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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Title of each class
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Trading Symbol(s)
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Name of exchange on which registered
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Common Stock, $0.01 par value
|
TPX
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New York Stock Exchange
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Page
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Three Months Ended
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||||||
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March 31,
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||||||
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2019
|
|
2018
|
||||
Net sales
|
$
|
690.9
|
|
|
$
|
637.4
|
|
Cost of sales
|
409.1
|
|
|
372.7
|
|
||
Gross profit
|
281.8
|
|
|
264.7
|
|
||
Selling and marketing expenses
|
153.5
|
|
|
145.4
|
|
||
General, administrative and other expenses
|
70.7
|
|
|
67.5
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(2.9
|
)
|
|
(3.9
|
)
|
||
Operating income
|
60.5
|
|
|
55.7
|
|
||
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|
|
|
||||
Other expense, net:
|
|
|
|
||||
Interest expense, net
|
22.4
|
|
|
22.7
|
|
||
Other income, net
|
(7.8
|
)
|
|
(2.6
|
)
|
||
Total other expense, net
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14.6
|
|
|
20.1
|
|
||
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|
|
|
||||
Income from continuing operations before income taxes
|
45.9
|
|
|
35.6
|
|
||
Income tax provision
|
(16.9
|
)
|
|
(10.0
|
)
|
||
Income from continuing operations
|
29.0
|
|
|
25.6
|
|
||
Loss from discontinued operations, net of tax
|
(0.4
|
)
|
|
(2.8
|
)
|
||
Net income before non-controlling interest
|
28.6
|
|
|
22.8
|
|
||
Less: Net income (loss) attributable to non-controlling interest
|
0.2
|
|
|
(0.3
|
)
|
||
Net income attributable to Tempur Sealy International, Inc.
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$
|
28.4
|
|
|
$
|
23.1
|
|
|
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|
|
||||
Earnings per common share:
|
|
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|
||||
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|
||||
Basic
|
|
|
|
||||
Earnings per share for continuing operations
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$
|
0.53
|
|
|
$
|
0.48
|
|
Loss per share for discontinued operations
|
(0.01
|
)
|
|
(0.05
|
)
|
||
Earnings per share
|
$
|
0.52
|
|
|
$
|
0.43
|
|
|
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|
||||
Diluted
|
|
|
|
||||
Earnings per share for continuing operations
|
$
|
0.52
|
|
|
$
|
0.47
|
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Loss per share for discontinued operations
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(0.01
|
)
|
|
(0.05
|
)
|
||
Earnings per share
|
$
|
0.51
|
|
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$
|
0.42
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|
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|
||||
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
54.7
|
|
|
54.3
|
|
||
Diluted
|
55.7
|
|
|
54.9
|
|
|
Three Months Ended
March 31, |
||||||
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2019
|
|
2018
|
||||
Net income before non-controlling interest
|
$
|
28.6
|
|
|
$
|
22.8
|
|
Other comprehensive income, net of tax
|
|
|
|
||||
Foreign currency translation adjustments
|
4.0
|
|
|
5.0
|
|
||
Pension benefits loss, net of tax
|
—
|
|
|
(0.6
|
)
|
||
Other comprehensive income, net of tax
|
4.0
|
|
|
4.4
|
|
||
Comprehensive income
|
32.6
|
|
|
27.2
|
|
||
Less: Comprehensive income (loss) attributable to non-controlling interest
|
0.2
|
|
|
(0.3
|
)
|
||
Comprehensive income attributable to Tempur Sealy International, Inc.
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$
|
32.4
|
|
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$
|
27.5
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
ASSETS
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(Unaudited)
|
|
|
||||
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|
||||
Current Assets:
|
|
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|
||||
Cash and cash equivalents
|
$
|
39.6
|
|
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$
|
45.8
|
|
Accounts receivable, net
|
356.4
|
|
|
321.5
|
|
||
Inventories
|
239.7
|
|
|
222.3
|
|
||
Prepaid expenses and other current assets
|
217.3
|
|
|
215.8
|
|
||
Total Current Assets
|
853.0
|
|
|
805.4
|
|
||
Property, plant and equipment, net
|
418.5
|
|
|
420.8
|
|
||
Goodwill
|
725.5
|
|
|
723.0
|
|
||
Other intangible assets, net
|
646.9
|
|
|
649.3
|
|
||
Operating lease right-of-use assets
|
191.9
|
|
|
—
|
|
||
Deferred income taxes
|
21.9
|
|
|
22.6
|
|
||
Other non-current assets
|
108.0
|
|
|
94.3
|
|
||
Total Assets
|
$
|
2,965.7
|
|
|
$
|
2,715.4
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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|
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|
||||
Current Liabilities:
|
|
|
|
|
|
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Accounts payable
|
$
|
245.7
|
|
|
$
|
253.0
|
|
Accrued expenses and other current liabilities
|
401.8
|
|
|
359.2
|
|
||
Current portion of long-term debt
|
55.5
|
|
|
47.1
|
|
||
Income taxes payable
|
22.5
|
|
|
9.7
|
|
||
Total Current Liabilities
|
725.5
|
|
|
669.0
|
|
||
Long-term debt, net
|
1,604.1
|
|
|
1,599.1
|
|
||
Long-term operating lease obligations
|
157.2
|
|
|
—
|
|
||
Deferred income taxes
|
115.5
|
|
|
117.5
|
|
||
Other non-current liabilities
|
109.9
|
|
|
112.3
|
|
||
Total Liabilities
|
2,712.2
|
|
|
2,497.9
|
|
||
|
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|
||||
Commitments and contingencies—see Note 10
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|
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|
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|
||||
Total Stockholders' Equity
|
253.5
|
|
|
217.5
|
|
||
Total Liabilities and Stockholders' Equity
|
$
|
2,965.7
|
|
|
$
|
2,715.4
|
|
|
|
|
Tempur Sealy International, Inc. Stockholders' Equity
|
|
|
|
|
||||||||||||||||||||||||||||||
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Redeemable
Non-controlling Interest
|
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
Non-controlling Interest in Subsidiaries
|
|
Total Stockholders' Equity
|
||||||||||||||||||||||
|
|
Shares Issued
|
|
At Par
|
|
Shares Issued
|
|
At Cost
|
|
Additional Paid in Capital
|
|
Retained Earnings
|
|
|
|
||||||||||||||||||||||
Balance as of December 31, 2018
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
44.7
|
|
|
$
|
(1,737.0
|
)
|
|
$
|
532.1
|
|
|
$
|
1,513.8
|
|
|
$
|
(95.3
|
)
|
|
$
|
2.9
|
|
|
$
|
217.5
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
28.4
|
|
|
|
|
|
|
28.4
|
|
||||||||||||||||
Net income attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
0.2
|
|
||||||||||||||||
Repurchase of interest in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.9
|
)
|
|
(1.9
|
)
|
||||||||||||||||
Foreign currency adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.0
|
|
|
|
|
4.0
|
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
(0.1
|
)
|
|
0.8
|
|
|
1.6
|
|
|
|
|
|
|
|
|
2.4
|
|
||||||||||||||
Issuances of PRSUs, RSUs, and DSUs
|
|
|
|
|
|
|
(0.2
|
)
|
|
3.2
|
|
|
(3.2
|
)
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Treasury stock repurchased
|
|
|
|
|
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
(0.8
|
)
|
||||||||||||||||
Treasury stock repurchased - PRSU/RSU/DSU releases
|
|
|
|
|
|
|
0.1
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
(2.9
|
)
|
|||||||||||||||
Amortization of unearned stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
6.6
|
|
||||||||||||||||
Balance, March 31, 2019
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
44.5
|
|
|
$
|
(1,736.7
|
)
|
|
$
|
537.1
|
|
|
$
|
1,542.2
|
|
|
$
|
(91.3
|
)
|
|
$
|
1.2
|
|
|
$
|
253.5
|
|
|
|
|
Tempur Sealy International, Inc. Stockholders' Equity
|
|
|
|
|
||||||||||||||||||||||||||||||
|
Redeemable
Non-controlling Interest
|
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
Non-controlling Interest in Subsidiaries
|
|
Total Stockholders' Equity
|
||||||||||||||||||||||
|
|
Shares Issued
|
|
At Par
|
|
Shares Issued
|
|
At Cost
|
|
Additional Paid in Capital
|
|
Retained Earnings
|
|
|
|
||||||||||||||||||||||
Balance as of December 31, 2017
|
$
|
2.2
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
45.0
|
|
|
$
|
(1,737.2
|
)
|
|
$
|
508.0
|
|
|
$
|
1,416.2
|
|
|
$
|
(75.5
|
)
|
|
$
|
—
|
|
|
$
|
112.5
|
|
Adoption of accounting standards effective January 1, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.9
|
)
|
|
(0.5
|
)
|
|
|
|
(3.4
|
)
|
|||||||||||||||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
|
23.1
|
|
||||||||||||||||
Net loss attributable to non-controlling interest
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||||
Adjustment to pension liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
(0.1
|
)
|
||||||||||||||||
Foreign currency adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.0
|
|
|
|
|
5.0
|
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
—
|
|
|
0.6
|
|
|
1.3
|
|
|
|
|
|
|
|
|
1.9
|
|
||||||||||||||
Issuances of PRSUs, RSUs, and DSUs
|
|
|
|
|
|
|
(0.1
|
)
|
|
2.0
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Treasury stock repurchased - PRSU/RSU/DSU releases
|
|
|
|
|
|
|
0.1
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
(2.9
|
)
|
|||||||||||||||
Amortization of unearned stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
6.3
|
|
|
|
|
|
|
|
|
6.3
|
|
||||||||||||||||
Balance, March 31, 2018
|
$
|
1.9
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
45.0
|
|
|
$
|
(1,737.5
|
)
|
|
$
|
513.6
|
|
|
$
|
1,436.4
|
|
|
$
|
(71.1
|
)
|
|
$
|
—
|
|
|
$
|
142.4
|
|
|
March 31,
|
|
December 31,
|
||||
(in millions)
|
2019
|
|
2018
|
||||
Finished goods
|
$
|
154.6
|
|
|
$
|
148.9
|
|
Work-in-process
|
12.0
|
|
|
11.8
|
|
||
Raw materials and supplies
|
73.1
|
|
|
61.6
|
|
||
|
$
|
239.7
|
|
|
$
|
222.3
|
|
(in millions)
|
|
||
Balance as of December 31, 2018
|
$
|
34.3
|
|
Amounts accrued
|
24.6
|
|
|
Returns charged to accrual
|
(24.0
|
)
|
|
Balance as of March 31, 2019
|
$
|
34.9
|
|
(in millions)
|
|
||
Balance as of December 31, 2018
|
$
|
36.4
|
|
Amounts accrued
|
7.9
|
|
|
Warranties charged to accrual
|
(7.2
|
)
|
|
Balance as of March 31, 2019
|
$
|
37.1
|
|
|
Three Months Ended March 31, 2019
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||||
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale
|
$
|
501.8
|
|
|
$
|
114.1
|
|
|
$
|
615.9
|
|
|
$
|
454.0
|
|
|
$
|
129.1
|
|
|
$
|
583.1
|
|
Direct
|
42.2
|
|
|
32.8
|
|
|
75.0
|
|
|
31.0
|
|
|
23.3
|
|
|
54.3
|
|
||||||
Net sales
|
$
|
544.0
|
|
|
$
|
146.9
|
|
|
$
|
690.9
|
|
|
$
|
485.0
|
|
|
$
|
152.4
|
|
|
$
|
637.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Product
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Bedding products
|
$
|
514.4
|
|
|
$
|
115.4
|
|
|
$
|
629.8
|
|
|
$
|
452.3
|
|
|
$
|
123.7
|
|
|
$
|
576.0
|
|
Other products
|
29.6
|
|
|
31.5
|
|
|
61.1
|
|
|
32.7
|
|
|
28.7
|
|
|
61.4
|
|
||||||
Net sales
|
$
|
544.0
|
|
|
$
|
146.9
|
|
|
$
|
690.9
|
|
|
$
|
485.0
|
|
|
$
|
152.4
|
|
|
$
|
637.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Geographical region
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
497.2
|
|
|
$
|
—
|
|
|
$
|
497.2
|
|
|
$
|
440.2
|
|
|
$
|
—
|
|
|
$
|
440.2
|
|
Canada
|
46.8
|
|
|
—
|
|
|
46.8
|
|
|
44.8
|
|
|
—
|
|
|
44.8
|
|
||||||
International
|
—
|
|
|
146.9
|
|
|
146.9
|
|
|
—
|
|
|
152.4
|
|
|
152.4
|
|
||||||
Net sales
|
$
|
544.0
|
|
|
$
|
146.9
|
|
|
$
|
690.9
|
|
|
$
|
485.0
|
|
|
$
|
152.4
|
|
|
$
|
637.4
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net sales
|
$
|
0.2
|
|
|
$
|
10.6
|
|
Cost of sales
|
0.2
|
|
|
7.4
|
|
||
Gross profit
|
—
|
|
|
3.2
|
|
||
Selling and marketing expenses
|
0.1
|
|
|
3.5
|
|
||
General, administrative and other expenses
|
0.6
|
|
|
1.5
|
|
||
Operating loss
|
(0.7
|
)
|
|
(1.8
|
)
|
||
|
|
|
|
||||
Interest (income) expense, net and other
|
(0.3
|
)
|
|
1.0
|
|
||
|
|
|
|
||||
Loss from discontinued operations before income taxes
|
(0.4
|
)
|
|
(2.8
|
)
|
||
Income tax provision
|
—
|
|
|
—
|
|
||
Net loss from discontinued operations, net of tax
|
$
|
(0.4
|
)
|
|
$
|
(2.8
|
)
|
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
||||||
Balance as of December 31, 2018
|
$
|
571.1
|
|
|
$
|
151.9
|
|
|
$
|
723.0
|
|
Foreign currency translation and other
|
1.3
|
|
|
1.2
|
|
|
2.5
|
|
|||
Balance as of March 31, 2019
|
$
|
572.4
|
|
|
$
|
153.1
|
|
|
$
|
725.5
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
|
||||||||
(in millions, except percentages)
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Maturity Date
|
||||
2016 Credit Agreement
|
|
|
|
|
|
|
|
|
|
||||
Term A Facility
|
$
|
467.5
|
|
|
(1)
|
|
$
|
525.0
|
|
|
(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
|
76.0
|
|
|
(3)
|
|
9.1
|
|
|
(3)
|
|
April 6, 2021
|
||
Financing/capital lease obligations (4)
|
65.8
|
|
|
|
|
66.7
|
|
|
|
|
Various
|
||
Other
|
7.5
|
|
|
|
|
3.0
|
|
|
|
|
Various
|
||
Total debt
|
1,666.8
|
|
|
|
|
1,653.8
|
|
|
|
|
|
||
Less: deferred financing costs
|
7.2
|
|
|
|
|
7.6
|
|
|
|
|
|
||
Total debt, net
|
1,659.6
|
|
|
|
|
1,646.2
|
|
|
|
|
|
||
Less: current portion
|
55.5
|
|
|
|
|
47.1
|
|
|
|
|
|
||
Total long-term debt, net
|
$
|
1,604.1
|
|
|
|
|
$
|
1,599.1
|
|
|
|
|
|
(1)
|
Interest at LIBOR plus applicable margin of 1.75% as of March 31, 2019.
|
(2)
|
Interest at LIBOR plus applicable margin of 2.00% as of December 31, 2018.
|
(3)
|
Interest at one month LIBOR index plus 80 basis points.
|
(4)
|
Financing/capital lease obligations are a non-cash financing activity.
|
|
|
Fair Value
|
||||||
(in millions)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
2023 Senior Notes
|
|
$
|
457.9
|
|
|
$
|
435.6
|
|
2026 Senior Notes
|
|
600.3
|
|
|
549.3
|
|
(in millions)
|
|
|
|
March 31, 2019
|
||
Assets
|
|
|
|
|
||
Operating lease assets
|
|
Operating lease right-of-use assets
|
|
$
|
191.9
|
|
Finance lease assets
|
|
Property, plant and equipment, net
|
|
57.2
|
|
|
Total leased assets
|
|
|
|
$
|
249.1
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|
|
||
Short-term:
|
|
|
|
|
||
Operating lease obligations
|
|
Accrued expenses and other current liabilities
|
|
$
|
40.7
|
|
Finance lease obligations
|
|
Current portion of long-term debt
|
|
6.8
|
|
|
Long-term:
|
|
|
|
|
||
Operating lease obligations
|
|
Long-term operating lease obligations
|
|
157.2
|
|
|
Finance lease obligations
|
|
Long-term debt, net
|
|
59.0
|
|
|
Total lease obligations
|
|
|
|
$
|
263.7
|
|
|
|
Three Months Ended
|
||
(in millions)
|
|
March 31, 2019
|
||
Operating lease expense (1)
|
|
$
|
19.1
|
|
Finance lease expense:
|
|
|
||
Amortization of right-of-use assets
|
|
1.9
|
|
|
Interest on lease obligations
|
|
1.2
|
|
|
Total lease expense
|
|
$
|
22.2
|
|
(1)
|
Includes short-term leases and variable lease expenses, which are immaterial.
|
(in millions)
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
Year Ended December 31,
|
|
|
|
|
|
|
||||||
2019 (excluding the three months ended March 31, 2019)
|
|
$
|
47.7
|
|
|
$
|
8.6
|
|
|
$
|
56.3
|
|
2020
|
|
55.1
|
|
|
11.2
|
|
|
66.3
|
|
|||
2021
|
|
48.0
|
|
|
10.9
|
|
|
58.9
|
|
|||
2022
|
|
39.4
|
|
|
9.0
|
|
|
48.4
|
|
|||
2023
|
|
31.0
|
|
|
7.5
|
|
|
38.5
|
|
|||
Thereafter
|
|
105.3
|
|
|
43.2
|
|
|
148.5
|
|
|||
Total lease payments
|
|
326.5
|
|
|
90.4
|
|
|
416.9
|
|
|||
Less: Interest
|
|
128.6
|
|
|
24.6
|
|
|
153.2
|
|
|||
Present value of lease obligations
|
|
$
|
197.9
|
|
|
$
|
65.8
|
|
|
$
|
263.7
|
|
|
|
March 31, 2019
|
|
Weighted average remaining lease term (years):
|
|
|
|
Operating leases
|
|
6.1
|
|
Finance leases
|
|
9.9
|
|
|
|
|
|
Weighted average discount rate:
|
|
|
|
Operating leases
|
|
5.67
|
%
|
Finance leases
|
|
6.37
|
%
|
|
|
Three Months Ended
|
||
(in millions)
|
|
March 31, 2019
|
||
Cash paid for amounts included in the measurement of lease obligations:
|
|
|
||
Operating cash flows paid for operating leases
|
|
$
|
13.4
|
|
Financing cash flows paid for finance leases
|
|
1.6
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for new operating lease obligations
|
|
$
|
5.4
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Foreign Currency Translation
|
|
|
|
||||
Balance at beginning of period
|
$
|
(91.7
|
)
|
|
$
|
(72.8
|
)
|
Other comprehensive loss:
|
|
|
|
||||
Foreign currency translation adjustments (1)
|
4.0
|
|
|
5.0
|
|
||
Balance at end of period
|
$
|
(87.7
|
)
|
|
$
|
(67.8
|
)
|
|
|
|
|
||||
Pensions
|
|
|
|
||||
Balance at beginning of period
|
$
|
(3.6
|
)
|
|
$
|
(2.7
|
)
|
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
|
$
|
(3.6
|
)
|
|
$
|
(3.3
|
)
|
(1)
|
In 2019 and 2018, 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.
|
(in millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
Taxes
|
$
|
132.4
|
|
|
$
|
136.8
|
|
Wages and benefits
|
47.9
|
|
|
43.7
|
|
||
Operating lease obligations
|
40.7
|
|
|
—
|
|
||
Advertising
|
31.0
|
|
|
46.1
|
|
||
Sales returns
|
22.7
|
|
|
22.0
|
|
||
Warranty
|
15.1
|
|
|
14.9
|
|
||
Rebates
|
8.7
|
|
|
11.6
|
|
||
Other
|
103.3
|
|
|
84.1
|
|
||
|
$
|
401.8
|
|
|
$
|
359.2
|
|
|
Three Months Ended
March 31, |
||||||
(in millions)
|
2019
|
|
2018
|
||||
PRSU expense
|
$
|
0.3
|
|
|
$
|
0.8
|
|
Option expense
|
1.2
|
|
|
1.9
|
|
||
RSU/DSU expense
|
5.1
|
|
|
3.6
|
|
||
Total stock-based compensation expense
|
$
|
6.6
|
|
|
$
|
6.3
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(in millions, except per common share amounts)
|
2019
|
|
2018
|
||||
Numerator:
|
|
|
|
||||
Income from continuing operations, net of loss attributable to non-controlling interest
|
$
|
28.8
|
|
|
$
|
25.9
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
|
|||
Denominator for basic earnings per common share-weighted average shares
|
54.7
|
|
|
54.3
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
Employee stock-based compensation
|
1.0
|
|
|
0.6
|
|
||
Denominator for diluted earnings per common share-adjusted weighted average shares
|
55.7
|
|
|
54.9
|
|
||
|
|
|
|
||||
Basic earnings per common share for continuing operations
|
$
|
0.53
|
|
|
$
|
0.48
|
|
|
|
|
|
||||
Diluted earnings per common share for continuing operations
|
$
|
0.52
|
|
|
$
|
0.47
|
|
(in millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
North America
|
$
|
3,015.1
|
|
|
$
|
2,788.1
|
|
International
|
632.9
|
|
|
604.8
|
|
||
Corporate
|
562.9
|
|
|
569.0
|
|
||
Inter-segment eliminations
|
(1,245.2
|
)
|
|
(1,246.5
|
)
|
||
Total assets
|
$
|
2,965.7
|
|
|
$
|
2,715.4
|
|
(in millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
North America
|
$
|
316.3
|
|
|
$
|
317.5
|
|
International
|
50.1
|
|
|
51.1
|
|
||
Corporate
|
52.1
|
|
|
52.2
|
|
||
Total property, plant and equipment, net
|
$
|
418.5
|
|
|
$
|
420.8
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
544.0
|
|
|
$
|
146.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
690.9
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
1.0
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
(1.3
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
1.0
|
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
204.4
|
|
|
77.4
|
|
|
—
|
|
|
—
|
|
|
281.8
|
|
|||||
Operating income (loss)
|
64.3
|
|
|
25.2
|
|
|
(29.0
|
)
|
|
—
|
|
|
60.5
|
|
|||||
Income (loss) from continuing operations before income taxes
|
62.4
|
|
|
29.8
|
|
|
(46.3
|
)
|
|
—
|
|
|
45.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization (1)
|
$
|
15.0
|
|
|
$
|
3.3
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
28.1
|
|
Capital expenditures
|
12.9
|
|
|
2.9
|
|
|
3.3
|
|
|
—
|
|
|
19.1
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
485.0
|
|
|
$
|
152.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
637.4
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
0.6
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
(0.8
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
0.5
|
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
184.0
|
|
|
80.7
|
|
|
|
|
—
|
|
|
264.7
|
|
||||||
Operating income (loss)
|
54.0
|
|
|
28.7
|
|
|
(27.0
|
)
|
|
—
|
|
|
55.7
|
|
|||||
Income (loss) from continuing operations before income taxes
|
51.8
|
|
|
29.3
|
|
|
(45.5
|
)
|
|
—
|
|
|
35.6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization (1)
|
$
|
13.4
|
|
|
$
|
3.6
|
|
|
$
|
10.1
|
|
|
$
|
—
|
|
|
$
|
27.1
|
|
Capital expenditures
|
16.8
|
|
|
2.9
|
|
|
2.1
|
|
|
—
|
|
|
21.8
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(in millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
United States
|
$
|
349.4
|
|
|
$
|
350.7
|
|
Canada
|
19.0
|
|
|
19.1
|
|
||
Other International
|
50.1
|
|
|
51.0
|
|
||
Total property, plant and equipment, net
|
$
|
418.5
|
|
|
$
|
420.8
|
|
Total International
|
$
|
69.1
|
|
|
$
|
70.1
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
United States
|
$
|
497.2
|
|
|
$
|
440.2
|
|
Canada
|
46.8
|
|
|
44.8
|
|
||
Other International
|
146.9
|
|
|
152.4
|
|
||
Total net sales
|
$
|
690.9
|
|
|
$
|
637.4
|
|
Total International
|
$
|
193.7
|
|
|
$
|
197.2
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
514.0
|
|
|
$
|
193.3
|
|
|
$
|
(16.4
|
)
|
|
$
|
690.9
|
|
Cost of sales
|
—
|
|
|
316.3
|
|
|
109.2
|
|
|
(16.4
|
)
|
|
409.1
|
|
|||||
Gross profit
|
—
|
|
|
197.7
|
|
|
84.1
|
|
|
—
|
|
|
281.8
|
|
|||||
Selling and marketing expenses
|
2.8
|
|
|
101.4
|
|
|
49.4
|
|
|
(0.1
|
)
|
|
153.5
|
|
|||||
General, administrative and other expenses
|
4.3
|
|
|
52.6
|
|
|
14.4
|
|
|
(0.6
|
)
|
|
70.7
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(2.9
|
)
|
|
—
|
|
|
(2.9
|
)
|
|||||
Operating (loss) income
|
(7.1
|
)
|
|
43.7
|
|
|
23.2
|
|
|
0.7
|
|
|
60.5
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third party interest expense, net
|
14.1
|
|
|
7.7
|
|
|
0.6
|
|
|
—
|
|
|
22.4
|
|
|||||
Intercompany interest (income) expense, net
|
(2.6
|
)
|
|
2.4
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense, net
|
11.5
|
|
|
10.1
|
|
|
0.8
|
|
|
—
|
|
|
22.4
|
|
|||||
Other income, net
|
—
|
|
|
(3.0
|
)
|
|
(5.1
|
)
|
|
0.3
|
|
|
(7.8
|
)
|
|||||
Total other expense (income), net
|
11.5
|
|
|
7.1
|
|
|
(4.3
|
)
|
|
0.3
|
|
|
14.6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
44.3
|
|
|
22.1
|
|
|
—
|
|
|
(66.4
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
25.7
|
|
|
58.7
|
|
|
27.5
|
|
|
(66.0
|
)
|
|
45.9
|
|
|||||
Income tax benefit (provision)
|
2.9
|
|
|
(14.4
|
)
|
|
(5.4
|
)
|
|
—
|
|
|
(16.9
|
)
|
|||||
Income from continuing operations
|
28.6
|
|
|
44.3
|
|
|
22.1
|
|
|
(66.0
|
)
|
|
29.0
|
|
|||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|||||
Net income before non-controlling interest
|
28.6
|
|
|
44.3
|
|
|
22.1
|
|
|
(66.4
|
)
|
|
28.6
|
|
|||||
Less: Net income attributable to non-controlling interest
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
(0.2
|
)
|
|
0.2
|
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
28.4
|
|
|
$
|
44.3
|
|
|
$
|
21.9
|
|
|
$
|
(66.2
|
)
|
|
$
|
28.4
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
32.4
|
|
|
$
|
46.6
|
|
|
$
|
23.6
|
|
|
$
|
(70.2
|
)
|
|
$
|
32.4
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
440.7
|
|
|
$
|
224.8
|
|
|
$
|
(28.1
|
)
|
|
$
|
637.4
|
|
Cost of sales
|
—
|
|
|
266.4
|
|
|
131.2
|
|
|
(24.9
|
)
|
|
372.7
|
|
|||||
Gross profit
|
—
|
|
|
174.3
|
|
|
93.6
|
|
|
(3.2
|
)
|
|
264.7
|
|
|||||
Selling and marketing expenses
|
1.9
|
|
|
93.1
|
|
|
53.9
|
|
|
(3.5
|
)
|
|
145.4
|
|
|||||
General, administrative and other expenses
|
4.7
|
|
|
47.5
|
|
|
16.8
|
|
|
(1.5
|
)
|
|
67.5
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(3.9
|
)
|
|
—
|
|
|
(3.9
|
)
|
|||||
Operating (loss) income
|
(6.6
|
)
|
|
33.7
|
|
|
26.8
|
|
|
1.8
|
|
|
55.7
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Third party interest expense, net
|
14.9
|
|
|
6.9
|
|
|
1.1
|
|
|
(0.2
|
)
|
|
22.7
|
|
|||||
Intercompany interest (income) expense, net
|
(1.8
|
)
|
|
1.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense, net
|
13.1
|
|
|
8.7
|
|
|
1.1
|
|
|
(0.2
|
)
|
|
22.7
|
|
|||||
Other (income) expense, net
|
—
|
|
|
(2.2
|
)
|
|
0.4
|
|
|
(0.8
|
)
|
|
(2.6
|
)
|
|||||
Total other expense, net
|
13.1
|
|
|
6.5
|
|
|
1.5
|
|
|
(1.0
|
)
|
|
20.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
39.1
|
|
|
19.0
|
|
|
—
|
|
|
(58.1
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
19.4
|
|
|
46.2
|
|
|
25.3
|
|
|
(55.3
|
)
|
|
35.6
|
|
|||||
Income tax benefit (provision)
|
3.4
|
|
|
(7.1
|
)
|
|
(6.3
|
)
|
|
—
|
|
|
(10.0
|
)
|
|||||
Income from continuing operations
|
22.8
|
|
|
39.1
|
|
|
19.0
|
|
|
(55.3
|
)
|
|
25.6
|
|
|||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.8
|
)
|
|
(2.8
|
)
|
|||||
Net income before non-controlling interest
|
22.8
|
|
|
39.1
|
|
|
19.0
|
|
|
(58.1
|
)
|
|
22.8
|
|
|||||
Less: Net loss attributable to non-controlling interest
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
0.3
|
|
|
(0.3
|
)
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
23.1
|
|
|
$
|
39.1
|
|
|
$
|
19.3
|
|
|
$
|
(58.4
|
)
|
|
$
|
23.1
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
27.5
|
|
|
$
|
38.5
|
|
|
$
|
24.3
|
|
|
$
|
(62.8
|
)
|
|
$
|
27.5
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
0.3
|
|
|
$
|
11.3
|
|
|
$
|
28.0
|
|
|
$
|
—
|
|
|
$
|
39.6
|
|
Accounts receivable, net
|
—
|
|
|
15.1
|
|
|
294.4
|
|
|
46.9
|
|
|
356.4
|
|
|||||
Inventories
|
—
|
|
|
172.0
|
|
|
67.7
|
|
|
—
|
|
|
239.7
|
|
|||||
Prepaid expenses and other current assets
|
282.1
|
|
|
65.2
|
|
|
149.1
|
|
|
(279.1
|
)
|
|
217.3
|
|
|||||
Total Current Assets
|
282.4
|
|
|
263.6
|
|
|
539.2
|
|
|
(232.2
|
)
|
|
853.0
|
|
|||||
Property, plant and equipment, net
|
—
|
|
|
349.4
|
|
|
69.1
|
|
|
—
|
|
|
418.5
|
|
|||||
Goodwill
|
—
|
|
|
508.8
|
|
|
216.7
|
|
|
—
|
|
|
725.5
|
|
|||||
Other intangible assets, net
|
—
|
|
|
569.7
|
|
|
77.2
|
|
|
—
|
|
|
646.9
|
|
|||||
Operating lease right-of-use assets
|
—
|
|
|
145.0
|
|
|
46.9
|
|
|
—
|
|
|
191.9
|
|
|||||
Deferred income taxes
|
13.4
|
|
|
—
|
|
|
21.9
|
|
|
(13.4
|
)
|
|
21.9
|
|
|||||
Other non-current assets
|
0.6
|
|
|
63.1
|
|
|
44.3
|
|
|
—
|
|
|
108.0
|
|
|||||
Net investment in subsidiaries
|
710.8
|
|
|
166.8
|
|
|
—
|
|
|
(877.6
|
)
|
|
—
|
|
|||||
Due from affiliates
|
425.4
|
|
|
144.9
|
|
|
15.9
|
|
|
(586.2
|
)
|
|
—
|
|
|||||
Total Assets
|
$
|
1,432.6
|
|
|
$
|
2,211.3
|
|
|
$
|
1,031.2
|
|
|
$
|
(1,709.4
|
)
|
|
$
|
2,965.7
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable
|
$
|
—
|
|
|
$
|
141.6
|
|
|
$
|
57.2
|
|
|
$
|
46.9
|
|
|
$
|
245.7
|
|
Accrued expenses and other current liabilities
|
20.5
|
|
|
166.6
|
|
|
214.7
|
|
|
—
|
|
|
401.8
|
|
|||||
Current portion of long-term debt
|
—
|
|
|
48.0
|
|
|
7.5
|
|
|
—
|
|
|
55.5
|
|
|||||
Income taxes payable
|
—
|
|
|
290.6
|
|
|
11.0
|
|
|
(279.1
|
)
|
|
22.5
|
|
|||||
Total Current Liabilities
|
20.5
|
|
|
646.8
|
|
|
290.4
|
|
|
(232.2
|
)
|
|
725.5
|
|
|||||
Long-term debt, net
|
1,043.3
|
|
|
484.8
|
|
|
76.0
|
|
|
—
|
|
|
1,604.1
|
|
|||||
Long-term operating lease obligations
|
—
|
|
|
124.7
|
|
|
32.5
|
|
|
—
|
|
|
157.2
|
|
|||||
Deferred income taxes
|
—
|
|
|
116.6
|
|
|
12.3
|
|
|
(13.4
|
)
|
|
115.5
|
|
|||||
Other non-current liabilities
|
0.1
|
|
|
57.0
|
|
|
52.8
|
|
|
—
|
|
|
109.9
|
|
|||||
Due to affiliates
|
115.2
|
|
|
70.6
|
|
|
400.4
|
|
|
(586.2
|
)
|
|
—
|
|
|||||
Total Liabilities
|
1,179.1
|
|
|
1,500.5
|
|
|
864.4
|
|
|
(831.8
|
)
|
|
2,712.2
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Stockholders' Equity
|
253.5
|
|
|
710.8
|
|
|
166.8
|
|
|
(877.6
|
)
|
|
253.5
|
|
|||||
Total Liabilities and Stockholders’ Equity
|
$
|
1,432.6
|
|
|
$
|
2,211.3
|
|
|
$
|
1,031.2
|
|
|
$
|
(1,709.4
|
)
|
|
$
|
2,965.7
|
|
•
|
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 8.4% to $690.9 million from $637.4 million in the first quarter of 2018. On a constant currency basis, which is a non-GAAP financial measure, total net sales increased 10.4%, with an increase of 12.7% in the North America business segment and an increase of 3.0% in the International business segment.
|
•
|
Gross margin was 40.8% as compared to 41.5% in the first quarter of 2018.
|
•
|
Operating income increased 8.6% to $60.5 million as compared to $55.7 million in the first quarter of 2018. Operating income in the first quarter of 2019 included $3.3 million of acquisition-related and other costs. Adjusted operating income, which is a non-GAAP financial measure, increased 14.5% to $63.8 million as compared to $55.7 million in the first quarter of 2018. The Company had no adjustments to operating income in the first quarter of 2018.
|
•
|
Net income increased 22.9% to $28.4 million as compared to $23.1 million in the first quarter of 2018. Adjusted net income, which is a non-GAAP financial measure, increased 18.7% to $29.8 million as compared to $25.1 million in the first quarter of 2018.
|
•
|
Earnings before interest, tax, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure, increased 16.2% to $96.3 million as compared to $82.9 million for the first quarter of 2018. Adjusted EBITDA, which is a non-GAAP financial measure, increased 8.3% to $92.8 million as compared to $85.7 million in the first quarter of 2018.
|
•
|
Earnings per diluted share ("EPS") increased 21.4% to $0.51 as compared to $0.42 in the first quarter of 2018. Adjusted EPS, which is a non-GAAP financial measure, increased 17.4% to $0.54 as compared to $0.46 in the first quarter of 2018.
|
|
Three Months Ended March 31,
|
||||||||||||
(in millions, except percentages and per share amounts)
|
2019
|
|
2018
|
||||||||||
Net sales
|
$
|
690.9
|
|
|
100.0
|
%
|
|
$
|
637.4
|
|
|
100.0
|
%
|
Cost of sales
|
409.1
|
|
|
59.2
|
|
|
372.7
|
|
|
58.5
|
|
||
Gross profit
|
281.8
|
|
|
40.8
|
|
|
264.7
|
|
|
41.5
|
|
||
Selling and marketing expenses
|
153.5
|
|
|
22.2
|
|
|
145.4
|
|
|
22.8
|
|
||
General, administrative and other expenses
|
70.7
|
|
|
10.2
|
|
|
67.5
|
|
|
10.6
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(2.9
|
)
|
|
(0.4
|
)
|
|
(3.9
|
)
|
|
(0.6
|
)
|
||
Operating income
|
60.5
|
|
|
8.8
|
|
|
55.7
|
|
|
8.7
|
|
||
|
|
|
|
|
|
|
|
||||||
Other expense, net:
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
22.4
|
|
|
3.2
|
|
|
22.7
|
|
|
3.6
|
|
||
Other income, net
|
(7.8
|
)
|
|
(1.1
|
)
|
|
(2.6
|
)
|
|
(0.4
|
)
|
||
Total other expense, net
|
14.6
|
|
|
2.1
|
|
|
20.1
|
|
|
3.2
|
|
||
|
|
|
|
|
|
|
|
||||||
Income from continuing operations before income taxes
|
45.9
|
|
|
6.6
|
|
|
35.6
|
|
|
5.6
|
|
||
Income tax provision
|
(16.9
|
)
|
|
(2.4
|
)
|
|
(10.0
|
)
|
|
(1.6
|
)
|
||
Income from continuing operations
|
29.0
|
|
|
4.2
|
|
|
25.6
|
|
|
4.0
|
|
||
Loss from discontinued operations, net of tax
|
(0.4
|
)
|
|
(0.1
|
)
|
|
(2.8
|
)
|
|
(0.4
|
)
|
||
Net income before non-controlling interest
|
28.6
|
|
|
4.1
|
|
|
22.8
|
|
|
3.6
|
|
||
Less: Net income (loss) attributable to non-controlling interest
|
0.2
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
28.4
|
|
|
4.1
|
%
|
|
$
|
23.1
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
0.53
|
|
|
|
|
$
|
0.48
|
|
|
|
||
Loss per share for discontinued operations
|
(0.01
|
)
|
|
|
|
(0.05
|
)
|
|
|
||||
Earnings per share
|
$
|
0.52
|
|
|
|
|
$
|
0.43
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
0.52
|
|
|
|
|
$
|
0.47
|
|
|
|
||
Loss per share for discontinued operations
|
(0.01
|
)
|
|
|
|
(0.05
|
)
|
|
|
||||
Earnings per share
|
$
|
0.51
|
|
|
|
|
$
|
0.42
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||
Basic
|
54.7
|
|
|
|
|
54.3
|
|
|
|
||||
Diluted
|
55.7
|
|
|
|
|
54.9
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
||||||||||||||||||
Net sales by channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale channel
|
$
|
615.9
|
|
|
$
|
583.1
|
|
|
$
|
501.8
|
|
|
$
|
454.0
|
|
|
$
|
114.1
|
|
|
$
|
129.1
|
|
Direct channel
|
75.0
|
|
|
54.3
|
|
|
42.2
|
|
|
31.0
|
|
|
32.8
|
|
|
23.3
|
|
||||||
Total net sales
|
$
|
690.9
|
|
|
$
|
637.4
|
|
|
$
|
544.0
|
|
|
$
|
485.0
|
|
|
$
|
146.9
|
|
|
$
|
152.4
|
|
•
|
North America net sales increased $59.0 million, or 12.2%. Net sales in the Wholesale channel increased $47.8 million, or 10.5%, driven by new Tempur product introductions. Net sales in our Direct channel increased $11.2 million, or 36.1%, driven by growth from expanded retail stores. On a constant currency basis, North America net sales increased 12.7%.
|
•
|
International net sales decreased $5.5 million, or 3.6%. On a constant currency basis, International net sales increased 3.0%, driven primarily by Direct channel growth. Net sales in the Wholesale channel decreased 5.5% on a constant currency basis, primarily driven by a macroeconomic slowdown in Europe. Net sales in the Direct channel increased 49.8% on a constant currency basis, driven by growth from company-owned stores.
|
|
|
Three Months Ended March 31,
|
|
|
|||||||||||||
|
|
2019
|
|
2018
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
204.4
|
|
|
37.6
|
%
|
|
$
|
184.0
|
|
|
37.9
|
%
|
|
(0.3
|
)%
|
International
|
|
77.4
|
|
|
52.7
|
%
|
|
80.7
|
|
|
53.0
|
%
|
|
(0.3
|
)%
|
||
Consolidated gross margin
|
|
$
|
281.8
|
|
|
40.8
|
%
|
|
$
|
264.7
|
|
|
41.5
|
%
|
|
(0.7
|
)%
|
•
|
North America gross margin declined 30 basis points. The decline in gross margin was primarily driven by commodity cost inflation of 150 basis points, increased floor model expenses of 110 basis points and unfavorable merchandising mix of 100 basis points. These were partially offset by favorable brand mix of 180 basis points and favorable pricing of 130 basis points.
|
•
|
International gross margin declined 30 basis points. The decline in gross margin was primarily driven by unfavorable foreign exchange of 110 basis points, which was partially offset by favorable operational improvements of 70 basis points.
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
|
Corporate
|
||||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Advertising expenses
|
$
|
62.5
|
|
|
$
|
62.9
|
|
|
$
|
50.5
|
|
|
$
|
50.2
|
|
|
$
|
12.0
|
|
|
$
|
12.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other selling and marketing expenses
|
91.0
|
|
|
82.5
|
|
|
56.6
|
|
|
48.6
|
|
|
31.6
|
|
|
32.0
|
|
|
2.8
|
|
|
1.9
|
|
||||||||
General, administrative and other expenses
|
70.7
|
|
|
67.5
|
|
|
33.0
|
|
|
31.2
|
|
|
11.5
|
|
|
11.2
|
|
|
26.2
|
|
|
25.1
|
|
||||||||
Total operating expenses
|
$
|
224.2
|
|
|
$
|
212.9
|
|
|
$
|
140.1
|
|
|
$
|
130.0
|
|
|
$
|
55.1
|
|
|
$
|
55.9
|
|
|
$
|
29.0
|
|
|
$
|
27.0
|
|
•
|
North America operating expenses increased $10.1 million, or 7.8%, and decreased 100 basis points as a percentage of net sales. Operating expenses increased primarily due to sales commissions, other selling and marketing investments and incremental retail stores. We expect advertising expenses to increase in subsequent quarters of 2019 after the completion of our Tempur and Stearns & Foster product launches.
|
•
|
International operating expenses decreased $0.8 million, or 1.4%, and increased 80 basis points as a percentage of net sales.
|
•
|
Corporate operating expenses increased $2.0 million, or 7.4%, primarily driven by $3.0 million of professional fees related to the Sleep Outfitters acquisition.
|
|
|
Three Months Ended March 31,
|
|
|
|||||||||||||
|
|
2019
|
|
2018
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Operating Income
|
|
Operating Margin
|
|
Operating Income
|
|
Operating Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
64.3
|
|
|
11.8
|
%
|
|
$
|
54.0
|
|
|
11.1
|
%
|
|
0.7
|
%
|
International
|
|
25.2
|
|
|
17.2
|
%
|
|
28.7
|
|
|
18.8
|
%
|
|
(1.6
|
)%
|
||
|
|
89.5
|
|
|
|
|
82.7
|
|
|
|
|
|
|||||
Corporate expenses
|
|
(29.0
|
)
|
|
|
|
(27.0
|
)
|
|
|
|
|
|||||
Total operating income
|
|
$
|
60.5
|
|
|
8.8
|
%
|
|
$
|
55.7
|
|
|
8.7
|
%
|
|
0.1
|
%
|
•
|
North America operating income increased $10.3 million and operating margin improved 70 basis points. The improvement in operating margin was primarily driven by improved operating expense leverage of 110 basis points, partially offset by the decline in gross margin.
|
•
|
International operating income decreased $3.5 million and operating margin declined 160 basis points. The decline in operating margin was primarily driven by the decline in operating expense leverage of 70 basis points, unfavorable performance in the Asia-Pacific joint venture of 60 basis points and by the decline in gross margin.
|
•
|
Corporate operating expenses increased $2.0 million, which negatively impacted our consolidated operating margin by 30 basis points. The increase in operating expenses is primarily driven by $3.0 million of professional fees related to the Sleep Outfitters acquisition.
|
|
Three Months Ended March 31,
|
|||||||||
(in millions, except percentages)
|
2019
|
|
2018
|
|
% Change
|
|||||
Interest expense, net
|
$
|
22.4
|
|
|
$
|
22.7
|
|
|
(1.3
|
)%
|
|
|
Three Months Ended March 31,
|
|||||||||
(in millions, except percentages)
|
|
2019
|
|
2018
|
|
% Change
|
|||||
Income tax provision
|
|
$
|
16.9
|
|
|
$
|
10.0
|
|
|
69.0
|
%
|
Effective tax rate
|
|
36.8
|
%
|
|
28.1
|
%
|
|
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
|
2019
|
|
2018
|
||||
Net cash provided by (used in) continuing operations:
|
|
|
|
|
||||
Operating activities
|
|
$
|
4.6
|
|
|
$
|
0.9
|
|
Investing activities
|
|
(20.3
|
)
|
|
(17.6
|
)
|
||
Financing activities
|
|
11.0
|
|
|
19.5
|
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
|
2019
|
|
2018
|
||||
Net cash used in discontinued operations:
|
|
|
|
|
||||
Operating activities
|
|
$
|
(0.7
|
)
|
|
$
|
(10.6
|
)
|
Investing activities
|
|
—
|
|
|
—
|
|
||
Financing activities
|
|
—
|
|
|
—
|
|
|
Three Months Ended
|
||||||
(in millions, except per share amounts)
|
March 31, 2019
|
|
March 31, 2018
|
||||
GAAP net income
|
$
|
28.4
|
|
|
$
|
23.1
|
|
Loss from discontinued operations, net of tax (1)
|
0.4
|
|
|
2.8
|
|
||
Other income (2)
|
(7.2
|
)
|
|
—
|
|
||
Acquisition-related costs and other (3)
|
3.3
|
|
|
—
|
|
||
Tax adjustments (4)
|
4.9
|
|
|
(0.8
|
)
|
||
Adjusted net income
|
$
|
29.8
|
|
|
$
|
25.1
|
|
|
|
|
|
||||
Adjusted earnings per common share, diluted
|
$
|
0.54
|
|
|
$
|
0.46
|
|
|
|
|
|
||||
Diluted shares outstanding
|
55.7
|
|
|
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)
|
We recorded $7.2 million of other income related to the sale of our interest in a subsidiary of the Asia-Pacific joint venture.
|
(3)
|
We recorded $3.3 million of acquisition-related and other costs, primarily related to professional fees for the acquisition of substantially all of the assets of iMS by Sleep Outfitters.
|
(4)
|
Tax adjustments represent adjustments associated with the aforementioned items and other discrete income tax events.
|
|
Three Months Ended March 31, 2019
|
|||||||||||||||||||||||
(in millions, except percentages)
|
Consolidated
|
|
Margin
|
|
North America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
|||||||||||
Net sales
|
$
|
690.9
|
|
|
|
|
$
|
544.0
|
|
|
|
|
$
|
146.9
|
|
|
|
|
$
|
—
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
$
|
281.8
|
|
|
40.8
|
%
|
|
$
|
204.4
|
|
|
37.6
|
%
|
|
$
|
77.4
|
|
|
52.7
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (expense)
|
$
|
60.5
|
|
|
8.8
|
%
|
|
$
|
64.3
|
|
|
11.8
|
%
|
|
$
|
25.2
|
|
|
17.2
|
%
|
|
$
|
(29.0
|
)
|
Acquisition-related costs and other(1)
|
3.3
|
|
|
|
|
—
|
|
|
|
|
0.3
|
|
|
|
|
3.0
|
|
|||||||
Adjusted operating income (expense)
|
$
|
63.8
|
|
|
9.2
|
%
|
|
$
|
64.3
|
|
|
11.8
|
%
|
|
$
|
25.5
|
|
|
17.4
|
%
|
|
$
|
(26.0
|
)
|
(1)
|
We recorded $3.3 million of acquisition-related and other costs, primarily related to professional fees for the acquisition of substantially all of the assets of iMS by Sleep Outfitters.
|
•
|
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)
|
March 31, 2019
|
|
March 31, 2018
|
||||
GAAP net income
|
$
|
28.4
|
|
|
$
|
23.1
|
|
Interest expense, net
|
22.4
|
|
|
22.7
|
|
||
Income taxes
|
16.9
|
|
|
10.0
|
|
||
Depreciation and amortization
|
28.6
|
|
|
27.1
|
|
||
EBITDA
|
$
|
96.3
|
|
|
$
|
82.9
|
|
Adjustments:
|
|
|
|
||||
Loss from discontinued operations, net of tax (1)
|
$
|
0.4
|
|
|
$
|
2.8
|
|
Other income (2)
|
(7.2
|
)
|
|
—
|
|
||
Acquisition-related costs and other(1)
|
3.3
|
|
|
—
|
|
||
Adjusted EBITDA
|
$
|
92.8
|
|
|
$
|
85.7
|
|
(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)
|
We recorded $7.2 million of other income related to the sale of our interest in a subsidiary of the Asia-Pacific joint venture.
|
(3)
|
We recorded $3.3 million of acquisition-related and other costs, primarily related to professional fees for the acquisition of substantially all of the assets of iMS by Sleep Outfitters.
|
|
|
Trailing Twelve Months Ended
|
||
(in millions)
|
|
March 31, 2019
|
||
GAAP net income
|
|
$
|
105.8
|
|
Interest expense, net
|
|
92.0
|
|
|
Income taxes
|
|
56.5
|
|
|
Depreciation and amortization
|
|
115.2
|
|
|
EBITDA
|
|
$
|
369.5
|
|
Adjustments:
|
|
|
||
Loss from discontinued operations, net of tax (1)
|
|
15.4
|
|
|
Restructuring costs (2)
|
|
22.3
|
|
|
Customer-related charges (3)
|
|
21.2
|
|
|
Supply chain transition costs (4)
|
|
7.3
|
|
|
Other income (5)
|
|
(7.2
|
)
|
|
Acquisition-related costs and other (6)
|
|
3.3
|
|
|
Adjusted EBITDA
|
|
$
|
431.8
|
|
|
|
|
||
Consolidated funded debt less qualified cash
|
|
$
|
1,660.2
|
|
|
|
|
||
Ratio of consolidated funded debt less qualified cash to Adjusted EBITDA
|
|
3.84 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)
|
In 2018, we recorded $24.9 million of restructuring costs, including $2.6 million of depreciation expense. These costs included $11.5 million of charges related to the operational alignment of a joint venture that was wholly acquired in the North America business segment, including $2.6 million of depreciation expense and $1.3 million of other expense, net. Restructuring costs also included $8.5 million of expenses in the International business segment related to International simplification efforts, including headcount reduction, professional fees and store closures, and $4.9 million of Corporate professional fees related to restructuring activities.
|
(3)
|
On January 11, 2019, iMS, a customer, filed a voluntary petition in U.S. Bankruptcy Court for the Eastern District of Kentucky seeking relief under Chapter 11 of the U.S. Bankruptcy Code. In the fourth quarter of 2018, we recorded charges of $21.2 million associated with certain iMS-related assets on our Consolidated Balance Sheet as of December 31, 2018, primarily made up of trade and other receivables, to fully reserve this account.
|
(4)
|
In 2018, we recorded $7.3 million of supply chain transition costs which represent charges incurred to consolidate certain manufacturing and distribution facilities, including $0.8 million of other expense.
|
(5)
|
We recorded $7.2 million of other income related to the sale of our interest in a subsidiary of the Asia-Pacific joint venture.
|
(6)
|
We recorded $3.3 million of acquisition-related and other costs, primarily related to professional fees for the acquisition of substantially all of the assets of iMS by Sleep Outfitters.
|
(in millions)
|
March 31, 2019
|
||
Total debt, net
|
$
|
1,659.6
|
|
Plus: Deferred financing costs (1)
|
7.2
|
|
|
Total debt
|
1,666.8
|
|
|
Plus: Letters of credit outstanding
|
23.2
|
|
|
Consolidated funded debt
|
$
|
1,690.0
|
|
Less:
|
|
||
Domestic qualified cash (2)
|
19.4
|
|
|
Foreign qualified cash (2)
|
10.4
|
|
|
Consolidated funded debt less qualified cash
|
$
|
1,660.2
|
|
(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)
|
January 1, 2019 - January 31, 2019
|
|
38,444
|
(1)
|
$42.21
|
|
—
|
|
$226.9
|
February 1, 2019 - February 28, 2019
|
|
19,185
|
(1)
|
$52.79
|
|
—
|
|
$226.9
|
March 1, 2019 - March 31, 2019
|
|
20,954
|
(1)
|
$57.36
|
|
15,731
|
|
$226.1
|
Total
|
|
78,583
|
|
|
|
15,731
|
|
|
(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.
|
†
|
Certain portions of this exhibit have been omitted
|
*
|
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: May 9, 2019
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
S&P Rating
|
Moody’s Rating
|
Allowable % of Eligible Receivables
|
A-1+
|
P-1
|
20.00%
|
A-1
|
P-1
|
20.00%
|
A-2
|
P-2
|
18.00%
|
A-3
|
P-3
|
9.00%
|
Below A-3 or otherwise Unrated Obligor
|
Below P-3 or otherwise Unrated Obligor
|
18% in the aggregate for the Top 4 Unrated Obligors and their Affiliates considered collectively, and 4.50% for any other Unrated Obligor and its Affiliates considered collectively,
|
Month
|
Amount
|
Month
|
Amount
|
April 2019
|
$ 95,000,000
|
April 2020
|
$ 85,000,000
|
May 2019
|
$120,000,000
|
May 2020
|
$120,000,000
|
June 2019
|
$120,000,000
|
June 2020
|
$120,000,000
|
July 2019
|
$120,000,000
|
July 2020
|
$120,000,000
|
August 019
|
$120,000,000
|
August 2020
|
$120,000,000
|
September 2019
|
$120,000,000
|
September 2020
|
$120,000,000
|
October 2019
|
$ 95,000,000
|
October 2020
|
$ 95,000,000
|
November 2019
|
$ 95,000,000
|
November 2020
|
$ 95,000,000
|
December 2019
|
$ 95,000,000
|
December 2020
|
$ 95,000,000
|
January 2020
|
$ 85,000,000
|
January 2021
|
$ 90,000,000
|
February 2020
|
$ 85,000,000
|
February 2021
|
$ 90,000,000
|
March 2020
|
$ 85,000,000
|
March 2021
|
$ 90,000,000
|
Date: May 9, 2019
|
By:
|
/s/ SCOTT L. THOMPSON
|
|
|
Scott L. Thompson
|
|
|
Chairman, President and Chief Executive Officer
|
Date: May 9, 2019
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
Date: May 9, 2019
|
By:
|
/s/ SCOTT L. THOMPSON
|
|
|
Scott L. Thompson
|
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
Date: May 9, 2019
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|