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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Page
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Three Months Ended
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Nine Months Ended
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||||||||||||
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September 30,
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September 30,
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||||||||||||
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2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net sales
|
$
|
729.5
|
|
|
$
|
711.5
|
|
|
$
|
2,026.8
|
|
|
$
|
2,069.2
|
|
Cost of sales
|
429.5
|
|
|
404.5
|
|
|
1,189.3
|
|
|
1,216.1
|
|
||||
Gross profit
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300.0
|
|
|
307.0
|
|
|
837.5
|
|
|
853.1
|
|
||||
Selling and marketing expenses
|
145.9
|
|
|
152.0
|
|
|
444.6
|
|
|
451.4
|
|
||||
General, administrative and other expenses
|
73.2
|
|
|
66.5
|
|
|
206.0
|
|
|
199.8
|
|
||||
Customer termination charges, net
|
—
|
|
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—
|
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—
|
|
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14.4
|
|
||||
Equity income in earnings of unconsolidated affiliates
|
(3.8
|
)
|
|
(3.5
|
)
|
|
(11.5
|
)
|
|
(10.6
|
)
|
||||
Royalty income, net of royalty expense
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
(15.0
|
)
|
||||
Operating income
|
84.7
|
|
|
97.3
|
|
|
198.4
|
|
|
213.1
|
|
||||
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||||||||
Other expense, net:
|
|
|
|
|
|
|
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||||||||
Interest expense, net
|
23.6
|
|
|
22.1
|
|
|
69.5
|
|
|
65.4
|
|
||||
Other expense (income), net
|
1.4
|
|
|
1.0
|
|
|
(1.8
|
)
|
|
(6.7
|
)
|
||||
Total other expense, net
|
25.0
|
|
|
23.1
|
|
|
67.7
|
|
|
58.7
|
|
||||
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||||||||
Income from continuing operations before income taxes
|
59.7
|
|
|
74.2
|
|
|
130.7
|
|
|
154.4
|
|
||||
Income tax provision
|
(15.6
|
)
|
|
(21.0
|
)
|
|
(34.4
|
)
|
|
(46.5
|
)
|
||||
Income from continuing operations
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44.1
|
|
|
53.2
|
|
|
96.3
|
|
|
107.9
|
|
||||
Loss from discontinued operations, net of tax
|
(2.7
|
)
|
|
(12.0
|
)
|
|
(10.9
|
)
|
|
(13.0
|
)
|
||||
Net income before non-controlling interest
|
41.4
|
|
|
41.2
|
|
|
85.4
|
|
|
94.9
|
|
||||
Less: Net loss attributable to non-controlling interest
|
(0.9
|
)
|
|
(3.4
|
)
|
|
(2.8
|
)
|
|
(8.1
|
)
|
||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
42.3
|
|
|
$
|
44.6
|
|
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$
|
88.2
|
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$
|
103.0
|
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Earnings per common share:
|
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||||||||
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||||||||
Basic
|
|
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||||||||
Earnings per share for continuing operations
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$
|
0.83
|
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$
|
1.05
|
|
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$
|
1.82
|
|
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$
|
2.15
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Loss per share for discontinued operations
|
(0.05
|
)
|
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(0.22
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)
|
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(0.20
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)
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(0.24
|
)
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||||
Earnings per share
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$
|
0.78
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$
|
0.83
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$
|
1.62
|
|
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$
|
1.91
|
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Diluted
|
|
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Earnings per share for continuing operations
|
$
|
0.82
|
|
|
$
|
1.03
|
|
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$
|
1.80
|
|
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$
|
2.13
|
|
Loss per share for discontinued operations
|
(0.05
|
)
|
|
(0.22
|
)
|
|
(0.20
|
)
|
|
(0.24
|
)
|
||||
Earnings per share
|
$
|
0.77
|
|
|
$
|
0.81
|
|
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$
|
1.60
|
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$
|
1.89
|
|
|
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||||||||
Weighted average common shares outstanding:
|
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||||||||
Basic
|
54.5
|
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54.0
|
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54.4
|
|
|
54.0
|
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||||
Diluted
|
55.1
|
|
|
54.9
|
|
|
55.0
|
|
|
54.6
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income before non-controlling interests
|
$
|
41.4
|
|
|
$
|
41.2
|
|
|
$
|
85.4
|
|
|
$
|
94.9
|
|
Other comprehensive income (loss), net of tax
|
|
|
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|
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||||||||
Foreign currency translation adjustments
|
2.4
|
|
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9.6
|
|
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(8.7
|
)
|
|
27.7
|
|
||||
Pension benefits loss, net of tax
|
—
|
|
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—
|
|
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(0.6
|
)
|
|
—
|
|
||||
Unrealized loss on cash flow hedging derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
||||
Other comprehensive income (loss), net of tax
|
2.4
|
|
|
9.6
|
|
|
(9.3
|
)
|
|
27.1
|
|
||||
Comprehensive income
|
43.8
|
|
|
50.8
|
|
|
76.1
|
|
|
122.0
|
|
||||
Less: Comprehensive loss attributable to non-controlling interest
|
(0.9
|
)
|
|
(3.4
|
)
|
|
(2.8
|
)
|
|
(8.1
|
)
|
||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
44.7
|
|
|
$
|
54.2
|
|
|
$
|
78.9
|
|
|
$
|
130.1
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
ASSETS
|
(Unaudited)
|
|
|
||||
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
32.1
|
|
|
$
|
41.1
|
|
Accounts receivable, net
|
374.1
|
|
|
310.8
|
|
||
Inventories
|
220.5
|
|
|
179.1
|
|
||
Prepaid expenses and other current assets
|
243.3
|
|
|
63.4
|
|
||
Current assets of discontinued operations
|
7.6
|
|
|
13.0
|
|
||
Total Current Assets
|
877.6
|
|
|
607.4
|
|
||
Property, plant and equipment, net
|
421.0
|
|
|
433.5
|
|
||
Goodwill
|
726.5
|
|
|
732.7
|
|
||
Other intangible assets, net
|
657.0
|
|
|
667.1
|
|
||
Deferred income taxes
|
22.8
|
|
|
23.4
|
|
||
Other non-current assets
|
102.3
|
|
|
227.3
|
|
||
Non-current assets of discontinued assets
|
1.5
|
|
|
2.6
|
|
||
Total Assets
|
$
|
2,808.7
|
|
|
$
|
2,694.0
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||
|
|
|
|
||||
Current Liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
266.6
|
|
|
$
|
228.3
|
|
Accrued expenses and other current liabilities
|
376.0
|
|
|
222.3
|
|
||
Income taxes payable
|
11.2
|
|
|
28.2
|
|
||
Current portion of long-term debt
|
73.0
|
|
|
72.4
|
|
||
Current liabilities of discontinued operations
|
6.9
|
|
|
25.7
|
|
||
Total Current Liabilities
|
733.7
|
|
|
576.9
|
|
||
Long-term debt, net
|
1,616.0
|
|
|
1,680.7
|
|
||
Deferred income taxes
|
121.7
|
|
|
114.3
|
|
||
Other non-current liabilities
|
126.7
|
|
|
206.1
|
|
||
Non-current liabilities of discontinued operations
|
1.1
|
|
|
1.3
|
|
||
Total Liabilities
|
2,599.2
|
|
|
2,579.3
|
|
||
|
|
|
|
||||
Commitments and contingencies—see Note 10
|
|
|
|
|
|
||
|
|
|
|
||||
Redeemable non-controlling interest
|
—
|
|
|
2.2
|
|
||
|
|
|
|
||||
Total Stockholders' Equity
|
209.5
|
|
|
112.5
|
|
||
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity
|
$
|
2,808.7
|
|
|
$
|
2,694.0
|
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2018
|
|
2017
|
||||
Finished goods
|
$
|
144.0
|
|
|
$
|
119.6
|
|
Work-in-process
|
12.1
|
|
|
11.3
|
|
||
Raw materials and supplies
|
64.4
|
|
|
48.2
|
|
||
|
$
|
220.5
|
|
|
$
|
179.1
|
|
(in millions)
|
|
||
Balance as of December 31, 2017
|
$
|
30.0
|
|
Reclassification and remeasurement of sales return asset under Topic 606
|
1.7
|
|
|
Balance as of January 1, 2018
|
31.7
|
|
|
Amounts accrued
|
72.5
|
|
|
Returns charged to accrual
|
(68.4
|
)
|
|
Balance as of September 30, 2018
|
$
|
35.8
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 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
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
$
|
729.5
|
|
|
$
|
724.0
|
|
|
$
|
5.5
|
|
|
$
|
2,026.8
|
|
|
$
|
2,010.5
|
|
|
$
|
16.3
|
|
Royalty income, net of royalty expense
|
—
|
|
|
5.5
|
|
|
(5.5
|
)
|
|
—
|
|
|
16.3
|
|
|
(16.3
|
)
|
|
September 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
|
$
|
243.3
|
|
|
$
|
242.0
|
|
|
$
|
1.3
|
|
Deferred income taxes
|
22.8
|
|
|
21.9
|
|
|
0.9
|
|
|||
Other non-current assets
|
102.3
|
|
|
101.4
|
|
|
0.9
|
|
|||
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Accrued expenses and other current liabilities
|
$
|
376.0
|
|
|
$
|
373.4
|
|
|
$
|
2.6
|
|
Other non-current liabilities
|
126.7
|
|
|
123.8
|
|
|
2.9
|
|
|||
|
|
|
|
|
|
||||||
Stockholders' Equity
|
|
|
|
|
|
||||||
Total stockholders' equity
|
$
|
209.5
|
|
|
$
|
211.9
|
|
|
$
|
(2.4
|
)
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale
|
$
|
553.6
|
|
|
$
|
107.3
|
|
|
$
|
660.9
|
|
|
$
|
1,501.9
|
|
|
$
|
343.7
|
|
|
$
|
1,845.6
|
|
Direct
|
42.2
|
|
|
26.4
|
|
|
68.6
|
|
|
106.7
|
|
|
74.5
|
|
|
181.2
|
|
||||||
Net sales
|
$
|
595.8
|
|
|
$
|
133.7
|
|
|
$
|
729.5
|
|
|
$
|
1,608.6
|
|
|
$
|
418.2
|
|
|
$
|
2,026.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Product
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Bedding products
|
$
|
563.0
|
|
|
$
|
108.3
|
|
|
$
|
671.3
|
|
|
$
|
1,512.7
|
|
|
$
|
335.9
|
|
|
$
|
1,848.6
|
|
Other products
|
32.8
|
|
|
25.4
|
|
|
58.2
|
|
|
95.9
|
|
|
82.3
|
|
|
178.2
|
|
||||||
Net sales
|
$
|
595.8
|
|
|
$
|
133.7
|
|
|
$
|
729.5
|
|
|
$
|
1,608.6
|
|
|
$
|
418.2
|
|
|
$
|
2,026.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Geographical region
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
536.8
|
|
|
$
|
—
|
|
|
$
|
536.8
|
|
|
$
|
1,454.6
|
|
|
$
|
—
|
|
|
$
|
1,454.6
|
|
Canada
|
59.0
|
|
|
—
|
|
|
59.0
|
|
|
154.0
|
|
|
—
|
|
|
154.0
|
|
||||||
International
|
—
|
|
|
133.7
|
|
|
133.7
|
|
|
—
|
|
|
418.2
|
|
|
418.2
|
|
||||||
Net sales
|
$
|
595.8
|
|
|
$
|
133.7
|
|
|
$
|
729.5
|
|
|
$
|
1,608.6
|
|
|
$
|
418.2
|
|
|
$
|
2,026.8
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net sales
|
$
|
6.4
|
|
|
$
|
13.3
|
|
|
$
|
26.8
|
|
|
$
|
37.0
|
|
Cost of sales
|
5.0
|
|
|
8.1
|
|
|
18.9
|
|
|
22.7
|
|
||||
Gross profit
|
1.4
|
|
|
5.2
|
|
|
7.9
|
|
|
14.3
|
|
||||
Selling and marketing expenses
|
2.6
|
|
|
3.4
|
|
|
10.2
|
|
|
10.0
|
|
||||
General, administrative and other expenses
|
1.6
|
|
|
4.5
|
|
|
4.8
|
|
|
6.7
|
|
||||
Operating loss
|
(2.8
|
)
|
|
(2.7
|
)
|
|
(7.1
|
)
|
|
(2.4
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest expense, net and other
|
(0.3
|
)
|
|
10.0
|
|
|
3.8
|
|
|
9.1
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss from discontinued operations before income taxes
|
(2.5
|
)
|
|
(12.7
|
)
|
|
(10.9
|
)
|
|
(11.5
|
)
|
||||
Income tax (provision) benefit
|
(0.2
|
)
|
|
0.7
|
|
|
—
|
|
|
(1.5
|
)
|
||||
Net loss from discontinued operations, net of tax
|
$
|
(2.7
|
)
|
|
$
|
(12.0
|
)
|
|
$
|
(10.9
|
)
|
|
$
|
(13.0
|
)
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Cash and cash equivalents
|
$
|
1.3
|
|
|
$
|
0.8
|
|
Accounts receivable, net
|
3.5
|
|
|
6.9
|
|
||
Inventories
|
1.9
|
|
|
3.9
|
|
||
Prepaid expenses and other current assets
|
0.9
|
|
|
1.4
|
|
||
Current assets of discontinued operations
|
$
|
7.6
|
|
|
$
|
13.0
|
|
|
|
|
|
||||
Property, plant and equipment, net
|
$
|
1.0
|
|
|
$
|
1.6
|
|
Other non-current assets
|
0.5
|
|
|
1.0
|
|
||
Non-current assets of discontinued operations
|
$
|
1.5
|
|
|
$
|
2.6
|
|
|
|
|
|
||||
Accounts payable
|
$
|
3.4
|
|
|
$
|
12.9
|
|
Accrued expenses and other current liabilities
|
2.8
|
|
|
11.9
|
|
||
Income taxes payable
|
0.7
|
|
|
0.9
|
|
||
Current liabilities of discontinued operations
|
$
|
6.9
|
|
|
$
|
25.7
|
|
|
|
|
|
||||
Other non-current liabilities
|
$
|
1.1
|
|
|
$
|
1.3
|
|
Non-current liabilities of discontinued operations
|
$
|
1.1
|
|
|
$
|
1.3
|
|
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
||||||
Balance as of December 31, 2017
|
$
|
576.6
|
|
|
$
|
156.1
|
|
|
$
|
732.7
|
|
Foreign currency translation and other
|
(2.1
|
)
|
|
(4.1
|
)
|
|
(6.2
|
)
|
|||
Balance as of September 30, 2018
|
$
|
574.5
|
|
|
$
|
152.0
|
|
|
$
|
726.5
|
|
|
September 30, 2018
|
|
December 31, 2017
|
|
|
||||||||
(in millions, except percentages)
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Maturity Date
|
||||
2016 Credit Agreement
|
|
|
|
|
|
|
|
|
|
||||
Term A Facility
|
$
|
532.5
|
|
|
(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
|
13.7
|
|
|
(3)
|
|
49.0
|
|
|
(3)
|
|
April 12, 2019
|
||
Capital lease obligations
(4)
|
68.0
|
|
|
|
|
71.8
|
|
|
|
|
Various
|
||
Other
|
32.9
|
|
|
|
|
36.7
|
|
|
|
|
Various
|
||
Total debt
|
1,697.1
|
|
|
|
|
1,762.5
|
|
|
|
|
|
||
Less: deferred financing costs
|
(8.1
|
)
|
|
|
|
(9.4
|
)
|
|
|
|
|
||
Total debt, net
|
1,689.0
|
|
|
|
|
1,753.1
|
|
|
|
|
|
||
Less: current portion
|
(73.0
|
)
|
|
|
|
(72.4
|
)
|
|
|
|
|
||
Total long-term debt, net
|
$
|
1,616.0
|
|
|
|
|
$
|
1,680.7
|
|
|
|
|
|
(1)
|
Interest at LIBOR plus applicable margin of 2.00% as of September 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)
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
2023 Senior Notes
|
|
$
|
449.3
|
|
|
$
|
470.9
|
|
2026 Senior Notes
|
|
576.9
|
|
|
618.1
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Foreign Currency Translation
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
(83.9
|
)
|
|
$
|
(101.8
|
)
|
|
$
|
(72.8
|
)
|
|
$
|
(119.9
|
)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments
(1)
|
2.4
|
|
|
9.6
|
|
|
(8.7
|
)
|
|
27.7
|
|
||||
Balance at end of period
|
$
|
(81.5
|
)
|
|
$
|
(92.2
|
)
|
|
$
|
(81.5
|
)
|
|
$
|
(92.2
|
)
|
|
|
|
|
|
|
|
|
||||||||
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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Net change from period revaluations
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.6
|
)
|
||||
Tax benefit
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
||||
Total other comprehensive loss before reclassifications, net of tax
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
|
$
|
—
|
|
|
$
|
(0.5
|
)
|
Net amount reclassified to earnings
(3)
|
—
|
|
|
0.3
|
|
|
—
|
|
|
(0.1
|
)
|
||||
Tax benefit
(2)
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
||||
Total amount reclassified from accumulated other comprehensive loss, net of tax
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
(0.1
|
)
|
Total other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(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)
|
September 30, 2018
|
|
December 31, 2017
|
||||
Advertising
|
$
|
51.4
|
|
|
$
|
44.4
|
|
Wages and benefits
|
41.3
|
|
|
51.4
|
|
||
Sales returns
|
23.4
|
|
|
19.6
|
|
||
Warranty
|
15.1
|
|
|
16.7
|
|
||
Rebates
|
9.4
|
|
|
11.4
|
|
||
Taxes
|
138.6
|
|
|
6.3
|
|
||
Other
|
96.8
|
|
|
72.5
|
|
||
|
$
|
376.0
|
|
|
$
|
222.3
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
PRSU expense (benefit)
|
$
|
0.7
|
|
|
$
|
1.0
|
|
|
$
|
2.2
|
|
|
$
|
(7.1
|
)
|
Option expense
|
1.6
|
|
|
1.8
|
|
|
5.4
|
|
|
5.6
|
|
||||
RSU/DSU expense
|
4.2
|
|
|
3.1
|
|
|
12.0
|
|
|
10.0
|
|
||||
Total stock-based compensation expense
|
$
|
6.5
|
|
|
$
|
5.9
|
|
|
$
|
19.6
|
|
|
$
|
8.5
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions, except per common share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations, net of loss attributable to non-controlling interest
|
$
|
45.0
|
|
|
$
|
56.6
|
|
|
$
|
99.1
|
|
|
$
|
116.0
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|||||
Denominator for basic earnings per common share-weighted average shares
|
54.5
|
|
|
54.0
|
|
|
54.4
|
|
|
54.0
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||||||
Employee stock-based compensation
|
0.6
|
|
|
0.9
|
|
|
0.6
|
|
|
0.6
|
|
||||
Denominator for diluted earnings per common share-adjusted weighted average shares
|
55.1
|
|
|
54.9
|
|
|
55.0
|
|
|
54.6
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic earnings per common share for continuing operations
|
$
|
0.83
|
|
|
$
|
1.05
|
|
|
$
|
1.82
|
|
|
$
|
2.15
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per common share for continuing operations
|
$
|
0.82
|
|
|
$
|
1.03
|
|
|
$
|
1.80
|
|
|
$
|
2.13
|
|
(in millions)
|
September 30, 2018
|
|
December 31, 2017
|
||||
North America
|
$
|
2,880.5
|
|
|
$
|
2,771.9
|
|
International
|
596.0
|
|
|
593.8
|
|
||
Corporate
|
665.1
|
|
|
614.9
|
|
||
Inter-segment eliminations
|
(1,342.0
|
)
|
|
(1,302.2
|
)
|
||
Discontinued operations
|
9.1
|
|
|
15.6
|
|
||
Total assets
|
$
|
2,808.7
|
|
|
$
|
2,694.0
|
|
(in millions)
|
September 30, 2018
|
|
December 31, 2017
|
||||
North America
|
$
|
317.0
|
|
|
$
|
320.0
|
|
International
|
51.0
|
|
|
53.1
|
|
||
Corporate
|
53.0
|
|
|
60.4
|
|
||
Total property, plant and equipment, net
|
$
|
421.0
|
|
|
$
|
433.5
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
595.8
|
|
|
$
|
133.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
729.5
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
1.1
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
(1.3
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
0.9
|
|
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
229.2
|
|
|
70.8
|
|
|
—
|
|
|
—
|
|
|
300.0
|
|
|||||
Operating income (loss)
|
81.9
|
|
|
25.8
|
|
|
(23.0
|
)
|
|
—
|
|
|
84.7
|
|
|||||
Income (loss) from continuing operations before income taxes
|
78.5
|
|
|
23.5
|
|
|
(42.3
|
)
|
|
—
|
|
|
59.7
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
16.6
|
|
|
$
|
3.3
|
|
|
$
|
10.0
|
|
|
$
|
—
|
|
|
$
|
29.9
|
|
Capital expenditures
|
11.2
|
|
|
2.9
|
|
|
1.2
|
|
|
—
|
|
|
15.3
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
580.6
|
|
|
$
|
130.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
711.5
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
0.9
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
(1.3
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
1.5
|
|
|
(1.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
238.4
|
|
|
68.6
|
|
|
—
|
|
|
—
|
|
|
307.0
|
|
|||||
Operating income (loss)
|
99.7
|
|
|
23.5
|
|
|
(25.9
|
)
|
|
—
|
|
|
97.3
|
|
|||||
Income (loss) from continuing operations before income taxes
|
97.0
|
|
|
22.0
|
|
|
(44.8
|
)
|
|
—
|
|
|
74.2
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
13.1
|
|
|
$
|
3.6
|
|
|
$
|
10.0
|
|
|
$
|
—
|
|
|
$
|
26.7
|
|
Capital expenditures
|
9.3
|
|
|
1.7
|
|
|
6.4
|
|
|
—
|
|
|
17.4
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
1,608.6
|
|
|
$
|
418.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,026.8
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
2.3
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
(2.7
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
2.2
|
|
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
616.7
|
|
|
220.8
|
|
|
—
|
|
|
—
|
|
|
837.5
|
|
|||||
Operating income (loss)
|
200.1
|
|
|
75.5
|
|
|
(77.2
|
)
|
|
—
|
|
|
198.4
|
|
|||||
Income (loss) from continuing operations before income taxes
|
193.7
|
|
|
71.0
|
|
|
(134.0
|
)
|
|
—
|
|
|
130.7
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
43.8
|
|
|
$
|
10.2
|
|
|
$
|
30.8
|
|
|
$
|
—
|
|
|
$
|
84.8
|
|
Capital expenditures
|
42.1
|
|
|
8.9
|
|
|
4.8
|
|
|
—
|
|
|
55.8
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
1,688.3
|
|
|
$
|
380.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,069.2
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
3.1
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
$
|
(3.8
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
4.4
|
|
|
(4.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
651.8
|
|
|
201.3
|
|
|
—
|
|
|
—
|
|
|
853.1
|
|
|||||
Operating income (loss)
|
206.9
|
|
|
75.4
|
|
|
(69.2
|
)
|
|
—
|
|
|
213.1
|
|
|||||
Income (loss) from continuing operations before income taxes
|
210.7
|
|
|
69.5
|
|
|
(125.8
|
)
|
|
—
|
|
|
154.4
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
(1)
|
$
|
38.3
|
|
|
$
|
10.5
|
|
|
$
|
19.8
|
|
|
$
|
—
|
|
|
$
|
68.6
|
|
Capital expenditures
|
23.1
|
|
|
5.0
|
|
|
15.0
|
|
|
—
|
|
|
43.1
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
September 30, 2018
|
|
December 31, 2017
|
||||
United States
|
$
|
349.6
|
|
|
$
|
373.2
|
|
Canada
|
20.4
|
|
|
7.2
|
|
||
Other International
|
51.0
|
|
|
53.1
|
|
||
Total property, plant and equipment, net
|
$
|
421.0
|
|
|
$
|
433.5
|
|
Total International
|
$
|
71.4
|
|
|
$
|
60.3
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
United States
|
$
|
536.8
|
|
|
$
|
517.8
|
|
|
$
|
1,454.6
|
|
|
$
|
1,522.5
|
|
Canada
|
59.0
|
|
|
62.8
|
|
|
154.0
|
|
|
165.8
|
|
||||
Other International
|
133.7
|
|
|
130.9
|
|
|
418.2
|
|
|
380.9
|
|
||||
Total net sales
|
$
|
729.5
|
|
|
$
|
711.5
|
|
|
$
|
2,026.8
|
|
|
$
|
2,069.2
|
|
Total International
|
$
|
192.7
|
|
|
$
|
193.7
|
|
|
$
|
572.2
|
|
|
$
|
546.7
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
556.6
|
|
|
$
|
197.4
|
|
|
$
|
(24.5
|
)
|
|
$
|
729.5
|
|
Cost of sales
|
—
|
|
|
338.6
|
|
|
114.1
|
|
|
(23.2
|
)
|
|
429.5
|
|
|||||
Gross profit
|
—
|
|
|
218.0
|
|
|
83.3
|
|
|
(1.3
|
)
|
|
300.0
|
|
|||||
Selling and marketing expenses
|
2.2
|
|
|
98.2
|
|
|
48.1
|
|
|
(2.6
|
)
|
|
145.9
|
|
|||||
General, administrative and other expenses
|
4.6
|
|
|
56.3
|
|
|
13.8
|
|
|
(1.5
|
)
|
|
73.2
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(3.8
|
)
|
|
—
|
|
|
(3.8
|
)
|
|||||
Operating (loss) income
|
(6.8
|
)
|
|
63.5
|
|
|
25.2
|
|
|
2.8
|
|
|
84.7
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third party interest expense, net
|
14.9
|
|
|
7.8
|
|
|
1.1
|
|
|
(0.2
|
)
|
|
23.6
|
|
|||||
Intercompany interest (income) expense, net
|
(1.7
|
)
|
|
3.3
|
|
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
|||||
Interest expense (income), net
|
13.2
|
|
|
11.1
|
|
|
(0.5
|
)
|
|
(0.2
|
)
|
|
23.6
|
|
|||||
Other (income) expense, net
|
—
|
|
|
(1.5
|
)
|
|
2.5
|
|
|
0.4
|
|
|
1.4
|
|
|||||
Total other expense, net
|
13.2
|
|
|
9.6
|
|
|
2.0
|
|
|
0.2
|
|
|
25.0
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) from equity investees
|
57.8
|
|
|
(14.9
|
)
|
|
—
|
|
|
(42.9
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
37.8
|
|
|
39.0
|
|
|
23.2
|
|
|
(40.3
|
)
|
|
59.7
|
|
|||||
Income tax benefit (provision)
|
3.6
|
|
|
18.8
|
|
|
(38.1
|
)
|
|
0.1
|
|
|
(15.6
|
)
|
|||||
Income (loss) from continuing operations
|
41.4
|
|
|
57.8
|
|
|
(14.9
|
)
|
|
(40.2
|
)
|
|
44.1
|
|
|||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.7
|
)
|
|
(2.7
|
)
|
|||||
Net income (loss) before non-controlling interest
|
41.4
|
|
|
57.8
|
|
|
(14.9
|
)
|
|
(42.9
|
)
|
|
41.4
|
|
|||||
Less: Net loss attributable to non-controlling interest
|
(0.9
|
)
|
|
(0.8
|
)
|
|
(0.1
|
)
|
|
0.9
|
|
|
(0.9
|
)
|
|||||
Net income (loss) attributable to Tempur Sealy International, Inc.
|
$
|
42.3
|
|
|
$
|
58.6
|
|
|
$
|
(14.8
|
)
|
|
$
|
(43.8
|
)
|
|
$
|
42.3
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income (loss) attributable to Tempur Sealy International, Inc.
|
$
|
44.7
|
|
|
$
|
58.6
|
|
|
$
|
(12.4
|
)
|
|
$
|
(46.2
|
)
|
|
$
|
44.7
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
520.2
|
|
|
$
|
222.8
|
|
|
$
|
(31.5
|
)
|
|
$
|
711.5
|
|
Cost of sales
|
—
|
|
|
300.4
|
|
|
130.4
|
|
|
(26.3
|
)
|
|
404.5
|
|
|||||
Gross profit
|
—
|
|
|
219.8
|
|
|
92.4
|
|
|
(5.2
|
)
|
|
307.0
|
|
|||||
Selling and marketing expenses
|
1.4
|
|
|
101.7
|
|
|
52.3
|
|
|
(3.4
|
)
|
|
152.0
|
|
|||||
General, administrative and other expenses
|
4.9
|
|
|
42.4
|
|
|
23.7
|
|
|
(4.5
|
)
|
|
66.5
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(3.5
|
)
|
|
—
|
|
|
(3.5
|
)
|
|||||
Royalty income, net of royalty expense
|
—
|
|
|
(5.3
|
)
|
|
—
|
|
|
—
|
|
|
(5.3
|
)
|
|||||
Operating (loss) income
|
(6.3
|
)
|
|
81.0
|
|
|
19.9
|
|
|
2.7
|
|
|
97.3
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Third party interest expense, net
|
14.8
|
|
|
6.7
|
|
|
10.5
|
|
|
(9.9
|
)
|
|
22.1
|
|
|||||
Intercompany interest (income) expense, net
|
(1.1
|
)
|
|
2.8
|
|
|
(1.7
|
)
|
|
—
|
|
|
—
|
|
|||||
Interest expense, net
|
13.7
|
|
|
9.5
|
|
|
8.8
|
|
|
(9.9
|
)
|
|
22.1
|
|
|||||
Other (income) expense, net
|
—
|
|
|
(4.5
|
)
|
|
5.6
|
|
|
(0.1
|
)
|
|
1.0
|
|
|||||
Total other expense, net
|
13.7
|
|
|
5.0
|
|
|
14.4
|
|
|
(10.0
|
)
|
|
23.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
53.8
|
|
|
1.7
|
|
|
—
|
|
|
(55.5
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
33.8
|
|
|
77.7
|
|
|
5.5
|
|
|
(42.8
|
)
|
|
74.2
|
|
|||||
Income tax benefit (provision)
|
7.4
|
|
|
(23.9
|
)
|
|
(3.8
|
)
|
|
(0.7
|
)
|
|
(21.0
|
)
|
|||||
Income from continuing operations
|
41.2
|
|
|
53.8
|
|
|
1.7
|
|
|
(43.5
|
)
|
|
53.2
|
|
|||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.0
|
)
|
|
(12.0
|
)
|
|||||
Net income before non-controlling interest
|
41.2
|
|
|
53.8
|
|
|
1.7
|
|
|
(55.5
|
)
|
|
41.2
|
|
|||||
Less: Net loss attributable to non-controlling interest
|
(3.4
|
)
|
|
—
|
|
|
(3.4
|
)
|
|
3.4
|
|
|
(3.4
|
)
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
44.6
|
|
|
$
|
53.8
|
|
|
$
|
5.1
|
|
|
$
|
(58.9
|
)
|
|
$
|
44.6
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
54.2
|
|
|
$
|
54.0
|
|
|
$
|
14.6
|
|
|
$
|
(68.6
|
)
|
|
$
|
54.2
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
|||||||||||
Net sales
|
$
|
—
|
|
|
$
|
1,507.6
|
|
|
$
|
594.3
|
|
|
$
|
(75.1
|
)
|
|
$
|
2,026.8
|
|
|
Cost of sales
|
—
|
|
|
918.0
|
|
|
338.5
|
|
|
(67.2
|
)
|
|
1,189.3
|
|
||||||
Gross profit
|
—
|
|
|
589.6
|
|
|
255.8
|
|
|
(7.9
|
)
|
|
837.5
|
|
||||||
Selling and marketing expenses
|
6.3
|
|
|
296.5
|
|
|
152.0
|
|
|
(10.2
|
)
|
|
444.6
|
|
||||||
General, administrative and other expenses
|
14.3
|
|
|
154.0
|
|
|
42.5
|
|
|
(4.8
|
)
|
|
206.0
|
|
||||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(11.5
|
)
|
|
—
|
|
|
(11.5
|
)
|
||||||
Operating (loss) income
|
(20.6
|
)
|
|
139.1
|
|
|
72.8
|
|
|
7.1
|
|
|
198.4
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Third party interest expense, net
|
44.7
|
|
|
22.3
|
|
|
4.2
|
|
|
(1.7
|
)
|
|
69.5
|
|
||||||
Intercompany interest (income) expense, net
|
(5.3
|
)
|
|
7.8
|
|
|
(2.5
|
)
|
|
—
|
|
|
—
|
|
||||||
Interest expense, net
|
39.4
|
|
|
30.1
|
|
|
1.7
|
|
|
(1.7
|
)
|
|
69.5
|
|
||||||
Other (income) expense, net
|
—
|
|
|
(7.1
|
)
|
|
7.4
|
|
|
(2.1
|
)
|
—
|
|
(1.8
|
)
|
|||||
Total other expense, net
|
39.4
|
|
|
23.0
|
|
|
9.1
|
|
|
(3.8
|
)
|
|
67.7
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from equity investees
|
134.1
|
|
|
15.1
|
|
|
—
|
|
|
(149.2
|
)
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations before income taxes
|
74.1
|
|
|
131.2
|
|
|
63.7
|
|
|
(138.3
|
)
|
|
130.7
|
|
||||||
Income tax benefit (provision)
|
11.3
|
|
|
2.9
|
|
|
(48.6
|
)
|
|
—
|
|
|
(34.4
|
)
|
||||||
Income from continuing operations
|
85.4
|
|
|
134.1
|
|
|
15.1
|
|
|
(138.3
|
)
|
|
96.3
|
|
||||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(10.9
|
)
|
|
(10.9
|
)
|
||||||
Net income before non-controlling interest
|
85.4
|
|
|
134.1
|
|
|
15.1
|
|
|
(149.2
|
)
|
|
85.4
|
|
||||||
Less: Net loss attributable to non-controlling interest
|
(2.8
|
)
|
|
(2.6
|
)
|
|
(0.2
|
)
|
|
2.8
|
|
|
(2.8
|
)
|
||||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
88.2
|
|
|
$
|
136.7
|
|
|
$
|
15.3
|
|
|
$
|
(152.0
|
)
|
|
$
|
88.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
78.9
|
|
|
$
|
136.1
|
|
|
$
|
6.6
|
|
|
$
|
(142.7
|
)
|
|
$
|
78.9
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
1,522.4
|
|
|
$
|
641.2
|
|
|
$
|
(94.4
|
)
|
|
$
|
2,069.2
|
|
Cost of sales
|
—
|
|
|
920.9
|
|
|
375.3
|
|
|
(80.1
|
)
|
|
1,216.1
|
|
|||||
Gross profit
|
—
|
|
|
601.5
|
|
|
265.9
|
|
|
(14.3
|
)
|
|
853.1
|
|
|||||
Selling and marketing expenses
|
4.2
|
|
|
308.9
|
|
|
148.3
|
|
|
(10.0
|
)
|
|
451.4
|
|
|||||
General, administrative and other expenses
|
13.8
|
|
|
132.2
|
|
|
60.5
|
|
|
(6.7
|
)
|
|
199.8
|
|
|||||
Customer termination charges, net
|
(8.4
|
)
|
|
21.8
|
|
|
1.0
|
|
|
—
|
|
|
14.4
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(10.6
|
)
|
|
—
|
|
|
(10.6
|
)
|
|||||
Royalty income, net of royalty expense
|
—
|
|
|
(15.0
|
)
|
|
—
|
|
|
—
|
|
|
(15.0
|
)
|
|||||
Operating (loss) income
|
(9.6
|
)
|
|
153.6
|
|
|
66.7
|
|
|
2.4
|
|
|
213.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
||||||||||
Third party interest expense, net
|
44.7
|
|
|
19.4
|
|
|
12.1
|
|
|
(10.8
|
)
|
|
65.4
|
|
|||||
Intercompany interest (income) expense, net
|
(3.6
|
)
|
|
5.6
|
|
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|||||
Interest expense, net
|
41.1
|
|
|
25.0
|
|
|
10.1
|
|
|
(10.8
|
)
|
|
65.4
|
|
|||||
Other (income) expense, net
|
—
|
|
|
(13.6
|
)
|
|
5.2
|
|
|
1.7
|
|
|
(6.7
|
)
|
|||||
Total other expense, net
|
41.1
|
|
|
11.4
|
|
|
15.3
|
|
|
(9.1
|
)
|
|
58.7
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
129.1
|
|
|
33.6
|
|
|
—
|
|
|
(162.7
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
78.4
|
|
|
175.8
|
|
|
51.4
|
|
|
(151.2
|
)
|
|
154.4
|
|
|||||
Income tax benefit (provision)
|
16.5
|
|
|
(46.7
|
)
|
|
(17.8
|
)
|
|
1.5
|
|
|
(46.5
|
)
|
|||||
Income from continuing operations
|
94.9
|
|
|
129.1
|
|
|
33.6
|
|
|
(149.7
|
)
|
|
107.9
|
|
|||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(13.0
|
)
|
|
(13.0
|
)
|
|||||
Net income before non-controlling interest
|
94.9
|
|
|
129.1
|
|
|
33.6
|
|
|
(162.7
|
)
|
|
94.9
|
|
|||||
Less: Net loss attributable to non-controlling interest
|
(8.1
|
)
|
|
—
|
|
|
(8.1
|
)
|
|
8.1
|
|
|
(8.1
|
)
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
103.0
|
|
|
$
|
129.1
|
|
|
$
|
41.7
|
|
|
$
|
(170.8
|
)
|
|
$
|
103.0
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
130.1
|
|
|
$
|
124.6
|
|
|
$
|
73.4
|
|
|
$
|
(198.0
|
)
|
|
$
|
130.1
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
10.5
|
|
|
$
|
22.9
|
|
|
$
|
(1.3
|
)
|
|
$
|
32.1
|
|
Accounts receivable, net
|
—
|
|
|
12.8
|
|
|
352.1
|
|
|
9.2
|
|
|
374.1
|
|
|||||
Inventories
|
—
|
|
|
160.8
|
|
|
61.6
|
|
|
(1.9
|
)
|
|
220.5
|
|
|||||
Prepaid expenses and other current assets
|
274.3
|
|
|
97.0
|
|
|
147.0
|
|
|
(275.0
|
)
|
|
243.3
|
|
|||||
Current assets of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
7.6
|
|
|
7.6
|
|
|||||
Total Current Assets
|
274.3
|
|
|
281.1
|
|
|
583.6
|
|
|
(261.4
|
)
|
|
877.6
|
|
|||||
Property, plant and equipment, net
|
—
|
|
|
349.6
|
|
|
72.4
|
|
|
(1.0
|
)
|
|
421.0
|
|
|||||
Goodwill
|
—
|
|
|
508.8
|
|
|
218.0
|
|
|
(0.3
|
)
|
|
726.5
|
|
|||||
Other intangible assets, net
|
—
|
|
|
575.8
|
|
|
81.3
|
|
|
(0.1
|
)
|
|
657.0
|
|
|||||
Deferred income taxes
|
12.7
|
|
|
—
|
|
|
22.8
|
|
|
(12.7
|
)
|
|
22.8
|
|
|||||
Other non-current assets
|
—
|
|
|
51.9
|
|
|
50.5
|
|
|
(0.1
|
)
|
|
102.3
|
|
|||||
Net investment in subsidiaries
|
645.6
|
|
|
215.1
|
|
|
—
|
|
|
(860.7
|
)
|
|
—
|
|
|||||
Due from affiliates
|
420.1
|
|
|
127.2
|
|
|
25.4
|
|
|
(572.7
|
)
|
|
—
|
|
|||||
Non-current assets of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
1.5
|
|
|||||
Total Assets
|
$
|
1,352.7
|
|
|
$
|
2,109.5
|
|
|
$
|
1,054.0
|
|
|
$
|
(1,707.5
|
)
|
|
$
|
2,808.7
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable
|
$
|
—
|
|
|
$
|
196.0
|
|
|
$
|
61.3
|
|
|
$
|
9.3
|
|
|
$
|
266.6
|
|
Accrued expenses and other current liabilities
|
21.4
|
|
|
150.2
|
|
|
207.2
|
|
|
(2.8
|
)
|
|
376.0
|
|
|||||
Income taxes payable
|
—
|
|
|
270.4
|
|
|
15.6
|
|
|
(274.8
|
)
|
|
11.2
|
|
|||||
Current portion of long-term debt
|
—
|
|
|
40.2
|
|
|
32.8
|
|
|
—
|
|
|
73.0
|
|
|||||
Current liabilities of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
6.9
|
|
|
6.9
|
|
|||||
Total Current Liabilities
|
21.4
|
|
|
656.8
|
|
|
316.9
|
|
|
(261.4
|
)
|
|
733.7
|
|
|||||
Long-term debt, net
|
1,042.7
|
|
|
559.7
|
|
|
13.6
|
|
|
—
|
|
|
1,616.0
|
|
|||||
Deferred income taxes
|
—
|
|
|
117.8
|
|
|
16.6
|
|
|
(12.7
|
)
|
|
121.7
|
|
|||||
Other non-current liabilities
|
—
|
|
|
76.8
|
|
|
51.0
|
|
|
(1.1
|
)
|
|
126.7
|
|
|||||
Due to affiliates
|
79.1
|
|
|
52.8
|
|
|
440.8
|
|
|
(572.7
|
)
|
|
—
|
|
|||||
Non-current liabilities of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
1.1
|
|
|||||
Total Liabilities
|
1,143.2
|
|
|
1,463.9
|
|
|
838.9
|
|
|
(846.8
|
)
|
|
2,599.2
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Stockholders' Equity
|
209.5
|
|
|
645.6
|
|
|
215.1
|
|
|
(860.7
|
)
|
|
209.5
|
|
|||||
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity
|
$
|
1,352.7
|
|
|
$
|
2,109.5
|
|
|
$
|
1,054.0
|
|
|
$
|
(1,707.5
|
)
|
|
$
|
2,808.7
|
|
•
|
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
2.5%
to
$729.5 million
from
$711.5 million
in the
third
quarter of
2017
. On a constant currency basis, which is a non-GAAP financial measure, total net sales
increased
3.4%
, with an
increase
of
3.0%
in the North America business segment and an
increase
of
4.9%
in the International business segment.
|
•
|
Gross margin was
41.1%
as compared to
43.1%
in the
third
quarter of
2017
. Gross margin in the third quarter of
2018
included
$4.9 million
of restructuring charges and
$3.7 million
of supply chain transition costs. Adjusted gross margin, which is a non-GAAP financial measure, was
42.3%
as compared to
43.3%
in the
third
quarter of
2017
.
|
•
|
Operating income
decreased
12.9%
to
$84.7 million
as compared to
$97.3 million
in the
third
quarter of
2017
. Operating income in the
third
quarter of 2018 included
$9.4 million
of restructuring charges and
$3.7 million
of supply chain transition costs. Adjusted operating income, which is a non-GAAP financial measure,
decreased
2.5%
to
$97.8 million
as compared to
$100.3 million
in the
third
quarter of
2017
.
|
•
|
Net income
decreased
5.2%
to
$42.3 million
as compared to
$44.6 million
in the
third
quarter of
2017
. Adjusted net income, which is a non-GAAP financial measure,
increased
0.9%
to
$56.1 million
as compared to
$55.6 million
in the
third
quarter of
2017
.
|
•
|
Earnings before interest, tax, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure,
decreased
1.5%
to
$112.7 million
as compared to
$114.4 million
for the
third
quarter of
2017
. Adjusted EBITDA, which is a non-GAAP financial measure,
decreased
1.3%
to
$127.7 million
as compared to
$129.4 million
in the
third
quarter of
2017
.
|
•
|
Earnings per diluted share ("EPS")
decreased
4.9%
to
$0.77
as compared to
$0.81
in the
third
quarter of
2017
. Adjusted EPS, which is a non-GAAP financial measure,
increased
1.0%
to
$1.02
as compared to
$1.01
in the
third
quarter of
2017
.
|
|
Three Months Ended September 30,
|
||||||||||||
(in millions, except percentages and per share amounts)
|
2018
|
|
2017
|
||||||||||
Net sales
|
$
|
729.5
|
|
|
100.0
|
%
|
|
$
|
711.5
|
|
|
100.0
|
%
|
Cost of sales
|
429.5
|
|
|
58.9
|
|
|
404.5
|
|
|
56.9
|
|
||
Gross profit
|
300.0
|
|
|
41.1
|
|
|
307.0
|
|
|
43.1
|
|
||
Selling and marketing expenses
|
145.9
|
|
|
20.0
|
|
|
152.0
|
|
|
21.4
|
|
||
General, administrative and other expenses
|
73.2
|
|
|
10.0
|
|
|
66.5
|
|
|
9.3
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(3.8
|
)
|
|
(0.5
|
)
|
|
(3.5
|
)
|
|
(0.5
|
)
|
||
Royalty income, net of royalty expense
|
—
|
|
|
—
|
|
|
(5.3
|
)
|
|
(0.7
|
)
|
||
Operating income
|
84.7
|
|
|
11.6
|
|
|
97.3
|
|
|
13.7
|
|
||
|
|
|
|
|
|
|
|
||||||
Other expense, net:
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
23.6
|
|
|
3.2
|
|
|
22.1
|
|
|
3.1
|
|
||
Other expense, net
|
1.4
|
|
|
0.2
|
|
|
1.0
|
|
|
0.1
|
|
||
Total other expense, net
|
25.0
|
|
|
3.4
|
|
|
23.1
|
|
|
3.2
|
|
||
|
|
|
|
|
|
|
|
||||||
Income from continuing operations before income taxes
|
59.7
|
|
|
8.2
|
|
|
74.2
|
|
|
10.4
|
|
||
Income tax provision
|
(15.6
|
)
|
|
(2.1
|
)
|
|
(21.0
|
)
|
|
(3.0
|
)
|
||
Income from continuing operations
|
44.1
|
|
|
6.0
|
|
|
53.2
|
|
|
7.5
|
|
||
Loss from discontinued operations, net of tax
|
(2.7
|
)
|
|
(0.4
|
)
|
|
(12.0
|
)
|
|
(1.7
|
)
|
||
Net income before non-controlling interest
|
41.4
|
|
|
5.7
|
|
|
41.2
|
|
|
5.8
|
|
||
Less: Net loss attributable to non-controlling interest
|
(0.9
|
)
|
|
(0.1
|
)
|
|
(3.4
|
)
|
|
(0.5
|
)
|
||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
42.3
|
|
|
5.8
|
%
|
|
$
|
44.6
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
0.83
|
|
|
|
|
$
|
1.05
|
|
|
|
||
Loss per share for discontinued operations
|
$
|
(0.05
|
)
|
|
|
|
$
|
(0.22
|
)
|
|
|
||
Earnings per share
|
$
|
0.78
|
|
|
|
|
$
|
0.83
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
0.82
|
|
|
|
|
$
|
1.03
|
|
|
|
||
Loss per share for discontinued operations
|
$
|
(0.05
|
)
|
|
|
|
$
|
(0.22
|
)
|
|
|
||
Earnings per share
|
$
|
0.77
|
|
|
|
|
$
|
0.81
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||
Basic
|
54.5
|
|
|
|
|
54.0
|
|
|
|
||||
Diluted
|
55.1
|
|
|
|
|
54.9
|
|
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
||||||||||||||||||
Net sales by channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale channel
|
$
|
660.9
|
|
|
$
|
658.2
|
|
|
$
|
553.6
|
|
|
$
|
547.3
|
|
|
$
|
107.3
|
|
|
$
|
110.9
|
|
Direct channel
|
68.6
|
|
|
53.3
|
|
|
42.2
|
|
|
33.3
|
|
|
26.4
|
|
|
20.0
|
|
||||||
Total net sales
|
$
|
729.5
|
|
|
$
|
711.5
|
|
|
$
|
595.8
|
|
|
$
|
580.6
|
|
|
$
|
133.7
|
|
|
$
|
130.9
|
|
•
|
North America
net sales
increased
$15.2 million
, or
2.6%
. Net sales in the Wholesale channel
increased
$6.3 million
, or
1.2%
. Net sales in our Direct channel increased
$8.9 million
, or
26.7%
, driven by growth from expanded retail stores. On a constant currency basis, North America net sales
increased
3.0%
.
|
•
|
International
net sales
increased
$2.8 million
, or
2.1%
. On a constant currency basis, International net sales
increased
4.9%
, driven primarily by Direct channel growth. Net sales in the Wholesale channel
decreased
0.7%
on a constant currency basis. Net sales in the Direct channel
increased
36.0%
on a constant currency basis, driven by growth from company-owned stores.
|
|
|
Three Months Ended September 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
229.2
|
|
|
38.5
|
%
|
|
$
|
238.4
|
|
|
41.1
|
%
|
|
(2.6
|
)%
|
International
|
|
70.8
|
|
|
53.0
|
%
|
|
68.6
|
|
|
52.4
|
%
|
|
0.6
|
%
|
||
Consolidated gross margin
|
|
$
|
300.0
|
|
|
41.1
|
%
|
|
$
|
307.0
|
|
|
43.1
|
%
|
|
(2.0
|
)%
|
•
|
North America
gross margin
declined
260
basis points. The decline in gross margin was primarily driven by commodity cost inflation of 170 basis points and unfavorable product mix of 150 basis points. We also recorded $4.9 million of restructuring charges related to our acquisition of the remaining interest in a joint venture and $3.7 million of supply chain transition costs to consolidate certain manufacturing and distribution facilities, resulting in an unfavorable impact of 130 basis points. These were partially offset by favorable brand mix of 90 basis points, favorable pricing of 60 basis points and other favorable operational improvements.
|
•
|
International
gross margin
improved
60
basis points. The improvement in gross margin was driven primarily by the change in classification of royalty income due to the adoption of the new revenue recognition accounting standard of 100 basis points, favorable operational improvements of 70 basis points and favorable product launch costs of 70 basis points. These were partially offset by unfavorable mix of 130 basis points, unfavorable foreign exchange and commodity cost inflation.
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
|
Corporate
|
||||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Advertising expenses
|
$
|
69.1
|
|
|
$
|
76.8
|
|
|
$
|
59.2
|
|
|
$
|
66.4
|
|
|
$
|
9.9
|
|
|
$
|
10.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other selling and marketing expenses
|
76.8
|
|
|
75.2
|
|
|
45.7
|
|
|
45.5
|
|
|
28.9
|
|
|
28.3
|
|
|
2.2
|
|
|
1.4
|
|
||||||||
General, administrative and other expenses
|
73.2
|
|
|
66.5
|
|
|
42.4
|
|
|
29.1
|
|
|
10.0
|
|
|
12.9
|
|
|
20.8
|
|
|
24.5
|
|
||||||||
Total operating expenses
|
$
|
219.1
|
|
|
$
|
218.5
|
|
|
$
|
147.3
|
|
|
$
|
141.0
|
|
|
$
|
48.8
|
|
|
$
|
51.6
|
|
|
$
|
23.0
|
|
|
$
|
25.9
|
|
•
|
North America
operating expenses
increased
$6.3 million
, or
4.5%
, and
increased
40
basis points as a percentage of net sales. The increase in operating expenses was driven by increased bad debt expense of $6.7 million, primarily driven by the bankruptcy of a department store retailer. We also recorded $4.1 million of restructuring charges related to our acquisition of the remaining interest in a joint venture. These increases were partially offset by decreased investments in our advertising programs, as well as decreased incentive compensation.
|
•
|
International
operating expenses
decreased
$2.8 million
, or
5.4%
, and
decreased
290
basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by a decrease in general, administrative and other expenses. In the third quarter of 2017, we recognized $1.9 million of customer-related charges. In the third quarter of 2018, we recorded $0.4 million of costs associated with International simplification efforts, including headcount reduction and professional fees.
|
•
|
Corporate
operating expenses
decreased
$2.9 million
, or
11.2%
, primarily driven by decreased incentive compensation costs.
|
|
|
Three Months Ended September 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Operating Income
|
|
Operating Margin
|
|
Operating Income
|
|
Operating Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
81.9
|
|
|
13.7
|
%
|
|
$
|
99.7
|
|
|
17.2
|
%
|
|
(3.5
|
)%
|
International
|
|
25.8
|
|
|
19.3
|
%
|
|
23.5
|
|
|
18.0
|
%
|
|
1.3
|
%
|
||
|
|
107.7
|
|
|
|
|
123.2
|
|
|
|
|
|
|||||
Corporate expenses
|
|
(23.0
|
)
|
|
|
|
(25.9
|
)
|
|
|
|
|
|||||
Total operating income
|
|
$
|
84.7
|
|
|
11.6
|
%
|
|
$
|
97.3
|
|
|
13.7
|
%
|
|
(2.1
|
)%
|
•
|
North America
operating income
decreased
$17.8 million
and operating margin
declined
350
basis points. The decline in operating margin was primarily driven by the decline in gross margin. In the third quarter of 2018, we recorded $9.0 million of restructuring charges related to our acquisition of the remaining interest in a joint venture and $3.7 million of supply chain transition costs. In addition, we recognized additional bad debt expense associated with the bankruptcy of a department store retailer, partially offset by decreased investments in direct advertising.
|
•
|
International
operating income
increased
$2.3 million
and operating margin
improved
130
basis points. The improvement in operating margin was primarily driven by the improvement in gross margin and decreases in operating expenses. These drivers were partially offset by the change in classification of royalty income due to the adoption of the new revenue recognition accounting standard. In the third quarter of 2017, we recognized $1.9 million of customer-related charges. In the third quarter of 2018, we recognized $0.4 million of costs associated with our International simplification efforts, including headcount reduction and professional fees.
|
•
|
Corporate
operating expenses
decreased
$2.9 million
, which
positively
impacted our consolidated operating margin by
40
basis points.
|
|
Three Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
2018
|
|
2017
|
|
% Change
|
|||||
Interest expense, net
|
$
|
23.6
|
|
|
$
|
22.1
|
|
|
6.8
|
%
|
|
|
Three Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
|
2018
|
|
2017
|
|
% Change
|
|||||
Income tax provision
|
|
$
|
15.6
|
|
|
$
|
21.0
|
|
|
(25.7
|
)%
|
Effective tax rate
|
|
26.1
|
%
|
|
28.3
|
%
|
|
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions, except percentages and per share amounts)
|
2018
|
|
2017
|
||||||||||
Net sales
|
$
|
2,026.8
|
|
|
100.0
|
%
|
|
$
|
2,069.2
|
|
|
100.0
|
%
|
Cost of sales
|
1,189.3
|
|
|
58.7
|
|
|
1,216.1
|
|
|
58.8
|
|
||
Gross profit
|
837.5
|
|
|
41.3
|
|
|
853.1
|
|
|
41.2
|
|
||
Selling and marketing expenses
|
444.6
|
|
|
21.9
|
|
|
451.4
|
|
|
21.8
|
|
||
General, administrative and other expenses
|
206.0
|
|
|
10.2
|
|
|
199.8
|
|
|
9.7
|
|
||
Customer termination charges, net
|
—
|
|
|
—
|
|
|
14.4
|
|
|
0.7
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(11.5
|
)
|
|
(0.6
|
)
|
|
(10.6
|
)
|
|
(0.5
|
)
|
||
Royalty income, net of royalty expense
|
—
|
|
|
—
|
|
|
(15.0
|
)
|
|
(0.7
|
)
|
||
Operating income
|
198.4
|
|
|
9.8
|
|
|
213.1
|
|
|
10.3
|
|
||
|
|
|
|
|
|
|
|
|
|||||
Other expense, net:
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
69.5
|
|
|
3.4
|
|
|
65.4
|
|
|
3.2
|
|
||
Other income, net
|
(1.8
|
)
|
|
(0.1
|
)
|
|
(6.7
|
)
|
|
(0.3
|
)
|
||
Total other expense, net
|
67.7
|
|
|
3.3
|
|
|
58.7
|
|
|
2.8
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations before income taxes
|
130.7
|
|
|
6.4
|
|
|
154.4
|
|
|
7.5
|
|
||
Income tax provision
|
(34.4
|
)
|
|
(1.7
|
)
|
|
(46.5
|
)
|
|
(2.2
|
)
|
||
Income from continuing operations
|
96.3
|
|
|
4.8
|
|
|
107.9
|
|
|
5.2
|
|
||
Loss from discontinued operations, net of tax
|
(10.9
|
)
|
|
(0.5
|
)
|
|
(13.0
|
)
|
|
(0.6
|
)
|
||
Net income before non-controlling interest
|
85.4
|
|
|
4.2
|
|
|
94.9
|
|
|
4.6
|
|
||
Less: Net loss attributable to non-controlling interest
|
(2.8
|
)
|
|
(0.1
|
)
|
|
(8.1
|
)
|
|
(0.4
|
)
|
||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
88.2
|
|
|
4.4
|
%
|
|
$
|
103.0
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
1.82
|
|
|
|
|
$
|
2.15
|
|
|
|
||
Loss per share for discontinued operations
|
$
|
(0.20
|
)
|
|
|
|
$
|
(0.24
|
)
|
|
|
||
Earnings per share
|
$
|
1.62
|
|
|
|
|
$
|
1.91
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
1.80
|
|
|
|
|
$
|
2.13
|
|
|
|
||
Loss per share for discontinued operations
|
$
|
(0.20
|
)
|
|
|
|
$
|
(0.24
|
)
|
|
|
||
Earnings per share
|
$
|
1.60
|
|
|
|
|
$
|
1.89
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||
Basic
|
54.4
|
|
|
|
|
54.0
|
|
|
|
||||
Diluted
|
55.0
|
|
|
|
|
54.6
|
|
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
||||||||||||||||||
Net sales by channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale channel
|
$
|
1,845.6
|
|
|
$
|
1,924.9
|
|
|
$
|
1,501.9
|
|
|
$
|
1,601.5
|
|
|
$
|
343.7
|
|
|
$
|
323.4
|
|
Direct channel
|
181.2
|
|
|
144.3
|
|
|
106.7
|
|
|
86.8
|
|
|
74.5
|
|
|
57.5
|
|
||||||
Total net sales
|
$
|
2,026.8
|
|
|
$
|
2,069.2
|
|
|
$
|
1,608.6
|
|
|
$
|
1,688.3
|
|
|
$
|
418.2
|
|
|
$
|
380.9
|
|
•
|
North America
net sales
decreased
$79.7 million
, or
4.7%
. Excluding Mattress Firm, North America net sales were flat. In 2017, net sales to Mattress Firm were $95.7 million. Net sales in the Wholesale channel
decreased
$99.6 million
, or
6.2%
, 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
0.3%
. Net sales in our Direct channel
increased
$19.9 million
, or
22.9%
, primarily driven by expanded retail stores. On a constant currency basis, North America net sales
decreased
4.8%
.
|
•
|
International
net sales
increased
$37.3 million
, or
9.8%
. On a constant currency basis, International net sales
increased
5.7%
, driven primarily by growth across all regions. Net sales in the Wholesale channel
increased
1.9%
on a constant currency basis. Net sales in the Direct channel
increased
26.8%
on a constant currency basis, primarily driven by growth from company-owned stores.
|
|
|
Nine Months Ended September 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
616.7
|
|
|
38.3
|
%
|
|
$
|
651.8
|
|
|
38.6
|
%
|
|
(0.3
|
)%
|
International
|
|
220.8
|
|
|
52.8
|
%
|
|
201.3
|
|
|
52.8
|
%
|
|
—
|
%
|
||
Consolidated gross margin
|
|
$
|
837.5
|
|
|
41.3
|
%
|
|
$
|
853.1
|
|
|
41.2
|
%
|
|
0.1
|
%
|
•
|
North America
gross margin
declined
30
basis points. The decline in gross margin was primarily driven by commodity cost inflation of 200 basis points and unfavorable product mix. We also recorded
$4.9 million
of restructuring charges related to our acquisition of the remaining interest in a joint venture and
$3.7 million
of supply chain transition costs to consolidate certain manufacturing and distribution facilities. The decline in gross margin was offset by operational improvements of 130 basis points, favorable brand mix and favorable pricing. In the first quarter of 2017, we also recorded costs associated with a $5.4 million write-off of customer-unique inventory and $6.1 million of increased product obligations as a result of the termination of the Mattress Firm relationship.
|
•
|
International
gross margin
was flat
. The change in gross margin was primarily driven by unfavorable mix of 140 basis points and unfavorable commodity cost inflation. These were partially offset by operational improvements of 80 basis points, the change in classification of royalty income due to the adoption of the new revenue recognition accounting standard of 70 basis points and favorable product launch costs.
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
|
Corporate
|
||||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Advertising expenses
|
$
|
198.8
|
|
|
$
|
220.5
|
|
|
$
|
167.8
|
|
|
$
|
193.4
|
|
|
$
|
31.0
|
|
|
$
|
27.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other selling and marketing expenses
|
245.8
|
|
|
230.9
|
|
|
145.8
|
|
|
144.6
|
|
|
93.7
|
|
|
82.1
|
|
|
6.3
|
|
|
4.2
|
|
||||||||
General, administrative and other expenses
|
206.0
|
|
|
199.8
|
|
|
103.0
|
|
|
92.5
|
|
|
32.1
|
|
|
35.0
|
|
|
70.9
|
|
|
72.3
|
|
||||||||
Customer termination charges, net
|
—
|
|
|
14.4
|
|
|
—
|
|
|
20.9
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
(7.3
|
)
|
||||||||
Total operating expenses
|
$
|
650.6
|
|
|
$
|
665.6
|
|
|
$
|
416.6
|
|
|
$
|
451.4
|
|
|
$
|
156.8
|
|
|
$
|
145.0
|
|
|
$
|
77.2
|
|
|
$
|
69.2
|
|
•
|
North America
operating expenses
decreased
$34.8 million
, or
7.7%
, and
decreased
80
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. The decrease was also driven by decreased participation in our wholesale cooperative advertising programs and decreased investments in our advertising programs. These decreases in 2018 as compared to 2017 were offset by $4.1 million of restructuring charges related to our acquisition of the remaining interest in a joint venture and a bad debt expense increase of $3.5 million, primarily driven by the bankruptcy of a department store retailer.
|
•
|
International
operating expenses
increased
$11.8 million
, or
8.1%
and
decreased
60
basis points as a percentage of net sales. The increase in operating expenses was primarily driven by increased other selling and marketing expenses, which was impacted by unfavorable foreign exchange. In 2018, we recorded $3.8 million of costs associated with our International simplification efforts, including headcount reduction, professional fees and store closures.
|
•
|
Corporate
operating expenses
increased
$8.0 million
, or
11.6%
. The increase in operating expenses was primarily driven by a $9.3 million benefit recorded in the first quarter of 2017 for the change in estimate associated 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. In 2018, we also recorded $2.0 million of professional fees associated with our International simplification efforts.
|
|
|
Nine Months Ended September 30,
|
|
|
|||||||||||||
|
|
2018
|
|
2017
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Operating Income
|
|
Operating Margin
|
|
Operating Income
|
|
Operating Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
200.1
|
|
|
12.4
|
%
|
|
$
|
206.9
|
|
|
12.3
|
%
|
|
0.1
|
%
|
International
|
|
75.5
|
|
|
18.1
|
%
|
|
75.4
|
|
|
19.8
|
%
|
|
(1.7
|
)%
|
||
|
|
275.6
|
|
|
|
|
282.3
|
|
|
|
|
|
|||||
Corporate expenses
|
|
(77.2
|
)
|
|
|
|
(69.2
|
)
|
|
|
|
|
|||||
Total operating income
|
|
$
|
198.4
|
|
|
9.8
|
%
|
|
$
|
213.1
|
|
|
10.3
|
%
|
|
(0.5
|
)%
|
•
|
North America
operating income
decreased
$6.8 million
and operating margin
improved
10
basis points. The improvement in operating margin was primarily driven by 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. This improvement was offset by the decline in gross margin.
|
•
|
International
operating income
increased
$0.1 million
and operating margin
declined
170
basis points. In 2018, we recorded $3.8 million of costs associated with our International simplification efforts, including headcount reduction, professional fees and store closures. In 2017, we recognized $1.9 million of customer-related charges. 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.
|
•
|
Corporate
operating expenses
increased
$8.0 million
, which
negatively
impacted our consolidated operating margin by
40
basis points. In the first quarter of 2017, we recorded $8.4 million of net stock-based compensation benefit.
|
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
|
2018
|
|
2017
|
|
% Change
|
|||||
Interest expense, net
|
|
$
|
69.5
|
|
|
$
|
65.4
|
|
|
6.3
|
%
|
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
|
2018
|
|
2017
|
|
% Change
|
|||||
Income tax provision
|
|
$
|
34.4
|
|
|
$
|
46.5
|
|
|
(26.0
|
)%
|
Effective tax rate
|
|
26.3
|
%
|
|
30.1
|
%
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
|
2018
|
|
2017
|
||||
Net cash provided by (used in) continuing operations:
|
|
|
|
|
||||
Operating activities
|
|
$
|
130.6
|
|
|
$
|
216.6
|
|
Investing activities
|
|
(55.5
|
)
|
|
(42.2
|
)
|
||
Financing activities
|
|
(63.7
|
)
|
|
(180.6
|
)
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
|
2018
|
|
2017
|
||||
Net cash used in discontinued operations:
|
|
|
|
|
||||
Operating activities
|
|
$
|
(17.6
|
)
|
|
$
|
(14.1
|
)
|
Investing activities
|
|
(0.2
|
)
|
|
3.7
|
|
||
Financing activities
|
|
—
|
|
|
—
|
|
|
Three Months Ended
|
||||||
(in millions, except per share amounts)
|
September 30, 2018
|
|
September 30, 2017
|
||||
GAAP net income
|
$
|
42.3
|
|
|
$
|
44.6
|
|
Loss from discontinued operations, net of tax
(1)
|
2.7
|
|
|
12.0
|
|
||
Restructuring costs
(2)
|
10.4
|
|
|
—
|
|
||
Supply chain transition costs
(3)
|
4.5
|
|
|
—
|
|
||
Other costs
(4)
|
—
|
|
|
3.0
|
|
||
Tax adjustments
(5)
|
(3.8
|
)
|
|
(4.0
|
)
|
||
Adjusted net income
|
$
|
56.1
|
|
|
$
|
55.6
|
|
|
|
|
|
||||
Adjusted earnings per common share, diluted
|
$
|
1.02
|
|
|
$
|
1.01
|
|
|
|
|
|
||||
Diluted shares outstanding
|
55.1
|
|
|
54.9
|
|
(1)
|
Certain subsidiaries in the International business segment are accounted for as discontinued operations and have been designated as unrestricted subsidiaries in the 2016 Credit Agreement. Therefore, these subsidiaries are excluded from our adjusted financial measures for covenant compliance purposes.
|
(2)
|
In the third quarter of 2018, we recorded $10.4 million of restructuring costs. These costs included $10.0 million of charges associated with the operational alignment of a joint venture that was wholly acquired in the North America business segment, including $2.6 million of depreciation expense. Restructuring costs also included $0.4 million of operating expenses associated with International simplification efforts, including headcount reduction and professional fees.
|
(3)
|
In the third quarter of 2018, we recorded $4.5 million of supply chain transition costs which represent charges incurred to consolidate certain manufacturing and distribution facilities.
|
(4)
|
In the third quarter of 2017, we recorded a total of $3.0 million in charges for hurricane-related costs and customer-related charges.
|
(5)
|
Tax adjustments represent adjustments associated with the aforementioned items and other discrete income tax events.
|
|
Three Months Ended September 30, 2018
|
|||||||||||||||||||||||
(in millions, except percentages)
|
Consolidated
|
|
Margin
|
|
North America
(1)
|
|
Margin
|
|
International
(2)
|
|
Margin
|
|
Corporate
|
|||||||||||
Net sales
|
$
|
729.5
|
|
|
|
|
$
|
595.8
|
|
|
|
|
$
|
133.7
|
|
|
|
|
$
|
—
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
$
|
300.0
|
|
|
41.1
|
%
|
|
$
|
229.2
|
|
|
38.5
|
%
|
|
$
|
70.8
|
|
|
53.0
|
%
|
|
$
|
—
|
|
Adjustments
|
8.6
|
|
|
|
|
8.6
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Adjusted gross profit
|
$
|
308.6
|
|
|
42.3
|
%
|
|
$
|
237.8
|
|
|
39.9
|
%
|
|
$
|
70.8
|
|
|
53.0
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (expense)
|
$
|
84.7
|
|
|
11.6
|
%
|
|
$
|
81.9
|
|
|
13.7
|
%
|
|
$
|
25.8
|
|
|
19.3
|
%
|
|
$
|
(23.0
|
)
|
Adjustments
|
13.1
|
|
|
|
|
12.7
|
|
|
|
|
0.4
|
|
|
|
|
—
|
|
|||||||
Adjusted operating income (expense)
|
$
|
97.8
|
|
|
13.4
|
%
|
|
$
|
94.6
|
|
|
15.9
|
%
|
|
$
|
26.2
|
|
|
19.6
|
%
|
|
$
|
(23.0
|
)
|
(1)
|
Adjustments for the North America segment represent $12.7 million of restructuring charges associated with the operational alignment of a joint venture that was wholly acquired and supply chain transition costs. Cost of sales included $4.9 million of restructuring charges related to the acquired joint venture and $3.7 million of supply chain transition costs. Operating expenses included $4.1 million of restructuring charges related to the acquired joint venture.
|
(2)
|
Adjustments to the International business segment represent $0.4 million of headcount reduction and professional fees related to International simplification efforts.
|
|
Three Months Ended September 30, 2017
|
|||||||||||||||||||||||
(in millions, except percentages)
|
Consolidated
|
|
Margin
|
|
North America
(1)
|
|
Margin
|
|
International
(2)
|
|
Margin
|
|
Corporate
|
|||||||||||
Net sales
|
$
|
711.5
|
|
|
|
|
$
|
580.6
|
|
|
|
|
$
|
130.9
|
|
|
|
|
$
|
—
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
$
|
307.0
|
|
|
43.1
|
%
|
|
$
|
238.4
|
|
|
41.1
|
%
|
|
$
|
68.6
|
|
|
52.4
|
%
|
|
$
|
—
|
|
Adjustments
|
1.0
|
|
|
|
|
1.0
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Adjusted gross profit
|
$
|
308.0
|
|
|
43.3
|
%
|
|
$
|
239.4
|
|
|
41.2
|
%
|
|
$
|
68.6
|
|
|
52.4
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (expense)
|
$
|
97.3
|
|
|
13.7
|
%
|
|
$
|
99.7
|
|
|
17.2
|
%
|
|
$
|
23.5
|
|
|
18.0
|
%
|
|
$
|
(25.9
|
)
|
Adjustments
|
3.0
|
|
|
|
|
1.1
|
|
|
|
|
1.9
|
|
|
|
|
—
|
|
|||||||
Adjusted operating income (expense)
|
$
|
100.3
|
|
|
14.1
|
%
|
|
$
|
100.8
|
|
|
17.4
|
%
|
|
$
|
25.4
|
|
|
19.4
|
%
|
|
$
|
(25.9
|
)
|
(1)
|
Adjustments for the North America business segment represent $1.1 million of hurricane-related costs, which we recorded primarily in cost of sales.
|
(2)
|
Adjustments to the International business segment represents $1.9 million of customer-related charges.
|
•
|
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)
|
September 30, 2018
|
|
September 30, 2017
|
||||
GAAP net income
|
$
|
42.3
|
|
|
$
|
44.6
|
|
Interest expense, net
|
23.6
|
|
|
22.1
|
|
||
Income taxes
|
15.6
|
|
|
21.0
|
|
||
Depreciation and amortization
|
31.2
|
|
|
26.7
|
|
||
EBITDA
|
$
|
112.7
|
|
|
$
|
114.4
|
|
Adjustments:
|
|
|
|
||||
Loss from discontinued operations, net of tax
(1)
|
$
|
2.7
|
|
|
$
|
12.0
|
|
Restructuring costs
(2)
|
7.8
|
|
|
—
|
|
||
Supply chain transition costs
(3)
|
4.5
|
|
|
—
|
|
||
Other costs
(4)
|
—
|
|
|
3.0
|
|
||
Adjusted EBITDA
|
$
|
127.7
|
|
|
$
|
129.4
|
|
(1)
|
Certain subsidiaries in the International business segment are accounted for as discontinued operations and have been designated as unrestricted subsidiaries in the 2016 Credit Agreement. Therefore, these subsidiaries are excluded from our adjusted financial measures for covenant compliance purposes.
|
(2)
|
In the third quarter of 2018, we recorded $10.4 million of restructuring costs. These costs included $10.0 million of charges associated with the operational alignment of a joint venture that was wholly acquired in the North America business segment, including $2.6 million of depreciation expense. Restructuring costs also included $0.4 million of operating expenses associated with International simplification efforts, including headcount reduction and professional fees.
|
(3)
|
In the third quarter of 2018, we recorded $4.5 million of supply chain transition costs which represent charges incurred to consolidate certain manufacturing and distribution facilities.
|
(4)
|
In the third quarter of 2017, we recorded a total of $3.0 million in charges for hurricane-related costs and customer-related charges.
|
|
|
Trailing Twelve Months Ended
|
||
(in millions)
|
|
September 30, 2018
|
||
GAAP net income
|
|
$
|
136.6
|
|
Interest expense, net
|
|
91.4
|
|
|
Income taxes
|
|
31.7
|
|
|
Depreciation and amortization
|
|
111.5
|
|
|
EBITDA
|
|
$
|
371.2
|
|
Adjustments:
|
|
|
||
Loss from discontinued operations, net of tax
(1)
|
|
28.8
|
|
|
Restructuring costs
(2)
|
|
13.2
|
|
|
Supply chain transition costs
(3)
|
|
4.5
|
|
|
Latin American subsidiary charges
(4)
|
|
0.5
|
|
|
Other costs
(5)
|
|
0.4
|
|
|
Adjusted EBITDA
|
|
$
|
418.6
|
|
|
|
|
||
Consolidated funded debt less qualified cash
|
|
$
|
1,695.8
|
|
|
|
|
||
Ratio of consolidated funded debt less qualified cash to Adjusted EBITDA
|
|
4.05 times
|
(1)
|
Certain subsidiaries in the International business segment are accounted for as discontinued operations and have been designated as unrestricted subsidiaries in the 2016 Credit Agreement. Therefore, these subsidiaries are excluded from our adjusted financial measures for covenant compliance purposes.
|
(2)
|
Restructuring costs represent $5.4 million and $7.8 million for the second and third quarters of 2018, respectively. These costs are related to the operational alignment of a wholly acquired joint venture in the North America business segment and International simplification efforts, including headcount reduction, professional fees and store closures.
|
(3)
|
In the third quarter of 2018, we recorded $4.5 million of supply chain transition costs which represent charges incurred to consolidate certain manufacturing and distribution facilities.
|
(4)
|
In the fourth quarter of 2017, we incurred $0.5 million of legal charges associated with a Latin American subsidiary.
|
(5)
|
In the fourth quarter of 2017, we incurred $0.4 million in costs associated with an early lease termination.
|
(in millions)
|
September 30, 2018
|
||
Total debt, net
|
$
|
1,689.0
|
|
Plus: Deferred financing costs
(1)
|
8.1
|
|
|
Total debt
|
1,697.1
|
|
|
Plus: Letters of credit outstanding
|
23.1
|
|
|
Consolidated funded debt
|
$
|
1,720.2
|
|
Less:
|
|
||
Domestic qualified cash
(2)
|
12.8
|
|
|
Foreign qualified cash
(2)
|
11.6
|
|
|
Consolidated funded debt less qualified cash
|
$
|
1,695.8
|
|
(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)
|
July 1, 2018 - July 31, 2018
|
|
—
|
(1)
|
$—
|
|
—
|
|
$226.9
|
August 1, 2018 - August 31, 2018
|
|
—
|
(1)
|
$—
|
|
—
|
|
$226.9
|
September 1, 2018 - September 30, 2018
|
|
10,604
|
(1)
|
$55.40
|
|
—
|
|
$226.9
|
Total
|
|
10,604
|
|
|
|
—
|
|
|
(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.
|
*
|
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: November 8, 2018
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
a.
|
Section 6.6(d) of the CSA is hereby amended and restated in its entirety to read as follows:
|
b.
|
The following new definition is hereby inserted in Exhibit I to the CSA in its appropriate alphabetical order:
|
c.
|
To the extent that, prior to the Effective Date (as defined in Section 6 below), the Lender has acquired any security interest in any Disregarded Obligor Receivables, the Lender shall be automatically deemed (i) to have released such security interest in such Disregarded Obligor Receivables and their proceeds, and (ii) to have consented to the sale or distribution of such Disregarded Obligor Receivables by the Borrower to TPNA (and, as applicable, by TPNA to SMMC) on such Effective Date.
|
Date: November 8, 2018
|
By:
|
/s/ SCOTT L. THOMPSON
|
|
|
Scott L. Thompson
|
|
|
Chairman, President and Chief Executive Officer
|
Date: November 8, 2018
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
Date: November 8, 2018
|
By:
|
/s/ SCOTT L. THOMPSON
|
|
|
Scott L. Thompson
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
Date: November 8, 2018
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|