be issued under the 2013 Plan may be either authorized but unissued shares of the Company's common stock or shares held by the Company in its treasury. Somnigroup may issue a maximum of 44.7 million shares of common stock under the 2013 Plan, subject to certain adjustment provisions. 
 
 
 In 2013, the Board of Directors approved the terms of another Long-Term Incentive Plan established under the 2013 Plan. Awards under the Long-Term Incentive Plan have typically consisted primarily of a mix of stock options, RSUs and PRSUs. Shares with respect to the PRSUs will be granted and vest following the end of the applicable performance period and achievement of applicable performance metrics and strategic initiatives as determined by the Human Resources/Capital and Talent Committee of the Board of Directors. 
 
 
 The Company's stock-based compensation expense for the year ended December 31, 2025, 2024 and 2023 included PRSUs, RSUs and stock options. A summary of the Company's stock-based compensation expense is presented below: 
 
 Year Ended December 31, 
 (in millions) 2025 2024 2023 
 RSU expense $ 18.2 $ 17.9 $ 20.6 
 PRSU expense 17.3 16.3 24.9 
 Stock option expense 5.5 2.2 2.2 
 Total stock-based compensation expense $ 41.0 $ 36.4 $ 47.7 

 
 
 Performance Restricted Stock Units 
 
 
 The Company grants PRSUs to executive officers and certain members of management. The Company granted PRSUs during the years ended December 31, 2025, 2024 and 2023. Actual payout under the PRSUs is dependent upon the achievement of certain financial and qualitative goals. A summary of the Company's PRSU activity and related information for the years ended December 31, 2025 and 2024 is presented below: 
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 (shares in millions) Shares Weighted Average Grant Date Fair Value 
 Awards unvested at December 31, 2023 
 2.9 $ 29.53 
 Granted 0.3 50.34 
 Performance adjustments (1) 
 — 51.95 
 Vested ( 1.6 ) 25.37 
 Forfeited — 36.64 
 Awards unvested at December 31, 2024 
 1.6 39.95 
 Granted 0.2 55.72 
 Performance adjustments (1) 
 — 49.23 
 Vested ( 0.8 ) 34.71 
 Forfeited ( 0.1 ) 47.32 
 Awards unvested at December 31, 2025 
 0.9 $ 49.52 
 (1) Adjustments based on current attainment expectations of performance targets. 
 

 
 
 During the first quarter of 2025, the Company granted 0.2 million PRSUs at target at a weighted average grant date fair value of $ 55.72 per share with a performance period of January 1, 2025 through December 31, 2025 as a component of the long-term incentive plan ("2025 PRSUs"). For the year ended December 31, 2025, the Company recognized stock-based compensation expense related to the 2025 PRSUs based on the Company's achievement of its performance targets for the performance period. 
 
 
 During the first quarter of 2024, the Company granted 0.3 million PRSUs at target at a weighted average grant date fair value of $ 50.34 per share with a performance period of January 1, 2024 through December 31, 2024 as a component of the long-term incentive plan ("2024 PRSUs"). For the year ended December 31, 2024, the Company recognized stock-based compensation expense related to the 2024 PRSUs based on the Company's achievement of its performance targets for the performance period. 
 
 
 Stock Options 
 
 
 The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options 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. Expected volatility is based on the unbiased standard deviation of the Company's common stock over the option term. The expected life of the options represents the period of time that the Company expects the options granted to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option for the expected term of the instrument. The dividend yield reflects an estimate of dividend payouts over the term of the award. The Company uses historical data to determine these assumptions. 
 
 Year Ended December 31, 
 2025 2024 2023 
 Expected volatility of stock 40.3 % N/A N/A 
 Expected life of option, in years 4 N/A N/A 
 Risk-free interest rate 3.9 % N/A N/A 
 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: 
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 (in millions, except per share amounts and years) Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value 
 Options outstanding at December 31, 2023 
 4.6 $ 20.54 
 Granted — — 
 Exercised — 14.22 
 Forfeited — 12.97 
 Options outstanding at December 31, 2024 
 4.6 $ 20.60 
 Granted 1.2 72.00 
 Exercised ( 2.8 ) 17.54 
 Forfeited — 14.38 
 Options outstanding at December 31, 2025 
 3.0 $ 44.59 6.89 $ 131.0 
 
 Options exercisable at December 31, 2025 
 1.4 $ 24.66 4.83 $ 92.5 

 
 
 The aggregate intrinsic value of options exercised during the years ended December 31, 2025 and 2024 was $ 135.7 million and $ 1.6 million, respectively. 
 
 
 A summary of the Company's unvested shares relating to stock options as of December 31, 2025 and 2024, and changes during the years ended December 31, 2025 and 2024, are presented below: 
 
 (shares in millions) Shares Weighted Average Grant Date Fair Value 
 Options unvested at December 31, 2023 
 0.9 $ 30.00 
 Granted — — 
 Vested ( 0.3 ) 30.00 
 Forfeited — — 
 Options unvested at December 31, 2024 
 0.6 $ 30.00 
 Granted 1.2 72.00 
 Vested ( 0.2 ) 30.00 
 Forfeited — — 
 Options unvested at December 31, 2025 
 1.6 $ 63.60 

 
 
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 Restricted Stock Units 
 
 
 A summary of the Company's RSU activity and related information for the years ended December 31, 2025 and 2024 is presented below: 
 
 (in millions, except per share amounts) Shares Weighted Average Grant Date Fair Value Aggregate Intrinsic Value 
 Awards outstanding at December 31, 2023 
 1.7 $ 29.51 
 Granted 0.3 48.23 
 Vested ( 0.6 ) 32.09 
 Terminated — 39.55 
 Awards outstanding at December 31, 2024 
 1.4 $ 33.29 $ 77.9 
 Granted 0.3 57.26 
 Vested ( 0.5 ) 39.51 
 Terminated — 47.63 
 Awards outstanding at December 31, 2025 
 1.2 $ 37.36 $ 111.0 

 
 
 The aggregate intrinsic value of RSUs vested during the years ended December 31, 2025 and 2024 was $ 25.6 million and $ 30.8 million, respectively. 
 
 
 A summary of total unrecognized stock-based compensation expense based on current performance estimates related to stock options, RSUs and PRSUs for the year ended December 31, 2025 is presented below: 
 
 (in millions, except years) December 31, 2025 Weighted Average Remaining Vesting Period (Years) 
 Unrecognized stock option expense $ 22.8 3.32 
 Unrecognized RSU expense 20.2 2.27 
 Unrecognized PRSU expense 14.8 1.63 
 Total unrecognized stock-based compensation expense $ 57.8 2.52 

 
 
 
 
 
 (12) Commitments and Contingencies 
 
 The Company is involved in various legal and administrative proceedings incidental to the operations of its business. Except as disclosed, the Company believes that the outcome of all such pending proceedings in the aggregate will not have a material adverse effect on its business, financial condition, liquidity or operating results. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable potential losses. Accordingly, the Company has not established material reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings in which it is involved, it could, in the future, enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows. 
 
 
 
 (13) Income Taxes 
 
 
 Pre-tax Income by Jurisdiction 
 
 
 The following sets forth the amount of income before income taxes attributable to each of the Company's geographies for the years ended December 31, 2025, 2024 and 2023: 
 
 
 
 Year Ended December 31, 
 (in millions) 2025 2024 2023 
 Income before income taxes: 
 United States $ 245.1 $ 279.2 $ 288.5 
 Rest of the world 235.9 225.1 185.6 
 $ 481.0 $ 504.3 $ 474.1 

 
 
 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. federal income tax rate, principally due to the following: 
 
 
 
 Year Ended December 31, 
 2025 
 (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) 
 12.1 2.5 % 
 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, 
 2024 2023 
 (in millions, except percentages) Amount Percentage of Income
Before Income Taxes Amount Percentage of Income
Before Income Taxes 
 Statutory U.S. federal income tax $ 105.9 21.0 % $ 99.6 21.0 % 
 State income taxes, net of federal benefit 12.8 2.5 % 9.1 1.9 % 
 
 Foreign tax differential 8.0 1.6 % 5.8 1.2 % 
 Change in valuation allowances ( 0.9 ) ( 0.2 ) % 6.4 1.4 % 
 Uncertain tax positions and interest ( 3.0 ) ( 0.6 ) % ( 0.8 ) ( 0.2 ) % 
 Global Intangible Low-Taxed Income ("GILTI") 
 2.0 0.4 % 2.7 0.6 % 
 Expiration of foreign tax credits 
 — — % 10.6 2.2 % 
 Stock compensation ( 9.6 ) ( 1.9 ) % ( 7.8 ) ( 1.6 ) % 
 Non-deductible compensation 15.1 3.0 % 12.7 2.7 % 
 Danish Tax Matter — — % ( 13.7 ) ( 2.9 ) % 
 Notional interest deduction ( 2.2 ) ( 0.4 ) % ( 14.0 ) ( 3.0 ) % 
 Permanent and other ( 9.5 ) ( 1.9 ) % ( 7.2 ) ( 1.5 ) % 
 Effective income tax provision $ 118.6 23.5 % $ 103.4 21.8 % 

 
 
 Income Tax Provision 
 The income tax provision consisted of the following: 
 
 Year Ended December 31, 
 (in millions) 2025 2024 2023 
 Current provision 
 Federal $ 5.1 $ 71.4 $ 47.2 
 State 9.5 19.5 15.9 
 Foreign 55.3 46.9 32.0 
 Total current $ 69.9 $ 137.8 $ 95.1 
 Deferred provision 
 Federal $ 18.2 $ ( 16.3 ) $ 6.3 
 State 5.9 ( 3.2 ) 2.0 
 Foreign 1.7 0.3 — 
 Total deferred 25.8 ( 19.2 ) 8.3 
 Total income tax provision $ 95.7 $ 118.6 $ 103.4 

 
 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 
 Denmark 17.8 
 United Kingdom 17.3 
 Mexico 5.6 
 Canada 5.2 
 Germany 2.0 
 Foreign other 5.6 
 Total $ 41.4 

 
 
 Disclosed below is a summary of income taxes paid by jurisdiction for the years ended December 31, 2024 and 2023: 
 
 
 
 December 31, 
 (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 
 
 
 The net deferred tax assets and liabilities recognized in the accompanying Consolidated Balance Sheets, determined using the income tax rate applicable to each period in which those items will reverse, consist of the following: 
 
 December 31, 
 (in millions) 2025 2024 
 Deferred tax assets: 
 Stock-based compensation $ 17.7 $ 22.9 
 Operating lease obligations 504.1 169.2 
 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 
 Inventories 20.9 16.6 
 Transaction costs 53.5 26.9 
 Property, plant and equipment 15.7 6.8 
 Total deferred tax assets 995.8 348.0 
 Valuation allowances ( 48.7 ) ( 48.1 ) 
 Total net deferred tax assets $ 947.1 $ 299.9 
 Deferred tax liabilities: 
 Intangible assets $ ( 643.7 ) $ ( 171.1 ) 
 Operating lease right-of-use assets ( 471.8 ) ( 153.0 ) 
 Stock basis recapture ( 335.8 ) — 
 Property, plant and equipment ( 61.2 ) ( 49.2 ) 
 Accrued expenses and other ( 41.0 ) ( 19.6 ) 
 Total deferred tax liabilities ( 1,553.5 ) ( 392.9 ) 
 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 
 
 
 Included in the calculation of the Company's deferred tax assets are the following gross income tax attributes available at December 31, 2025 and 2024, respectively: 
 
 (in millions) 2025 2024 
 U.S. federal net operating losses ("FedNOLs") $ 157.5 $ — 
 State net operating losses ("SNOLs") 3,511.7 103.4 
 Foreign net operating losses ("FNOLs") 31.6 45.8 
 U.S. 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 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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible or creditable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making its assessment regarding the recoverability of its deferred tax assets. The Company has recorded valuation allowances against $ 1,457.4 million of the SNOLs, $ 14.6 million of FNOLs, $ 46.3 million of the NID and $ 0.6 million of the SCCCs as of December 31, 2025. With respect to all other Tax Attributes above, based upon the level of historical taxable income and projections for future taxable income, management believes it is more likely than not the Company will realize the benefits of the underlying deferred tax assets. However, there can be no assurance that such assets will be realized if circumstances change. 
 
 
 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, 2025, the Company has accrued approximately $ 2.9 million and $ 1.4 million, respectively, for income and withholding taxes. 
 
 
 Uncertain Income Tax Positions 
 
 GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires the Company to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the largest amount of benefit that has a greater than 50.0% likelihood of being realized. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense. 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. and other international tax and transfer pricing requirements. 
 
 
 A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 
 
 (in millions) 
 Balance as of December 31, 2023 
 $ 4.5 
 
 Additions for tax positions of prior years 0.2 
 Expiration of statutes of limitations ( 2.6 ) 
 
 
 Balance as of December 31, 2024 
 $ 2.1 
 Additions based on tax positions related to 2025 
 11.5 
 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 
 $ 30.7 

 
 
 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. 
 
 
 With few exceptions, the Company is no longer subject to tax examinations by the U.S., state and local municipalities or non-U.S. jurisdictions for periods prior to 2020. The Company is currently under examination by various tax authorities around the world. 
 
 
 The OECD (Organization for Economic Co-operation and Development) has proposed a global minimum effective tax of 15.0% on income arising in each jurisdiction ("Pillar 2") that has been agreed upon in principle by over 140 countries. During 2024 and 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. 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 
 
 
 The Company was involved in a dispute with the Danish tax authority ("SKAT") regarding the royalty paid by a U.S. subsidiary to a Danish subsidiary for tax years 2012 through 2022. The issues involved the royalty paid by the U.S. subsidiary for the right to utilize certain intangible assets owned by the Danish subsidiary in the U.S. production process. 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 
 
 
 The following table sets forth the components of the numerator and denominator for the computation of basic and diluted earnings per share for net income attributable to Somnigroup: 
 
 Year Ended December 31, 
 (in millions, except per common share amounts) 2025 2024 2023 
 Numerator: 
 Net income attributable to Somnigroup International Inc. $ 384.1 $ 384.3 $ 368.1 
 
 Denominator: 
 Denominator for basic earnings per common share-weighted average shares 206.0 173.6 172.2 
 Effect of dilutive securities: 
 Employee stock-based compensation 3.2 4.6 5.1 
 Denominator for diluted earnings per common share-adjusted weighted average shares 209.2 178.2 177.3 
 
 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. Holders of non-vested stock-based compensation awards do not have voting rights but do participate in dividend equivalents distributed upon award vesting. 
 
 
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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 (15) Business Segment Information 
 
 
 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. 
 
 
 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 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. 
 
 
 The Company considers its Chairman, President and Chief Executive Officer to be its chief operating decision maker ("CODM"). The Company’s CODM manages business operations, evaluates segment performance and allocates resources based on metrics such as net sales, gross profit, operating income and other key financial indicators, guiding strategic decisions to align with company-wide goals. 
 
 
 The following table summarizes total assets by segment: 
 
 December 31, December 31, 
 (in millions) 2025 2024 
 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 
 Inter-segment eliminations ( 6,177.9 ) ( 4,652.4 ) 
 Total assets $ 11,600.7 $ 5,980.4 

 
 
 The following table summarizes property, plant and equipment, net, by segment: 
 
 December 31, December 31, 
 (in millions) 2025 2024 
 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 

 
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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 The following table summarizes operating lease right-of-use assets by segment: 
 
 December 31, December 31, 
 (in millions) 2025 2024 
 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 
 Total operating lease right-of-use assets $ 1,878.8 $ 598.8 

 
 
 The following table summarizes segment information for the year ended December 31, 2025: 
 
 (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 ) — — — 
 
 Gross profit 1,171.7 1,383.8 627.7 — — 3,183.2 
 Advertising expense 197.9 393.2 101.1 — — 692.2 
 Other selling and marketing expense 575.1 254.6 199.4 17.7 — 1,046.8 
 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 ) 
 Operating income (loss) 190.8 553.3 221.2 ( 210.4 ) — 754.9 
 Interest expense, net 267.9 
 
 Other expense, net 6.0 
 Income before income taxes 481.0 
 
 Depreciation and amortization (1) 
 $ 85.0 $ 121.4 $ 32.0 $ 52.1 $ — $ 290.5 
 Capital expenditures 96.1 29.4 38.0 3.4 — 166.9 

 (1) Depreciation and amortization includes stock-based compensation amortization expense. 
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 SOMNIGROUP INTERNATIONAL INC. AND CONSOLIDATED SUBSIDIARIES 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 
 
 The following table summarizes segment information for the year ended December 31, 2024: 
 
 (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 ) — — — 
 
 Gross profit 1,466.7 561.2 — — 2,027.9 
 Advertising expense 382.0 88.9 — — 470.9 
 Other selling and marketing expense 270.6 181.7 16.2 — 468.5 
 General, administrative and other expenses 202.0 114.6 156.6 — 473.2 
 Equity income in earnings of unconsolidated affiliates — ( 18.9 ) — — ( 18.9 ) 
 Operating income (loss) 612.1 194.9 ( 172.8 ) — 634.2 
 Interest expense, net 134.8 
 Other income, net ( 4.9 ) 
 Income before income taxes 504.3 
 
 Depreciation and amortization (1) 
 $ 127.6 $ 28.2 $ 45.7 $ — $ 201.5 
 Capital expenditures 57.2 30.9 9.2 — 97.3 

 (1) Depreciation and amortization includes stock-based compensation amortization expense. 
 
 
 The following table summarizes segment information for the year ended December 31, 2023: 
 
 (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 ) — — — 
 
 Gross profit 1,478.6 507.6 — — 1,986.2 
 Advertising expense 389.9 79.1 — — 469.0 
 Other selling and marketing expense 261.0 170.4 20.5 — 451.9 
 General, administrative and other expenses 184.6 110.2 186.3 — 481.1 
 Equity income in earnings of unconsolidated affiliates — ( 23.0 ) — — ( 23.0 ) 
 Operating income (loss) 643.1 170.9 ( 206.8 ) — 607.2 
 Interest expense, net 129.9 
 Loss on extinguishment of debt 3.2 
 Income before income taxes 474.1 
 
 Depreciation and amortization (1) 
 $ 102.2 $ 25.6 $ 55.2 $ — $ 183.0 
 Capital expenditures 158.8 18.1 8.5 — 185.4 

 (1) Depreciation and amortization includes stock-based compensation amortization expense. 
 
 
 64 

 
 
 SOMNIGROUP INTERNATIONAL INC. AND CONSOLIDATED SUBSIDIARIES 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 

 The following table summarizes property, plant and equipment, net, by geographic region: 
 
 December 31, December 31, 
 (in millions) 
 2025 2024 
 United States $ 889.3 $ 704.1 
 All other 129.9 107.0 
 Total property, plant and equipment, net 
 $ 1,019.2 $ 811.1 

 
 
 The following table summarizes operating lease right-of-use assets by geographic region: 
 
 December 31, December 31, 
 (in millions) 
 2025 2024 
 United States $ 1,653.1 $ 401.0 
 All other 225.7 197.8 
 Total operating lease right-of-use assets 
 $ 1,878.8 $ 598.8 

 
 
 The following table summarizes net sales by geographic region: 
 
 Year Ended December 31, 
 (in millions) 2025 2024 2023 
 United States $ 5,934.7 $ 3,490.1 $ 3,560.8 
 All other 1,541.8 1,440.8 1,364.6 
 Total net sales $ 7,476.5 $ 4,930.9 $ 4,925.4 

 
 65 

 
 Table of Contents 

 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
 
 
 None.
SOMNIGROUP INTERNATIONAL INC. 10-K

Item 8. Financial Statements and Supplementary Data
