ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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33-1022198
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging Growth Company
o
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(Do not check if a smaller reporting company)
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Page
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Three Months Ended
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Six Months Ended
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||||||||||||
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June 30,
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June 30,
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||||||||||||
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2018
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2017
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2018
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2017
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||||||||
Net sales
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$
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669.7
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|
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$
|
659.3
|
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$
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1,317.7
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$
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1,381.4
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Cost of sales
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393.6
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390.7
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773.7
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826.2
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Gross profit
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276.1
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268.6
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544.0
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555.2
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Selling and marketing expenses
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157.4
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152.3
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306.3
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306.0
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General, administrative and other expenses
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67.0
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69.0
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136.0
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135.5
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||||
Customer termination charges, net
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—
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—
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—
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14.4
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||||
Equity income in earnings of unconsolidated affiliates
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(3.8
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)
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(4.4
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)
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(7.7
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)
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(7.1
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)
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||||
Royalty income, net of royalty expense
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—
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(4.9
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)
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—
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(9.7
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)
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||||
Operating income
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55.5
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56.6
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109.4
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116.1
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Other expense, net:
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||||||||
Interest expense, net
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24.5
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22.1
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47.4
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44.2
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Other expense (income), net
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1.2
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(0.3
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)
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(0.6
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)
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(9.5
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)
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||||
Total other expense, net
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25.7
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21.8
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46.8
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34.7
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Income before income taxes
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29.8
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34.8
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62.6
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81.4
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Income tax provision
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(8.6
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)
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(13.1
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)
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(18.6
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)
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(27.7
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)
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Net income before non-controlling interests
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21.2
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21.7
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44.0
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53.7
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Less: Net loss attributable to non-controlling interests
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(1.6
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)
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(2.8
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)
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(1.9
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)
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(4.7
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)
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Net income attributable to Tempur Sealy International, Inc.
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$
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22.8
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$
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24.5
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$
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45.9
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$
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58.4
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Earnings per common share:
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Basic
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$
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0.42
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$
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0.45
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$
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0.84
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$
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1.08
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Diluted
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$
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0.42
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$
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0.45
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$
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0.83
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$
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1.07
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Weighted average common shares outstanding:
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Basic
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54.4
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53.9
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54.4
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53.9
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Diluted
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54.9
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54.5
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55.0
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54.6
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Three Months Ended
June 30, |
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Six Months Ended June 30,
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||||||||||||
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2018
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2017
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2018
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2017
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Net income before non-controlling interests
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$
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21.2
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$
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21.7
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$
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44.0
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$
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53.7
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Other comprehensive (loss) income, net of tax
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Foreign currency translation adjustments
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(16.1
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)
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9.3
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(11.1
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)
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18.1
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Pension benefits loss, net of tax
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—
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—
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(0.6
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)
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—
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Unrealized loss on cash flow hedging derivatives, net of tax
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—
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(0.1
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)
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—
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(0.6
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)
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Other comprehensive (loss) income, net of tax
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(16.1
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)
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9.2
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(11.7
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)
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17.5
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Comprehensive income
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5.1
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30.9
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32.3
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71.2
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Less: Comprehensive loss attributable to non-controlling interests
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(1.6
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)
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(2.8
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)
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(1.9
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)
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(4.7
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)
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Comprehensive income attributable to Tempur Sealy International, Inc.
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$
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6.7
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$
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33.7
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$
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34.2
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$
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75.9
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June 30, 2018
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December 31, 2017
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||||
ASSETS
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(Unaudited)
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Current Assets:
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Cash and cash equivalents
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$
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32.6
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$
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41.9
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Accounts receivable, net
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359.4
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317.7
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Inventories
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224.4
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183.0
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Prepaid expenses and other current assets
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69.8
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64.8
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Total Current Assets
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686.2
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607.4
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Property, plant and equipment, net
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433.1
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435.1
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Goodwill
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727.1
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733.1
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Other intangible assets, net
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659.4
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667.4
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Deferred income taxes
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23.6
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23.6
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Other non-current assets
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236.2
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227.4
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Total Assets
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$
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2,765.6
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$
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2,694.0
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current Liabilities:
|
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Accounts payable
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$
|
247.3
|
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$
|
241.2
|
|
Accrued expenses and other current liabilities
|
227.2
|
|
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234.2
|
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Income taxes payable
|
29.3
|
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29.1
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|
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Current portion of long-term debt
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77.3
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72.4
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Total Current Liabilities
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581.1
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576.9
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Long-term debt, net
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1,706.8
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1,680.7
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Deferred income taxes
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110.4
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114.3
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Other non-current liabilities
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209.0
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207.4
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Total Liabilities
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2,607.3
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2,579.3
|
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Commitments and contingencies—see Note 9
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Redeemable non-controlling interest
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0.3
|
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2.2
|
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Total Stockholders' Equity
|
158.0
|
|
|
112.5
|
|
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Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity
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$
|
2,765.6
|
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$
|
2,694.0
|
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Six Months Ended
|
||||||
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June 30,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income before non-controlling interests
|
$
|
44.0
|
|
|
$
|
53.7
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
42.0
|
|
|
39.7
|
|
||
Amortization of stock-based compensation
|
13.1
|
|
|
2.6
|
|
||
Amortization of deferred financing costs
|
1.2
|
|
|
1.1
|
|
||
Bad debt expense
|
1.8
|
|
|
6.0
|
|
||
Deferred income taxes
|
(2.5
|
)
|
|
(13.4
|
)
|
||
Dividends received from unconsolidated affiliates
|
3.7
|
|
|
3.5
|
|
||
Equity income in earnings of unconsolidated affiliates
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(7.7
|
)
|
|
(7.1
|
)
|
||
Loss (gain) on sale of assets
|
0.2
|
|
|
(1.3
|
)
|
||
Foreign currency adjustments and other
|
(1.9
|
)
|
|
0.7
|
|
||
Changes in operating assets and liabilities
|
(92.3
|
)
|
|
(10.3
|
)
|
||
Net cash provided by operating activities
|
1.6
|
|
|
75.2
|
|
||
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Purchases of property, plant and equipment
|
(40.6
|
)
|
|
(25.9
|
)
|
||
Other
|
0.6
|
|
|
0.9
|
|
||
Net cash used in investing activities
|
(40.0
|
)
|
|
(25.0
|
)
|
||
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Proceeds from borrowings under long-term debt obligations
|
732.2
|
|
|
718.9
|
|
||
Repayments of borrowings under long-term debt obligations
|
(697.8
|
)
|
|
(745.9
|
)
|
||
Proceeds from exercise of stock options
|
2.6
|
|
|
1.9
|
|
||
Treasury stock repurchased
|
(3.0
|
)
|
|
(44.1
|
)
|
||
Payments of deferred financing costs
|
—
|
|
|
(0.4
|
)
|
||
Other
|
(3.4
|
)
|
|
(2.7
|
)
|
||
Net cash provided by (used in) financing activities
|
30.6
|
|
|
(72.3
|
)
|
||
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
(1.5
|
)
|
|
(5.1
|
)
|
||
Decrease in cash and cash equivalents
|
(9.3
|
)
|
|
(27.2
|
)
|
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CASH AND CASH EQUIVALENTS, beginning of period
|
41.9
|
|
|
65.7
|
|
||
CASH AND CASH EQUIVALENTS, end of period
|
$
|
32.6
|
|
|
$
|
38.5
|
|
|
|
|
|
||||
Supplemental cash flow information:
|
|
|
|
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|
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Cash paid during the period for:
|
|
|
|
|
|
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Interest
|
$
|
46.7
|
|
|
$
|
43.0
|
|
Income taxes, net of refunds
|
17.9
|
|
|
37.1
|
|
|
June 30,
|
|
December 31,
|
||||
(in millions)
|
2018
|
|
2017
|
||||
Finished goods
|
$
|
149.1
|
|
|
$
|
121.8
|
|
Work-in-process
|
10.8
|
|
|
11.5
|
|
||
Raw materials and supplies
|
64.5
|
|
|
49.7
|
|
||
|
$
|
224.4
|
|
|
$
|
183.0
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
(in millions)
|
As Reported
|
|
Balances Without Adoption of Topic 606
|
|
Effect of Change
Higher/(Lower)
|
|
As Reported
|
|
Balances Without Adoption of Topic 606
|
|
Effect of Change
Higher/(Lower)
|
||||||||||||
Statement of Income
|
|
|
|
|
|
|
|
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|
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|
||||||||||||
Net sales
|
$
|
669.7
|
|
|
$
|
664.2
|
|
|
$
|
5.5
|
|
|
$
|
1,317.7
|
|
|
$
|
1,306.9
|
|
|
$
|
10.8
|
|
Royalty income, net of royalty expense
|
—
|
|
|
5.5
|
|
|
(5.5
|
)
|
|
—
|
|
|
10.8
|
|
|
(10.8
|
)
|
|
June 30, 2018
|
||||||||||
(in millions)
|
As Reported
|
|
Balances Without Adoption of Topic 606
|
|
Effect of Change
Higher/(Lower)
|
||||||
Balance Sheet
|
|
|
|
|
|
||||||
Assets
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
$
|
69.8
|
|
|
$
|
68.6
|
|
|
$
|
1.2
|
|
Deferred income taxes
|
23.6
|
|
|
22.7
|
|
|
0.9
|
|
|||
Other non-current assets
|
236.2
|
|
|
235.3
|
|
|
0.9
|
|
|||
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Accrued expenses and other current liabilities
|
$
|
227.2
|
|
|
$
|
224.7
|
|
|
$
|
2.5
|
|
Other non-current liabilities
|
209.0
|
|
|
206.2
|
|
|
2.8
|
|
|||
|
|
|
|
|
|
||||||
Stockholders' Equity
|
|
|
|
|
|
||||||
Total stockholders' equity
|
$
|
158.0
|
|
|
$
|
160.3
|
|
|
$
|
(2.3
|
)
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale
|
$
|
494.3
|
|
|
$
|
108.5
|
|
|
$
|
602.8
|
|
|
$
|
948.3
|
|
|
$
|
242.7
|
|
|
$
|
1,191.0
|
|
Direct
|
33.5
|
|
|
33.4
|
|
|
66.9
|
|
|
64.5
|
|
|
62.2
|
|
|
126.7
|
|
||||||
Net sales
|
$
|
527.8
|
|
|
$
|
141.9
|
|
|
$
|
669.7
|
|
|
$
|
1,012.8
|
|
|
$
|
304.9
|
|
|
$
|
1,317.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Product
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Bedding products
|
$
|
497.4
|
|
|
$
|
112.8
|
|
|
$
|
610.2
|
|
|
$
|
949.7
|
|
|
$
|
246.0
|
|
|
$
|
1,195.7
|
|
Other products
|
30.4
|
|
|
29.1
|
|
|
59.5
|
|
|
63.1
|
|
|
58.9
|
|
|
122.0
|
|
||||||
Net sales
|
$
|
527.8
|
|
|
$
|
141.9
|
|
|
$
|
669.7
|
|
|
$
|
1,012.8
|
|
|
$
|
304.9
|
|
|
$
|
1,317.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Geographical region
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
477.7
|
|
|
$
|
—
|
|
|
$
|
477.7
|
|
|
$
|
917.9
|
|
|
$
|
—
|
|
|
$
|
917.9
|
|
Canada
|
50.1
|
|
|
—
|
|
|
50.1
|
|
|
94.9
|
|
|
—
|
|
|
94.9
|
|
||||||
International
|
—
|
|
|
141.9
|
|
|
141.9
|
|
|
—
|
|
|
304.9
|
|
|
304.9
|
|
||||||
Net sales
|
$
|
527.8
|
|
|
$
|
141.9
|
|
|
$
|
669.7
|
|
|
$
|
1,012.8
|
|
|
$
|
304.9
|
|
|
$
|
1,317.7
|
|
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
||||||
Balance as of December 31, 2017
|
$
|
576.6
|
|
|
$
|
156.5
|
|
|
$
|
733.1
|
|
Foreign currency translation and other
|
(3.2
|
)
|
|
(2.8
|
)
|
|
(6.0
|
)
|
|||
Balance as of June 30, 2018
|
$
|
573.4
|
|
|
$
|
153.7
|
|
|
$
|
727.1
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
|
||||||||
(in millions, except percentages)
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Maturity Date
|
||||
2016 Credit Agreement
|
|
|
|
|
|
|
|
|
|
||||
Term A Facility
|
$
|
540.0
|
|
|
(1)
|
|
$
|
555.0
|
|
|
(2)
|
|
April 6, 2021
|
Revolver
|
—
|
|
|
(1)
|
|
—
|
|
|
(2)
|
|
April 6, 2021
|
||
2026 Senior Notes
|
600.0
|
|
|
5.500%
|
|
600.0
|
|
|
5.500%
|
|
June 15, 2026
|
||
2023 Senior Notes
|
450.0
|
|
|
5.625%
|
|
450.0
|
|
|
5.625%
|
|
October 15, 2023
|
||
Securitized debt
|
92.4
|
|
|
(3)
|
|
49.0
|
|
|
(3)
|
|
April 12, 2019
|
||
Capital lease obligations
(4)
|
69.2
|
|
|
|
|
71.8
|
|
|
|
|
Various
|
||
Other
|
41.0
|
|
|
|
|
36.7
|
|
|
|
|
Various
|
||
Total debt
|
1,792.6
|
|
|
|
|
1,762.5
|
|
|
|
|
|
||
Less: deferred financing costs
|
(8.5
|
)
|
|
|
|
(9.4
|
)
|
|
|
|
|
||
Total debt, net
|
1,784.1
|
|
|
|
|
1,753.1
|
|
|
|
|
|
||
Less: current portion
|
(77.3
|
)
|
|
|
|
(72.4
|
)
|
|
|
|
|
||
Total long-term debt, net
|
$
|
1,706.8
|
|
|
|
|
$
|
1,680.7
|
|
|
|
|
|
(1)
|
Interest at LIBOR plus applicable margin of 2.00% as of June 30, 2018
|
(2)
|
Interest at LIBOR plus applicable margin of 1.75% as of December 31, 2017.
|
(3)
|
Interest at one month LIBOR index plus 80 basis points.
|
(4)
|
Capital lease obligations are a non-cash financing activity.
|
|
|
Fair Value
|
||||||
(in millions)
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
2023 Senior Notes
|
|
$
|
451.1
|
|
|
$
|
470.9
|
|
2026 Senior Notes
|
|
581.5
|
|
|
618.1
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Foreign Currency Translation
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
(67.8
|
)
|
|
$
|
(111.1
|
)
|
|
$
|
(72.8
|
)
|
|
$
|
(119.9
|
)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments
(1)
|
(16.1
|
)
|
|
9.3
|
|
|
(11.1
|
)
|
|
18.1
|
|
||||
Balance at end of period
|
$
|
(83.9
|
)
|
|
$
|
(101.8
|
)
|
|
$
|
(83.9
|
)
|
|
$
|
(101.8
|
)
|
|
|
|
|
|
|
|
|
||||||||
Pensions
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
(3.3
|
)
|
|
$
|
(2.2
|
)
|
|
$
|
(2.7
|
)
|
|
$
|
(2.2
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Net change from period revaluations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Tax expense
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total other comprehensive income before reclassifications, net of tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net amount reclassified to earnings
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
U.S. tax reform - reclassification to retained earnings upon adoption of ASU No. 2018-02
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
||||
Tax benefit
(2)
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
||||
Total amount reclassified from accumulated other comprehensive loss, net of tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
Total other comprehensive loss
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
||||
Balance at end of period
|
$
|
(3.3
|
)
|
|
$
|
(2.2
|
)
|
|
$
|
(3.3
|
)
|
|
$
|
(2.2
|
)
|
|
|
|
|
|
|
|
|
||||||||
Foreign Exchange Forward Contracts
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Net change from period revaluations
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.4
|
)
|
||||
Tax benefit
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
||||
Total other comprehensive loss before reclassifications, net of tax
|
$
|
—
|
|
|
$
|
(0.1
|
)
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
Net amount reclassified to earnings
(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
||||
Tax benefit
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
||||
Total amount reclassified from accumulated other comprehensive loss, net of tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
Total other comprehensive loss
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.6
|
)
|
||||
Balance at end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
In 2018 and 2017, 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 Condensed Consolidated Statements of Income.
|
(3)
|
This amount was included in cost of sales in the accompanying Condensed Consolidated Statements of Income.
|
(in millions)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Advertising
|
$
|
47.9
|
|
|
$
|
44.5
|
|
Wages and benefits
|
43.4
|
|
|
57.6
|
|
||
Sales returns
|
22.4
|
|
|
19.6
|
|
||
Warranty
|
16.0
|
|
|
16.7
|
|
||
Rebates
|
7.5
|
|
|
11.4
|
|
||
Other
|
90.0
|
|
|
84.4
|
|
||
|
$
|
227.2
|
|
|
$
|
234.2
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
PRSU expense (benefit)
|
$
|
0.7
|
|
|
$
|
1.2
|
|
|
$
|
1.5
|
|
|
$
|
(8.1
|
)
|
Option expense
|
1.9
|
|
|
1.8
|
|
|
3.8
|
|
|
3.8
|
|
||||
RSU/DSU expense
|
4.2
|
|
|
3.0
|
|
|
7.8
|
|
|
6.9
|
|
||||
Total stock-based compensation expense
|
$
|
6.8
|
|
|
$
|
6.0
|
|
|
$
|
13.1
|
|
|
$
|
2.6
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions, except per common share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
22.8
|
|
|
$
|
24.5
|
|
|
$
|
45.9
|
|
|
$
|
58.4
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|||||
Denominator for basic earnings per common share-weighted average shares
|
54.4
|
|
|
53.9
|
|
|
54.4
|
|
|
53.9
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||||||
Employee stock-based compensation
|
0.5
|
|
|
0.6
|
|
|
0.6
|
|
|
0.7
|
|
||||
Denominator for diluted earnings per common share-adjusted weighted average shares
|
54.9
|
|
|
54.5
|
|
|
55.0
|
|
|
54.6
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic earnings per common share
|
$
|
0.42
|
|
|
$
|
0.45
|
|
|
$
|
0.84
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per common share
|
$
|
0.42
|
|
|
$
|
0.45
|
|
|
$
|
0.83
|
|
|
$
|
1.07
|
|
(in millions)
|
June 30, 2018
|
|
December 31, 2017
|
||||
North America
|
$
|
2,852.7
|
|
|
$
|
2,759.8
|
|
International
|
601.6
|
|
|
609.4
|
|
||
Corporate
|
603.3
|
|
|
614.9
|
|
||
Inter-segment eliminations
|
(1,292.0
|
)
|
|
(1,290.1
|
)
|
||
Total assets
|
$
|
2,765.6
|
|
|
$
|
2,694.0
|
|
(in millions)
|
June 30, 2018
|
|
December 31, 2017
|
||||
North America
|
$
|
326.1
|
|
|
$
|
320.0
|
|
International
|
51.8
|
|
|
54.7
|
|
||
Corporate
|
55.2
|
|
|
60.4
|
|
||
Total property, plant and equipment, net
|
$
|
433.1
|
|
|
$
|
435.1
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
527.8
|
|
|
$
|
141.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
669.7
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
0.8
|
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
203.4
|
|
|
72.7
|
|
|
—
|
|
|
—
|
|
|
276.1
|
|
|||||
Operating income (loss)
|
64.2
|
|
|
18.4
|
|
|
(27.1
|
)
|
|
—
|
|
|
55.5
|
|
|||||
Income (loss) before income taxes
|
63.4
|
|
|
12.7
|
|
|
(46.3
|
)
|
|
—
|
|
|
29.8
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
13.8
|
|
|
$
|
3.4
|
|
|
$
|
10.7
|
|
|
$
|
—
|
|
|
$
|
27.9
|
|
Capital expenditures
|
14.1
|
|
|
3.2
|
|
|
1.5
|
|
|
—
|
|
|
18.8
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
525.4
|
|
|
$
|
133.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
659.3
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
1.3
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
(1.5
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
1.2
|
|
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
198.9
|
|
|
69.7
|
|
|
—
|
|
|
—
|
|
|
268.6
|
|
|||||
Operating income (loss)
|
55.8
|
|
|
26.3
|
|
|
(25.5
|
)
|
|
—
|
|
|
56.6
|
|
|||||
Income (loss) before income taxes
|
54.3
|
|
|
24.9
|
|
|
(44.4
|
)
|
|
—
|
|
|
34.8
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
12.9
|
|
|
$
|
3.6
|
|
|
$
|
9.6
|
|
|
$
|
—
|
|
|
$
|
26.1
|
|
Capital expenditures
|
5.1
|
|
|
2.1
|
|
|
5.8
|
|
|
—
|
|
|
13.0
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
1,012.8
|
|
|
$
|
304.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,317.7
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
1.2
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
(1.4
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
1.3
|
|
|
(1.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
387.4
|
|
|
156.6
|
|
|
—
|
|
|
—
|
|
|
544.0
|
|
|||||
Operating income (loss)
|
118.1
|
|
|
45.4
|
|
|
(54.1
|
)
|
|
—
|
|
|
109.4
|
|
|||||
Income (loss) before income taxes
|
115.2
|
|
|
39.2
|
|
|
(91.8
|
)
|
|
—
|
|
|
62.6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
27.2
|
|
|
$
|
7.1
|
|
|
$
|
20.8
|
|
|
$
|
—
|
|
|
$
|
55.1
|
|
Capital expenditures
|
30.9
|
|
|
6.1
|
|
|
3.6
|
|
|
—
|
|
|
40.6
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
1,107.7
|
|
|
$
|
273.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,381.4
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
2.2
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
(2.5
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
2.9
|
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
413.4
|
|
|
141.8
|
|
|
—
|
|
|
—
|
|
|
555.2
|
|
|||||
Operating income (loss)
|
107.1
|
|
|
52.2
|
|
|
(43.2
|
)
|
|
—
|
|
|
116.1
|
|
|||||
Income (loss) before income taxes
|
113.7
|
|
|
48.6
|
|
|
(80.9
|
)
|
|
—
|
|
|
81.4
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
25.2
|
|
|
$
|
7.3
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
42.3
|
|
Capital expenditures
|
13.7
|
|
|
3.6
|
|
|
8.6
|
|
|
—
|
|
|
25.9
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
June 30, 2018
|
|
December 31, 2017
|
||||
United States
|
$
|
360.7
|
|
|
$
|
373.2
|
|
Canada
|
20.6
|
|
|
7.2
|
|
||
Other International
|
51.8
|
|
|
54.7
|
|
||
Total property, plant and equipment, net
|
$
|
433.1
|
|
|
$
|
435.1
|
|
Total International
|
$
|
72.4
|
|
|
$
|
61.9
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
United States
|
$
|
477.7
|
|
|
$
|
471.2
|
|
|
$
|
917.9
|
|
|
$
|
1,004.7
|
|
Canada
|
50.1
|
|
|
54.2
|
|
|
94.9
|
|
|
103.0
|
|
||||
Other International
|
141.9
|
|
|
133.9
|
|
|
304.9
|
|
|
273.7
|
|
||||
Total net sales
|
$
|
669.7
|
|
|
$
|
659.3
|
|
|
$
|
1,317.7
|
|
|
$
|
1,381.4
|
|
Total International
|
$
|
192.0
|
|
|
$
|
188.1
|
|
|
$
|
399.8
|
|
|
$
|
376.7
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
482.7
|
|
|
$
|
202.9
|
|
|
$
|
(15.9
|
)
|
|
$
|
669.7
|
|
Cost of sales
|
—
|
|
|
289.4
|
|
|
120.1
|
|
|
(15.9
|
)
|
|
393.6
|
|
|||||
Gross profit
|
—
|
|
|
193.3
|
|
|
82.8
|
|
|
—
|
|
|
276.1
|
|
|||||
Selling and marketing expenses
|
2.1
|
|
|
103.5
|
|
|
51.8
|
|
|
—
|
|
|
157.4
|
|
|||||
General, administrative and other expenses
|
5.0
|
|
|
45.6
|
|
|
16.4
|
|
|
—
|
|
|
67.0
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(3.8
|
)
|
|
—
|
|
|
(3.8
|
)
|
|||||
Operating (loss) income
|
(7.1
|
)
|
|
44.2
|
|
|
18.4
|
|
|
—
|
|
|
55.5
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third party interest expense, net
|
14.9
|
|
|
7.5
|
|
|
2.1
|
|
|
—
|
|
|
24.5
|
|
|||||
Intercompany interest (income) expense, net
|
(1.7
|
)
|
|
2.1
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|||||
Interest expense, net
|
13.2
|
|
|
9.6
|
|
|
1.7
|
|
|
—
|
|
|
24.5
|
|
|||||
Other (income) expense, net
|
—
|
|
|
(3.5
|
)
|
|
4.7
|
|
|
—
|
|
|
1.2
|
|
|||||
Total other expense, net
|
13.2
|
|
|
6.1
|
|
|
6.4
|
|
|
—
|
|
|
25.7
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
37.2
|
|
|
7.8
|
|
|
—
|
|
|
(45.0
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes
|
16.9
|
|
|
45.9
|
|
|
12.0
|
|
|
(45.0
|
)
|
|
29.8
|
|
|||||
Income tax benefit (provision)
|
4.3
|
|
|
(8.7
|
)
|
|
(4.2
|
)
|
|
—
|
|
|
(8.6
|
)
|
|||||
Net income before non-controlling interests
|
21.2
|
|
|
37.2
|
|
|
7.8
|
|
|
(45.0
|
)
|
|
21.2
|
|
|||||
Less: Net loss attributable to non-controlling interests
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
|
1.6
|
|
|
(1.6
|
)
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
22.8
|
|
|
$
|
37.2
|
|
|
$
|
9.4
|
|
|
$
|
(46.6
|
)
|
|
$
|
22.8
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss) attributable to Tempur Sealy International, Inc.
|
$
|
6.7
|
|
|
$
|
36.9
|
|
|
$
|
(6.7
|
)
|
|
$
|
(30.2
|
)
|
|
$
|
6.7
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
472.4
|
|
|
$
|
205.7
|
|
|
$
|
(18.8
|
)
|
|
$
|
659.3
|
|
Cost of sales
|
—
|
|
|
290.2
|
|
|
119.3
|
|
|
(18.8
|
)
|
|
390.7
|
|
|||||
Gross profit
|
—
|
|
|
182.2
|
|
|
86.4
|
|
|
—
|
|
|
268.6
|
|
|||||
Selling and marketing expenses
|
1.4
|
|
|
102.3
|
|
|
48.6
|
|
|
—
|
|
|
152.3
|
|
|||||
General, administrative and other expenses
|
4.9
|
|
|
45.5
|
|
|
18.6
|
|
|
—
|
|
|
69.0
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|
—
|
|
|
(4.4
|
)
|
|||||
Royalty income, net of royalty expense
|
—
|
|
|
(4.9
|
)
|
|
—
|
|
|
—
|
|
|
(4.9
|
)
|
|||||
Operating (loss) income
|
(6.3
|
)
|
|
39.3
|
|
|
23.6
|
|
|
—
|
|
|
56.6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense (income), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Third party interest expense, net
|
14.9
|
|
|
6.4
|
|
|
0.8
|
|
|
—
|
|
|
22.1
|
|
|||||
Intercompany interest (income) expense, net
|
(1.2
|
)
|
|
3.0
|
|
|
(1.8
|
)
|
|
—
|
|
|
—
|
|
|||||
Interest expense (income), net
|
13.7
|
|
|
9.4
|
|
|
(1.0
|
)
|
|
—
|
|
|
22.1
|
|
|||||
Other expense (income), net
|
—
|
|
|
0.2
|
|
|
(0.5
|
)
|
|
—
|
|
|
(0.3
|
)
|
|||||
Total other expense (income), net
|
13.7
|
|
|
9.6
|
|
|
(1.5
|
)
|
|
—
|
|
|
21.8
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
34.7
|
|
|
16.3
|
|
|
—
|
|
|
(51.0
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes
|
14.7
|
|
|
46.0
|
|
|
25.1
|
|
|
(51.0
|
)
|
|
34.8
|
|
|||||
Income tax benefit (provision)
|
7.0
|
|
|
(11.3
|
)
|
|
(8.8
|
)
|
|
—
|
|
|
(13.1
|
)
|
|||||
Net income before non-controlling interests
|
21.7
|
|
|
34.7
|
|
|
16.3
|
|
|
(51.0
|
)
|
|
21.7
|
|
|||||
Less: Net loss attributable to non-controlling interests
|
(2.8
|
)
|
|
—
|
|
|
(2.8
|
)
|
|
2.8
|
|
|
(2.8
|
)
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
24.5
|
|
|
$
|
34.7
|
|
|
$
|
19.1
|
|
|
$
|
(53.8
|
)
|
|
$
|
24.5
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
33.7
|
|
|
$
|
34.5
|
|
|
$
|
28.5
|
|
|
$
|
(63.0
|
)
|
|
$
|
33.7
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|||||||||||
Net sales
|
$
|
—
|
|
|
$
|
923.3
|
|
|
$
|
427.7
|
|
|
$
|
(33.3
|
)
|
|
$
|
1,317.7
|
|
|
Cost of sales
|
—
|
|
|
555.8
|
|
|
251.2
|
|
|
(33.3
|
)
|
|
773.7
|
|
||||||
Gross profit
|
—
|
|
|
367.5
|
|
|
176.5
|
|
|
—
|
|
|
544.0
|
|
||||||
Selling and marketing expenses
|
4.0
|
|
|
196.6
|
|
|
105.7
|
|
|
—
|
|
|
306.3
|
|
||||||
General, administrative and other expenses
|
9.7
|
|
|
93.0
|
|
|
33.3
|
|
|
—
|
|
|
136.0
|
|
||||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(7.7
|
)
|
|
—
|
|
|
(7.7
|
)
|
||||||
Operating (loss) income
|
(13.7
|
)
|
|
77.9
|
|
|
45.2
|
|
|
—
|
|
|
109.4
|
|
||||||
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Third party interest expense, net
|
29.9
|
|
|
14.5
|
|
|
3.0
|
|
|
—
|
|
|
47.4
|
|
||||||
Intercompany interest (income) expense, net
|
(3.6
|
)
|
|
3.9
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
||||||
Interest expense, net
|
26.3
|
|
|
18.4
|
|
|
2.7
|
|
|
—
|
|
|
47.4
|
|
||||||
Other (income) expense, net
|
—
|
|
|
(5.8
|
)
|
|
5.2
|
|
|
—
|
|
—
|
|
(0.6
|
)
|
|||||
Total other expense, net
|
26.3
|
|
|
12.6
|
|
|
7.9
|
|
|
—
|
|
|
46.8
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from equity investees
|
76.3
|
|
|
26.8
|
|
|
—
|
|
|
(103.1
|
)
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income before income taxes
|
36.3
|
|
|
92.1
|
|
|
37.3
|
|
|
(103.1
|
)
|
|
62.6
|
|
||||||
Income tax benefit (provision)
|
7.7
|
|
|
(15.8
|
)
|
|
(10.5
|
)
|
|
—
|
|
|
(18.6
|
)
|
||||||
Net income before non-controlling interests
|
44.0
|
|
|
76.3
|
|
|
26.8
|
|
|
(103.1
|
)
|
|
44.0
|
|
||||||
Less: Net loss attributable to non-controlling interests
|
$
|
(1.9
|
)
|
|
$
|
—
|
|
|
$
|
(1.9
|
)
|
|
$
|
1.9
|
|
|
$
|
(1.9
|
)
|
|
Net income attributable to Tempur Sealy International, Inc.
|
45.9
|
|
|
76.3
|
|
|
28.7
|
|
|
(105.0
|
)
|
|
45.9
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
34.2
|
|
|
$
|
75.4
|
|
|
$
|
17.6
|
|
|
$
|
(93.0
|
)
|
|
$
|
34.2
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
1,002.2
|
|
|
$
|
418.4
|
|
|
$
|
(39.2
|
)
|
|
$
|
1,381.4
|
|
Cost of sales
|
—
|
|
|
620.5
|
|
|
244.9
|
|
|
(39.2
|
)
|
|
826.2
|
|
|||||
Gross profit
|
—
|
|
|
381.7
|
|
|
173.5
|
|
|
—
|
|
|
555.2
|
|
|||||
Selling and marketing expenses
|
2.8
|
|
|
207.2
|
|
|
96.0
|
|
|
—
|
|
|
306.0
|
|
|||||
General, administrative and other expenses
|
8.9
|
|
|
89.8
|
|
|
36.8
|
|
|
—
|
|
|
135.5
|
|
|||||
Customer termination charges, net
|
(8.4
|
)
|
|
21.8
|
|
|
1.0
|
|
|
—
|
|
|
14.4
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(7.1
|
)
|
|
—
|
|
|
(7.1
|
)
|
|||||
Royalty income, net of royalty expense
|
—
|
|
|
(9.7
|
)
|
|
—
|
|
|
—
|
|
|
(9.7
|
)
|
|||||
Operating (loss) income
|
(3.3
|
)
|
|
72.6
|
|
|
46.8
|
|
|
—
|
|
|
116.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Third party interest expense, net
|
29.7
|
|
|
12.9
|
|
|
1.6
|
|
|
—
|
|
|
44.2
|
|
|||||
Intercompany interest (income) expense, net
|
(2.4
|
)
|
|
2.8
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|||||
Interest expense, net
|
27.3
|
|
|
15.7
|
|
|
1.2
|
|
|
—
|
|
|
44.2
|
|
|||||
Other income, net
|
—
|
|
|
(9.2
|
)
|
|
(0.3
|
)
|
|
—
|
|
|
(9.5
|
)
|
|||||
Total other expense, net
|
27.3
|
|
|
6.5
|
|
|
0.9
|
|
|
—
|
|
|
34.7
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
75.3
|
|
|
31.9
|
|
|
—
|
|
|
(107.2
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before income taxes
|
44.7
|
|
|
98.0
|
|
|
45.9
|
|
|
(107.2
|
)
|
|
81.4
|
|
|||||
Income tax benefit (provision)
|
9.0
|
|
|
(22.7
|
)
|
|
(14.0
|
)
|
|
—
|
|
|
(27.7
|
)
|
|||||
Net income before non-controlling interests
|
53.7
|
|
|
75.3
|
|
|
31.9
|
|
|
(107.2
|
)
|
|
53.7
|
|
|||||
Less: Net loss attributable to non-controlling interests
|
(4.7
|
)
|
|
—
|
|
|
(4.7
|
)
|
|
4.7
|
|
|
(4.7
|
)
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
58.4
|
|
|
$
|
75.3
|
|
|
$
|
36.6
|
|
|
$
|
(111.9
|
)
|
|
$
|
58.4
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
75.9
|
|
|
$
|
70.6
|
|
|
$
|
58.8
|
|
|
$
|
(129.4
|
)
|
|
$
|
75.9
|
|
•
|
an overview of our business;
|
•
|
factors impacting results of operations;
|
•
|
results of operations including our net sales and costs in the periods presented as well as changes between periods;
|
•
|
expected sources of liquidity for future operations; and
|
•
|
our use of certain non-GAAP financial measures.
|
•
|
Total net sales
increased
1.6%
to
$669.7 million
from
$659.3 million
in the
second
quarter of
2017
. On a constant currency basis, which is a non-GAAP financial measure, total net sales
increased
1.2%
, with an
increase
of
0.1%
in the North America business segment and an
increase
of
5.4%
in the International business segment.
|
•
|
Gross margin was
41.2%
as compared to
40.7%
in the
second
quarter of
2017
.
|
•
|
Operating income
decreased
1.9%
to
$55.5 million
as compared to
$56.6 million
in the
second
quarter of
2017
. Operating income in the
second
quarter of 2018 included $6.9 million of restructuring charges. Adjusted operating income, which is a non-GAAP financial measure,
increased
10.2%
to
$62.4 million
as compared to operating income of
$56.6 million
in the
second
quarter of
2017
. The Company had no adjustments to operating income in the
second
quarter of
2017
.
|
•
|
Net income
decreased
6.9%
to
$22.8 million
as compared to
$24.5 million
in the
second
quarter of
2017
. Adjusted net income, which is a non-GAAP financial measure,
increased
16.3%
to
$28.5 million
as compared to net income of
$24.5 million
in the
second
quarter of
2017
. The Company had no adjustments to net income in the
second
quarter of
2017
.
|
•
|
Earnings before interest, tax, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure,
decreased
2.3%
to
$83.8 million
as compared to
$85.8 million
for the
second
quarter of
2017
. Adjusted EBITDA, which is a non-GAAP financial measure,
increased
5.7%
to
$90.7 million
as compared to EBITDA of
$85.8 million
in the
second
quarter of
2017
. The Company had no adjustments to EBITDA in the
second
quarter of
2017
.
|
•
|
Earnings per diluted share ("EPS")
decreased
6.7%
to
$0.42
as compared to
$0.45
in the
second
quarter of
2017
. Adjusted EPS, which is a non-GAAP financial measure,
increased
15.6%
to
$0.52
as compared to EPS of
$0.45
in the
second
quarter of
2017
. The Company no adjustments to EPS in the
second
quarter of
2017
.
|
|
Three Months Ended June 30,
|
||||||||||||
(in millions, except percentages and per share amounts)
|
2018
|
|
2017
|
||||||||||
Net sales
|
$
|
669.7
|
|
|
100.0
|
%
|
|
$
|
659.3
|
|
|
100.0
|
%
|
Cost of sales
|
393.6
|
|
|
58.8
|
|
|
390.7
|
|
|
59.3
|
|
||
Gross profit
|
276.1
|
|
|
41.2
|
|
|
268.6
|
|
|
40.7
|
|
||
Selling and marketing expenses
|
157.4
|
|
|
23.5
|
|
|
152.3
|
|
|
23.1
|
|
||
General, administrative and other expenses
|
67.0
|
|
|
10.0
|
|
|
69.0
|
|
|
10.5
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(3.8
|
)
|
|
(0.6
|
)
|
|
(4.4
|
)
|
|
(0.7
|
)
|
||
Royalty income, net of royalty expense
|
—
|
|
|
—
|
|
|
(4.9
|
)
|
|
(0.8
|
)
|
||
Operating income
|
55.5
|
|
|
8.3
|
|
|
56.6
|
|
|
8.6
|
|
||
|
|
|
|
|
|
|
|
||||||
Other expense, net:
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
24.5
|
|
|
3.7
|
|
|
22.1
|
|
|
3.3
|
|
||
Other expense (income), net
|
1.2
|
|
|
0.2
|
|
|
(0.3
|
)
|
|
—
|
|
||
Total other expense, net
|
25.7
|
|
|
3.8
|
|
|
21.8
|
|
|
3.3
|
|
||
|
|
|
|
|
|
|
|
||||||
Income before income taxes
|
29.8
|
|
|
4.4
|
|
|
34.8
|
|
|
5.3
|
|
||
Income tax provision
|
(8.6
|
)
|
|
(1.3
|
)
|
|
(13.1
|
)
|
|
(2.0
|
)
|
||
Net income before non-controlling interests
|
21.2
|
|
|
3.2
|
|
|
21.7
|
|
|
3.3
|
|
||
Less: Net loss attributable to non-controlling interests
|
(1.6
|
)
|
|
(0.2
|
)
|
|
(2.8
|
)
|
|
(0.4
|
)
|
||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
22.8
|
|
|
3.4
|
%
|
|
$
|
24.5
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
Basic
|
$
|
0.42
|
|
|
|
|
$
|
0.45
|
|
|
|
||
Diluted
|
$
|
0.42
|
|
|
|
|
$
|
0.45
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||
Basic
|
54.4
|
|
|
|
|
53.9
|
|
|
|
||||
Diluted
|
54.9
|
|
|
|
|
54.5
|
|
|
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
||||||||||||||||||
Net sales by channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale channel
|
$
|
602.8
|
|
|
$
|
604.4
|
|
|
$
|
494.3
|
|
|
$
|
496.0
|
|
|
$
|
108.5
|
|
|
$
|
108.4
|
|
Direct channel
|
66.9
|
|
|
54.9
|
|
|
33.5
|
|
|
29.4
|
|
|
33.4
|
|
|
25.5
|
|
||||||
Total net sales
|
$
|
669.7
|
|
|
$
|
659.3
|
|
|
$
|
527.8
|
|
|
$
|
525.4
|
|
|
$
|
141.9
|
|
|
$
|
133.9
|
|
•
|
North America
net sales
increased
$2.4 million
, or
0.5%
. Net sales in the Wholesale channel
decreased
$1.7 million
, or
0.3%
. Net sales in our Direct channel increased
$4.1 million
, or
13.9%
, driven by growth from expanded retail stores, offset by a decline in web and call center sales. Canada net sales
decreased
11.1%
on a constant currency basis, which is primarily due to the bankruptcy of a major customer.
|
•
|
International
net sales
increased
$8.0 million
, or
6.0%
. On a constant currency basis, International net sales
increased
5.4%
, driven primarily by Direct channel growth. Net sales in the Wholesale channel decreased
2.9%
on a constant currency basis. Net sales in the Direct channel increased
40.4%
on a constant currency basis across several regions.
|
|
|
Three Months Ended June 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
203.4
|
|
|
38.5
|
%
|
|
$
|
198.9
|
|
|
37.9
|
%
|
|
0.6
|
%
|
International
|
|
72.7
|
|
|
51.2
|
%
|
|
69.7
|
|
|
52.1
|
%
|
|
(0.9
|
)%
|
||
Consolidated gross margin
|
|
$
|
276.1
|
|
|
41.2
|
%
|
|
$
|
268.6
|
|
|
40.7
|
%
|
|
0.5
|
%
|
•
|
North America
gross margin
improved
60
basis points. The improvement in gross margin was primarily driven by operational improvements of 150 basis points, increased pricing of 80 basis points and favorable brand mix of 70 basis points. These were partially offset by commodity cost inflation of 240 basis points and incremental costs from our product launches.
|
•
|
International
gross margin
declined
90
basis points. The decline in gross margin was driven primarily by commodity cost inflation of 80 basis points, unfavorable foreign exchange of 80 basis points and unfavorable mix. These were partially offset by the change in classification of royalty income due to the adoption of the new revenue recognition accounting standard of 120 basis points.
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
|
Corporate
|
||||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Advertising expenses
|
$
|
66.9
|
|
|
$
|
70.8
|
|
|
$
|
58.4
|
|
|
$
|
62.2
|
|
|
$
|
8.5
|
|
|
$
|
8.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other selling and marketing expenses
|
90.5
|
|
|
81.5
|
|
|
51.5
|
|
|
50.3
|
|
|
36.8
|
|
|
29.8
|
|
|
2.2
|
|
|
1.4
|
|
||||||||
General, administrative and other expenses
|
67.0
|
|
|
69.0
|
|
|
29.3
|
|
|
32.7
|
|
|
12.8
|
|
|
12.2
|
|
|
24.9
|
|
|
24.1
|
|
||||||||
Total operating expenses
|
$
|
224.4
|
|
|
$
|
221.3
|
|
|
$
|
139.2
|
|
|
$
|
145.2
|
|
|
$
|
58.1
|
|
|
$
|
50.6
|
|
|
$
|
27.1
|
|
|
$
|
25.5
|
|
•
|
North America
operating expenses
decreased
$6.0 million
, or
4.1%
, and
decreased
120
basis points as a percentage of net sales. The decrease in operating expenses was driven by improved operating expense leverage, primarily a result of decreased investments in our advertising programs.
|
•
|
International
operating expenses
increased
$7.5 million
, or
14.8%
, and
increased
310
basis points as a percentage of net sales. In the second quarter of 2018, we recorded $4.9 million of costs associated with International simplification efforts, including headcount reduction, professional fees and store closures. Additionally, the increase in operating expenses is driven by other selling and marketing expense, primarily driven by unfavorable foreign exchange.
|
•
|
Corporate
operating expenses
increased
$1.6 million
, or
6.3%
. In the second quarter of 2018, we recorded $2.0 million of professional fees costs associated with our International simplification efforts.
|
|
|
Three Months Ended June 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Operating Income
|
|
Operating Margin
|
|
Operating Income
|
|
Operating Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
64.2
|
|
|
12.2
|
%
|
|
$
|
55.8
|
|
|
10.6
|
%
|
|
1.6
|
%
|
International
|
|
18.4
|
|
|
13.0
|
%
|
|
26.3
|
|
|
19.6
|
%
|
|
(6.6
|
)%
|
||
|
|
82.6
|
|
|
|
|
82.1
|
|
|
|
|
|
|||||
Corporate expenses
|
|
(27.1
|
)
|
|
|
|
(25.5
|
)
|
|
|
|
|
|||||
Total operating income
|
|
$
|
55.5
|
|
|
8.3
|
%
|
|
$
|
56.6
|
|
|
8.6
|
%
|
|
(0.3
|
)%
|
•
|
North America
operating income
increased
$8.4 million
and operating margin
improved
160
basis points. The improvement in operating margin was primarily driven by favorable operating expense leverage of 160 basis points and the improvement in gross margin.
|
•
|
International
operating income
decreased
$7.9 million
and operating margin
declined
660
basis points. In the second quarter of 2018, we recognized $4.9 million of costs associated with our International simplification efforts, including headcount reduction, professional fees and store closures. Additionally, the decline in operating margin was driven by the change in classification of royalty income due to the adoption of the new revenue recognition accounting standard and the decline in gross margin.
|
•
|
Corporate
operating expenses
increased
$1.6 million
, which negatively impacted our consolidated operating margin by 20 basis points. The increase in operating expenses is primarily driven by $2.0 million of professional fees incurred as a result of our International simplification efforts.
|
|
Three Months Ended June 30,
|
|||||||||
(in millions, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Interest expense, net
|
$
|
24.5
|
|
|
$
|
22.1
|
|
|
10.9
|
%
|
|
|
Three Months Ended June 30,
|
|||||||||
(in millions, except percentages)
|
|
2018
|
|
2017
|
|
% Change
|
|||||
Income tax provision
|
|
$
|
8.6
|
|
|
$
|
13.1
|
|
|
(34.4
|
)%
|
Effective tax rate
|
|
28.9
|
%
|
|
37.6
|
%
|
|
|
|
Six Months Ended June 30,
|
||||||||||||
(in millions, except percentages and per share amounts)
|
2018
|
|
2017
|
||||||||||
Net sales
|
$
|
1,317.7
|
|
|
100.0
|
%
|
|
$
|
1,381.4
|
|
|
100.0
|
%
|
Cost of sales
|
773.7
|
|
|
58.7
|
|
|
826.2
|
|
|
59.8
|
|
||
Gross profit
|
544.0
|
|
|
41.3
|
|
|
555.2
|
|
|
40.2
|
|
||
Selling and marketing expenses
|
306.3
|
|
|
23.2
|
|
|
306.0
|
|
|
22.2
|
|
||
General, administrative and other expenses
|
136.0
|
|
|
10.3
|
|
|
135.5
|
|
|
9.8
|
|
||
Customer termination charges, net
|
—
|
|
|
—
|
|
|
14.4
|
|
|
1.0
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(7.7
|
)
|
|
(0.6
|
)
|
|
(7.1
|
)
|
|
(0.5
|
)
|
||
Royalty income, net of royalty expense
|
—
|
|
|
—
|
|
|
(9.7
|
)
|
|
(0.7
|
)
|
||
Operating income
|
109.4
|
|
|
8.3
|
|
|
116.1
|
|
|
8.4
|
|
||
|
|
|
|
|
|
|
|
|
|||||
Other expense, net:
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
47.4
|
|
|
3.6
|
|
|
44.2
|
|
|
3.2
|
|
||
Other income, net
|
(0.6
|
)
|
|
—
|
|
|
(9.5
|
)
|
|
(0.7
|
)
|
||
Total other expense, net
|
46.8
|
|
|
3.6
|
|
|
34.7
|
|
|
2.5
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes
|
62.6
|
|
|
4.8
|
|
|
81.4
|
|
|
5.9
|
|
||
Income tax provision
|
(18.6
|
)
|
|
(1.4
|
)
|
|
(27.7
|
)
|
|
(2.0
|
)
|
||
Net income before non-controlling interests
|
44.0
|
|
|
3.3
|
|
|
53.7
|
|
|
3.9
|
|
||
Less: Net loss attributable to non-controlling interests
|
(1.9
|
)
|
|
(0.1
|
)
|
|
(4.7
|
)
|
|
(0.3
|
)
|
||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
45.9
|
|
|
3.5
|
%
|
|
$
|
58.4
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
|||||
Earnings per common share:
|
|
|
|
|
|
|
|
|
|||||
Basic
|
$
|
0.84
|
|
|
|
|
$
|
1.08
|
|
|
|
||
Diluted
|
$
|
0.83
|
|
|
|
|
$
|
1.07
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||
Basic
|
54.4
|
|
|
|
|
53.9
|
|
|
|
||||
Diluted
|
55.0
|
|
|
|
|
54.6
|
|
|
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
||||||||||||||||||
Net sales by channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale channel
|
$
|
1,191.0
|
|
|
$
|
1,276.7
|
|
|
$
|
948.3
|
|
|
$
|
1,054.2
|
|
|
$
|
242.7
|
|
|
$
|
222.5
|
|
Direct channel
|
126.7
|
|
|
104.7
|
|
|
64.5
|
|
|
53.5
|
|
|
62.2
|
|
|
51.2
|
|
||||||
Total net sales
|
$
|
1,317.7
|
|
|
$
|
1,381.4
|
|
|
$
|
1,012.8
|
|
|
$
|
1,107.7
|
|
|
$
|
304.9
|
|
|
$
|
273.7
|
|
•
|
North America
net sales
decreased
$94.9 million
, or
8.6%
. Excluding Mattress Firm, North America net sales were flat. In the first half of 2017, net sales to Mattress Firm were $95.7 million. Net sales in the Wholesale channel
decreased
$105.9 million
, or
10.0%
, driven primarily by the termination of our contract with Mattress Firm. Additionally, we experienced a decline in certain department store accounts. Excluding sales to Mattress Firm, Wholesale net sales
decreased
1.1%
. Net sales in our Direct channel
increased
$11.0 million
, or
20.6%
. Canada net sales
decreased
11.6%
on a constant currency basis, which is primarily due to the bankruptcy of a major customer.
|
•
|
International
net sales
increased
$31.2 million
, or
11.4%
. On a constant currency basis, International net sales
increased
6.8%
, driven primarily by growth across all regions. Net sales in the Wholesale channel increased
2.5%
on a constant currency basis. Net sales in the Direct channel increased
25.4%
on a constant currency basis.
|
|
|
Six Months Ended June 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
387.4
|
|
|
38.3
|
%
|
|
$
|
413.4
|
|
|
37.3
|
%
|
|
1.0
|
%
|
International
|
|
156.6
|
|
|
51.4
|
%
|
|
141.8
|
|
|
51.8
|
%
|
|
(0.4
|
)%
|
||
Consolidated gross margin
|
|
$
|
544.0
|
|
|
41.3
|
%
|
|
$
|
555.2
|
|
|
40.2
|
%
|
|
1.1
|
%
|
•
|
North America
gross margin
improved
100
basis points. The improvement in gross margin was primarily driven by costs incurred in the first quarter of 2017 as a result of the termination of the Mattress Firm relationship, which resulted in a favorable impact of 100 basis points. These prior year costs included a $5.4 million write-off of customer-unique inventory and $6.1 million of increased product obligations. The improvement in gross margin was also driven by operational improvements of 150 basis points and increased pricing. These were offset by unfavorable commodity costs of 210 basis points and fixed cost deleverage on lower unit volume.
|
•
|
International
gross margin
declined
40
basis points. The decline in gross margin was driven primarily by unfavorable mix of 220 basis points and commodity cost inflation. These were partially offset by the change in classification of royalty income due to the adoption of the new revenue recognition accounting standard of 80 basis points, operational improvements and lower product launch expenses.
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
|
Corporate
|
||||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Advertising expenses
|
$
|
130.0
|
|
|
$
|
144.0
|
|
|
$
|
108.5
|
|
|
$
|
127.0
|
|
|
$
|
21.5
|
|
|
$
|
17.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other selling and marketing expenses
|
176.3
|
|
|
162.0
|
|
|
100.2
|
|
|
99.0
|
|
|
72.0
|
|
|
60.2
|
|
|
4.1
|
|
|
2.8
|
|
||||||||
General, administrative and other expenses
|
136.0
|
|
|
135.5
|
|
|
60.6
|
|
|
63.5
|
|
|
25.4
|
|
|
24.3
|
|
|
50.0
|
|
|
47.7
|
|
||||||||
Customer termination charges, net
|
—
|
|
|
14.4
|
|
|
—
|
|
|
20.9
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
(7.3
|
)
|
||||||||
Total operating expenses
|
$
|
442.3
|
|
|
$
|
455.9
|
|
|
$
|
269.3
|
|
|
$
|
310.4
|
|
|
$
|
118.9
|
|
|
$
|
102.3
|
|
|
$
|
54.1
|
|
|
$
|
43.2
|
|
•
|
North America
operating expenses
decreased
$41.1 million
, or
13.2%
, and
decreased
140
basis points as a percentage of net sales. In the first quarter of 2017, we recorded $20.9 million of charges related to the Mattress Firm termination, which included the $17.2 million write-off of the March 31, 2017 value of customer incentives and marketing assets and $3.7 million of employee-related and professional fees. Additionally, the decrease in operating expenses was driven by decreased participation in our wholesale cooperative advertising programs.
|
•
|
International
operating expenses
increased
$16.6 million
, or
16.2%
and
increased
160
basis points as a percentage of net sales. In the second quarter of 2018, we recorded $4.9 million of costs associated with our International simplification efforts, including headcount reduction, professional fees and store closures. The increase in operating expenses is primarily driven by increased other selling and marketing expenses, primarily driven by unfavorable foreign exchange.
|
•
|
Corporate
operating expenses
increased
$10.9 million
, or
25.2%
. The increase in operating expenses is primarily driven by a $9.3 million benefit recorded in the first quarter of 2017 for the change in estimate associate with performance-based stock compensation that was no longer probable of payout following the Mattress Firm termination, offset by $0.9 million of accelerated stock-based compensation and $1.1 million of other employee-related expenses and professional fees. Additionally, in the second quarter of 2018, we recorded $2.0 million of professional fees costs associated with our International simplification efforts.
|
|
|
Six Months Ended June 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Operating Income
|
|
Operating Margin
|
|
Operating Income
|
|
Operating Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
118.1
|
|
|
11.7
|
%
|
|
$
|
107.1
|
|
|
9.7
|
%
|
|
2.0
|
%
|
International
|
|
45.4
|
|
|
14.9
|
%
|
|
52.2
|
|
|
19.1
|
%
|
|
(4.2
|
)%
|
||
|
|
163.5
|
|
|
|
|
159.3
|
|
|
|
|
|
|||||
Corporate expenses
|
|
(54.1
|
)
|
|
|
|
(43.2
|
)
|
|
|
|
|
|||||
Total operating income
|
|
$
|
109.4
|
|
|
8.3
|
%
|
|
$
|
116.1
|
|
|
8.4
|
%
|
|
(0.1
|
)%
|
•
|
North America
operating income
increased
$11.0 million
and operating margin
improved
200
basis points. The improvement in operating margin was primarily driven by the improvement in gross margin and lower operating expenses due to costs incurred in the first quarter of 2017 in connection with the Mattress Firm termination. In the first quarter of 2017, we recorded $32.4 million of charges associated with the Mattress Firm termination. Cost of sales included $11.5 million of charges related to the write-off of customer-unique inventory and increased product obligations. Operating expenses included $20.9 million of charges related to the write-off of customer incentives and marketing assets, as well as employee-related expenses.
|
•
|
International
operating income
decreased
$6.8 million
and operating margin
declined
420
basis points. In the second quarter of 2018, we recorded $4.9 million of costs associated with our International simplification efforts, including
|
•
|
Corporate
operating expenses
increased
$10.9 million
, which
negatively
impacted our consolidated operating margin by
80
basis points. In the first quarter of 2017, we recorded $8.4 million of net stock-based compensation benefit. Additionally, in the second quarter of 2018, we recorded $2.0 million of professional fees costs associated with our International simplification efforts.
|
|
|
Six Months Ended June 30,
|
|||||||||
(in millions, except percentages)
|
|
2018
|
|
2017
|
|
% Change
|
|||||
Interest expense, net
|
|
$
|
47.4
|
|
|
$
|
44.2
|
|
|
7.2
|
%
|
|
|
Six Months Ended June 30,
|
|||||||||
(in millions, except percentages)
|
|
2018
|
|
2017
|
|
% Change
|
|||||
Income tax provision
|
|
$
|
18.6
|
|
|
$
|
27.7
|
|
|
(32.9
|
)%
|
Effective tax rate
|
|
29.7
|
%
|
|
34.0
|
%
|
|
|
|
|
Six Months Ended June 30,
|
||||||
(in millions)
|
|
2018
|
|
2017
|
||||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
1.6
|
|
|
$
|
75.2
|
|
Investing activities
|
|
(40.0
|
)
|
|
(25.0
|
)
|
||
Financing activities
|
|
30.6
|
|
|
(72.3
|
)
|
|
Three Months Ended
|
||||||
(in millions, except per share amounts)
|
June 30, 2018
|
|
June 30, 2017
|
||||
GAAP net income
|
$
|
22.8
|
|
|
$
|
24.5
|
|
Restructuring costs
(1)
|
6.9
|
|
|
—
|
|
||
Tax adjustments
(2)
|
(1.2
|
)
|
|
—
|
|
||
Adjusted net income
|
$
|
28.5
|
|
|
$
|
24.5
|
|
|
|
|
|
||||
Adjusted earnings per common share, diluted
|
$
|
0.52
|
|
|
$
|
0.45
|
|
|
|
|
|
||||
Diluted shares outstanding
|
54.9
|
|
|
54.5
|
|
(1)
|
Restructuring costs represent costs associated with International business segment simplification efforts, including headcount reduction, professional fees and store closures.
|
(2)
|
Tax adjustments represent adjustments associated with the aforementioned items and other discrete income tax events.
|
|
Three Months Ended June 30, 2018
|
|||||||||||||||||||||||
(in millions, except percentages)
|
Consolidated
|
|
Margin
|
|
North America
|
|
Margin
|
|
International
(1)
|
|
Margin
|
|
Corporate
(2)
|
|||||||||||
Net sales
|
$
|
669.7
|
|
|
|
|
$
|
527.8
|
|
|
|
|
$
|
141.9
|
|
|
|
|
$
|
—
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
$
|
276.1
|
|
|
41.2
|
%
|
|
$
|
203.4
|
|
|
38.5
|
%
|
|
$
|
72.7
|
|
|
51.2
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (expense)
|
$
|
55.5
|
|
|
8.3
|
%
|
|
$
|
64.2
|
|
|
12.2
|
%
|
|
$
|
18.4
|
|
|
13.0
|
%
|
|
$
|
(27.1
|
)
|
Adjustments
|
6.9
|
|
|
|
|
—
|
|
|
|
|
4.9
|
|
|
|
|
2.0
|
|
|||||||
Adjusted operating income (expense)
|
$
|
62.4
|
|
|
9.3
|
%
|
|
$
|
64.2
|
|
|
12.2
|
%
|
|
$
|
23.3
|
|
|
16.4
|
%
|
|
$
|
(25.1
|
)
|
(1)
|
Adjustments to the International business segment represent costs associated with simplification efforts, including headcount reduction, professional fees and store closures.
|
(2)
|
Adjustments to Corporate represent professional fees incurred as a result of International simplification efforts.
|
|
Three Months Ended June 30, 2017
|
|||||||||||||||||||||||
(in millions, except percentages)
|
Consolidated
|
|
Margin
|
|
North America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
|||||||||||
Net sales
|
$
|
659.3
|
|
|
|
|
$
|
525.4
|
|
|
|
|
$
|
133.9
|
|
|
|
|
$
|
—
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
$
|
268.6
|
|
|
40.7
|
%
|
|
$
|
198.9
|
|
|
37.9
|
%
|
|
$
|
69.7
|
|
|
52.1
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (expense)
|
$
|
56.6
|
|
|
8.6
|
%
|
|
$
|
55.8
|
|
|
10.6
|
%
|
|
$
|
26.3
|
|
|
19.6
|
%
|
|
$
|
(25.5
|
)
|
•
|
GAAP net income to EBITDA and adjusted EBITDA
|
•
|
Ratio of consolidated funded debt less qualified cash to adjusted EBITDA
|
•
|
Total debt to consolidated funded debt less qualified cash
|
|
Three Months Ended
|
||||||
(in millions)
|
June 30, 2018
|
|
June 30, 2017
|
||||
GAAP net income
|
$
|
22.8
|
|
|
$
|
24.5
|
|
Interest expense, net
|
24.5
|
|
|
22.1
|
|
||
Income taxes
|
8.6
|
|
|
13.1
|
|
||
Depreciation and amortization
|
27.9
|
|
|
26.1
|
|
||
EBITDA
|
$
|
83.8
|
|
|
$
|
85.8
|
|
Adjustments:
|
|
|
|
||||
Restructuring costs
(1)
|
6.9
|
|
|
—
|
|
||
Adjusted EBITDA
|
$
|
90.7
|
|
|
$
|
85.8
|
|
(1)
|
Restructuring costs represent costs associated with International business segment simplification efforts, including headcount reduction, professional fees and store closures.
|
|
|
Trailing Twelve Months Ended
|
||
(in millions)
|
|
June 30, 2018
|
||
GAAP net income
|
|
$
|
138.9
|
|
Interest expense, net
|
|
111.2
|
|
|
Income taxes
|
|
38.6
|
|
|
Depreciation and amortization
|
|
107.4
|
|
|
EBITDA
|
|
$
|
396.1
|
|
Adjustments:
|
|
|
||
Latin American subsidiary charges
(1)
|
|
9.1
|
|
|
Restructuring costs
(2)
|
|
6.9
|
|
|
Other costs
(3)
|
|
3.4
|
|
|
Adjusted EBITDA
|
|
$
|
415.5
|
|
|
|
|
||
Consolidated funded debt less qualified cash
|
|
$
|
1,790.0
|
|
|
|
|
||
Ratio of consolidated funded debt less qualified cash to Adjusted EBITDA
|
|
4.31 times
|
(1)
|
In the third and fourth quarters of 2017, we recorded a total of $9.1 million of non-interest related charges associated with a Latin American subsidiary. Operating income includes $5.1 million of restructuring charges, which relate to the wind-down of certain operations, leadership termination charges, and professional fees, as well as $3.8 million of non-income tax charges. Other expense, net includes $0.2 million of other charges.
|
(2)
|
Restructuring costs represent costs associated with International business segment simplification efforts, including headcount reduction, professional fees and store closures.
|
(3)
|
In the third and fourth quarters of 2017, we incurred a total of $3.4 million in other costs. In the third quarter of 2017, we recorded $3.0 million in charges for hurricane-related costs and a customer's bankruptcy. In the fourth quarter of 2017, we incurred $0.4 million in costs associated with an early lease termination.
|
(in millions)
|
June 30, 2018
|
||
Total debt, net
|
$
|
1,784.1
|
|
Plus: Deferred financing costs
(1)
|
8.5
|
|
|
Total debt
|
1,792.6
|
|
|
Plus: Letters of credit outstanding
|
23.1
|
|
|
Consolidated funded debt
|
$
|
1,815.7
|
|
Less:
|
|
||
Domestic qualified cash
(2)
|
15.3
|
|
|
Foreign qualified cash
(2)
|
10.4
|
|
|
Consolidated funded debt less qualified cash
|
$
|
1,790.0
|
|
(1)
|
We present deferred financing costs as a direct reduction from the carrying amount of the related debt in the Condensed Consolidated Balance Sheets. For purposes of determining total debt for financial covenant purposes, we have added these costs back to total debt, net as calculated per the Condensed Consolidated Balance Sheets.
|
(2)
|
Qualified cash as defined in the 2016 Credit Agreement equals 100.0% of unrestricted domestic cash plus 60.0% of unrestricted foreign cash. For purposes of calculating leverage ratios, qualified cash is capped at $150.0 million.
|
Period
|
|
(a) Total number of shares purchased
|
|
(b) Average Price Paid per Share
|
|
(c) Total number of shares purchased as part of publicly announced plans or programs
|
|
(d) Maximum number of shares (or approximate dollar value of shares) that may yet be purchased under the plans or programs
(in millions)
|
April 1, 2018 - April 30, 2018
|
|
—
|
(1)
|
$—
|
|
—
|
|
$226.9
|
May 1, 2018 - May 31, 2018
|
|
499
|
(1)
|
$43.80
|
|
—
|
|
$226.9
|
June 1, 2018 - June 30, 2018
|
|
1,359
|
(1)
|
$48.10
|
|
—
|
|
$226.9
|
Total
|
|
1,858
|
|
|
|
—
|
|
|
(1)
|
Includes shares withheld upon the vesting of certain equity awards to satisfy tax withholding obligations. The shares withheld were valued at the closing price of the common stock on the New York Stock Exchange on the vesting date or prior business day.
|
(1)
|
Indicates management contract or compensatory plan or arrangement.
|
*
|
This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78r), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
|
|
TEMPUR SEALY INTERNATIONAL, INC.
|
|
|
|
|
Date: August 2, 2018
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
5.
|
Miscellaneous
.
|
By:
|
/s/ James M. Schockett
|
By:
|
/s/ James M. Schockett
|
5.
|
M
is
cellaneous.
|
By:
|
/s/ James M. Schockett
|
By:
|
/s/ James M. Schockett
|
Date: August 2, 2018
|
By:
|
/s/ SCOTT L. THOMPSON
|
|
|
Scott L. Thompson
|
|
|
Chairman, President and Chief Executive Officer
|
Date: August 2, 2018
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
Date: August 2, 2018
|
By:
|
/s/ SCOTT L. THOMPSON
|
|
|
Scott L. Thompson
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
Date: August 2, 2018
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|