☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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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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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, $0.01 par value
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TPX
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New York Stock Exchange
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging Growth Company
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x
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o
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o
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☐
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☐
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Page
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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||||||||||||
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2019
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2018
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|
2019
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2018
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||||||||
Net sales
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$
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821.0
|
|
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$
|
729.5
|
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$
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2,234.7
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$
|
2,026.8
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Cost of sales
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460.4
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429.5
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1,278.9
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1,189.3
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||||
Gross profit
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360.6
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|
300.0
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|
|
955.8
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837.5
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Selling and marketing expenses
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168.6
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145.9
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485.4
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444.6
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General, administrative and other expenses
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75.3
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73.2
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218.7
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206.0
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||||
Equity income in earnings of unconsolidated affiliates
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(3.9
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)
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(3.8
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)
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(10.4
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)
|
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(11.5
|
)
|
||||
Operating income
|
120.6
|
|
|
84.7
|
|
|
262.1
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|
|
198.4
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||||
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||||||||
Other expense, net:
|
|
|
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||||||||
Interest expense, net
|
20.8
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|
|
23.6
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65.7
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69.5
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||||
Other expense (income), net
|
1.3
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|
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1.4
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|
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(6.5
|
)
|
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(1.8
|
)
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||||
Total other expense, net
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22.1
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|
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25.0
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59.2
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67.7
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||||
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Income from continuing operations before income taxes
|
98.5
|
|
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59.7
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|
|
202.9
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|
|
130.7
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|
||||
Income tax provision
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(26.1
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)
|
|
(15.6
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)
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(58.8
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)
|
|
(34.4
|
)
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||||
Income from continuing operations
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72.4
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44.1
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144.1
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96.3
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||||
Income (loss) from discontinued operations, net of tax
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0.8
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(2.7
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)
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(0.8
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)
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(10.9
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)
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||||
Net income before non-controlling interest
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73.2
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41.4
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143.3
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85.4
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||||
Less: Net loss attributable to non-controlling interest
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(0.1
|
)
|
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(0.9
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)
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—
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(2.8
|
)
|
||||
Net income attributable to Tempur Sealy International, Inc.
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$
|
73.3
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$
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42.3
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$
|
143.3
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$
|
88.2
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Earnings per common share:
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Basic
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Earnings per share for continuing operations
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$
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1.33
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$
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0.83
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$
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2.63
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$
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1.82
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Earnings (loss) per share for discontinued operations
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0.01
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(0.05
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)
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(0.01
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)
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(0.20
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)
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Earnings per share
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$
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1.34
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$
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0.78
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$
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2.62
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$
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1.62
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Diluted
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Earnings per share for continuing operations
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$
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1.30
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$
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0.82
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$
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2.57
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$
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1.80
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Earnings (loss) per share for discontinued operations
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0.01
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(0.05
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)
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(0.01
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)
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(0.20
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)
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Earnings per share
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$
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1.31
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$
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0.77
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$
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2.56
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$
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1.60
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Weighted average common shares outstanding:
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||||||||
Basic
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54.6
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54.5
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54.7
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54.4
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Diluted
|
55.8
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55.1
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56.0
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55.0
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Three Months Ended
September 30, |
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Nine Months Ended September 30,
|
||||||||||||
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2019
|
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2018
|
|
2019
|
|
2018
|
||||||||
Net income before non-controlling interest
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$
|
73.2
|
|
|
$
|
41.4
|
|
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$
|
143.3
|
|
|
$
|
85.4
|
|
Other comprehensive income, net of tax
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
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(6.7
|
)
|
|
2.4
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|
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0.3
|
|
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(8.7
|
)
|
||||
Pension benefits loss, net of tax
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—
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—
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—
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(0.6
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)
|
||||
Other comprehensive (loss) income, net of tax
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(6.7
|
)
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2.4
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0.3
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(9.3
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)
|
||||
Comprehensive income
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66.5
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|
|
43.8
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|
|
143.6
|
|
|
76.1
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|
||||
Less: Comprehensive loss attributable to non-controlling interest
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(0.1
|
)
|
|
(0.9
|
)
|
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—
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(2.8
|
)
|
||||
Comprehensive income attributable to Tempur Sealy International, Inc.
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$
|
66.6
|
|
|
$
|
44.7
|
|
|
$
|
143.6
|
|
|
$
|
78.9
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
ASSETS
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(Unaudited)
|
|
|
||||
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|
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|
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Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
52.9
|
|
|
$
|
45.8
|
|
Accounts receivable, net
|
431.2
|
|
|
321.5
|
|
||
Inventories
|
270.8
|
|
|
222.3
|
|
||
Prepaid expenses and other current assets
|
205.6
|
|
|
215.8
|
|
||
Total Current Assets
|
960.5
|
|
|
805.4
|
|
||
Property, plant and equipment, net
|
431.5
|
|
|
420.8
|
|
||
Goodwill
|
730.4
|
|
|
723.0
|
|
||
Other intangible assets, net
|
644.0
|
|
|
649.3
|
|
||
Operating lease right-of-use assets
|
227.2
|
|
|
—
|
|
||
Deferred income taxes
|
13.6
|
|
|
22.6
|
|
||
Other non-current assets
|
95.9
|
|
|
94.3
|
|
||
Total Assets
|
$
|
3,103.1
|
|
|
$
|
2,715.4
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||
|
|
|
|
||||
Current Liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
276.2
|
|
|
$
|
253.0
|
|
Accrued expenses and other current liabilities
|
486.4
|
|
|
359.2
|
|
||
Current portion of long-term debt
|
60.1
|
|
|
47.1
|
|
||
Income taxes payable
|
25.3
|
|
|
9.7
|
|
||
Total Current Liabilities
|
848.0
|
|
|
669.0
|
|
||
Long-term debt, net
|
1,509.5
|
|
|
1,599.1
|
|
||
Long-term operating lease obligations
|
186.2
|
|
|
—
|
|
||
Deferred income taxes
|
110.1
|
|
|
117.5
|
|
||
Other non-current liabilities
|
112.8
|
|
|
112.3
|
|
||
Total Liabilities
|
2,766.6
|
|
|
2,497.9
|
|
||
|
|
|
|
||||
Commitments and contingencies—see Note 12
|
|
|
|
|
|
||
|
|
|
|
||||
Total Stockholders' Equity
|
336.5
|
|
|
217.5
|
|
||
Total Liabilities and Stockholders' Equity
|
$
|
3,103.1
|
|
|
$
|
2,715.4
|
|
|
|
|
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 June 30, 2019
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
44.4
|
|
|
$
|
(1,737.3
|
)
|
|
$
|
545.6
|
|
|
$
|
1,583.8
|
|
|
$
|
(88.3
|
)
|
|
$
|
1.1
|
|
|
$
|
305.9
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
73.3
|
|
|
|
|
|
|
73.3
|
|
||||||||||||||||
Net loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
||||||||||||||||
Foreign currency adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6.7
|
)
|
|
|
|
(6.7
|
)
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
(0.1
|
)
|
|
1.9
|
|
|
5.4
|
|
|
|
|
|
|
|
|
7.3
|
|
||||||||||||||
Issuances of PRSUs, RSUs, and DSUs
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Treasury stock repurchased
|
|
|
|
|
|
|
0.7
|
|
|
(50.0
|
)
|
|
|
|
|
|
|
|
|
|
(50.0
|
)
|
|||||||||||||||
Amortization of unearned stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
6.8
|
|
|
|
|
|
|
|
|
6.8
|
|
||||||||||||||||
Balance, September 30, 2019
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
45.0
|
|
|
$
|
(1,785.3
|
)
|
|
$
|
557.7
|
|
|
$
|
1,657.1
|
|
|
$
|
(95.0
|
)
|
|
$
|
1.0
|
|
|
$
|
336.5
|
|
|
|
|
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 June 30, 2018
|
$
|
0.4
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
44.9
|
|
|
$
|
(1,736.9
|
)
|
|
$
|
520.4
|
|
|
$
|
1,459.2
|
|
|
$
|
(87.2
|
)
|
|
$
|
1.2
|
|
2.0
|
|
$
|
157.7
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
42.3
|
|
|
|
|
|
|
42.3
|
|
|||||||||||||||||
Net loss attributable to non-controlling interest
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||||
Foreign currency adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
|
|
|
2.4
|
|
|||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
—
|
|
|
0.6
|
|
|
1.0
|
|
|
|
|
|
|
|
|
1.6
|
|
|||||||||||||||
Issuances of PRSUs, RSUs, and DSUs
|
|
|
|
|
|
|
(0.1
|
)
|
|
0.4
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
—
|
|
|||||||||||||||
Treasury stock repurchased
|
|
|
|
|
|
|
—
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
(0.5
|
)
|
||||||||||||||||
Amortization of unearned stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
6.5
|
|
|
|
|
|
|
|
|
6.5
|
|
|||||||||||||||||
Acquisition of non-controlling interest
|
0.5
|
|
|
|
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
(0.5
|
)
|
||||||||||||||||
Balance, September 30, 2018
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
44.8
|
|
|
$
|
(1,736.4
|
)
|
|
$
|
527.0
|
|
|
$
|
1,501.5
|
|
|
$
|
(84.8
|
)
|
|
$
|
1.2
|
|
|
$
|
209.5
|
|
|
|
|
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, 2018
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
44.7
|
|
|
$
|
(1,737.0
|
)
|
|
$
|
532.1
|
|
|
$
|
1,513.8
|
|
|
$
|
(95.3
|
)
|
|
$
|
2.9
|
|
|
$
|
217.5
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
143.3
|
|
|
|
|
|
|
143.3
|
|
||||||||||||||||
Net income attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
||||||||||||||||
Repurchase of interest in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.9
|
)
|
|
(1.9
|
)
|
||||||||||||||||
Foreign currency adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
0.3
|
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
(0.3
|
)
|
|
3.6
|
|
|
9.2
|
|
|
|
|
|
|
|
|
12.8
|
|
||||||||||||||
Issuances of PRSUs, RSUs, and DSUs
|
|
|
|
|
|
|
(0.2
|
)
|
|
3.6
|
|
|
(3.6
|
)
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Treasury stock repurchased
|
|
|
|
|
|
|
0.8
|
|
|
(55.5
|
)
|
|
|
|
|
|
|
|
|
|
(55.5
|
)
|
|||||||||||||||
Amortization of unearned stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
20.0
|
|
|
|
|
|
|
|
|
20.0
|
|
||||||||||||||||
Balance, September 30, 2019
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
45.0
|
|
|
$
|
(1,785.3
|
)
|
|
$
|
557.7
|
|
|
$
|
1,657.1
|
|
|
$
|
(95.0
|
)
|
|
$
|
1.0
|
|
|
$
|
336.5
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
88.2
|
|
|
|
|
|
|
88.2
|
|
||||||||||||||||
Net loss attributable to non-controlling interest
|
(2.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|||||||||||||||
Acquisition of non-controlling interest in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.3
|
|
|
1.3
|
|
||||||||||||||||
Adjustment to pension liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
(0.1
|
)
|
||||||||||||||||
Foreign currency adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.7
|
)
|
|
|
|
(8.7
|
)
|
||||||||||||||||
Exercise of stock options
|
|
|
|
|
|
|
(0.1
|
)
|
|
1.6
|
|
|
2.6
|
|
|
|
|
|
|
|
|
4.2
|
|
||||||||||||||
Issuances of PRSUs, RSUs, and DSUs
|
|
|
|
|
|
|
(0.2
|
)
|
|
2.7
|
|
|
(2.7
|
)
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Treasury stock repurchased
|
|
|
|
|
|
|
0.1
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
|
(3.5
|
)
|
|||||||||||||||
Amortization of unearned stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
19.6
|
|
|
|
|
|
|
|
|
19.6
|
|
||||||||||||||||
Acquisition of non-controlling interest
|
0.5
|
|
|
|
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
(0.5
|
)
|
|||||||||||||||
Balance, September 30, 2018
|
$
|
—
|
|
|
99.2
|
|
|
$
|
1.0
|
|
|
44.8
|
|
|
$
|
(1,736.4
|
)
|
|
$
|
527.0
|
|
|
$
|
1,501.5
|
|
|
$
|
(84.8
|
)
|
|
$
|
1.2
|
|
|
$
|
209.5
|
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2019
|
|
2018
|
||||
Finished goods
|
$
|
165.5
|
|
|
$
|
148.9
|
|
Work-in-process
|
11.5
|
|
|
11.8
|
|
||
Raw materials and supplies
|
93.8
|
|
|
61.6
|
|
||
|
$
|
270.8
|
|
|
$
|
222.3
|
|
(in millions)
|
|
||
Balance as of December 31, 2018
|
$
|
34.3
|
|
Amounts accrued
|
81.5
|
|
|
Returns charged to accrual
|
(76.0
|
)
|
|
Balance as of September 30, 2019
|
$
|
39.8
|
|
(in millions)
|
|
||
Balance as of December 31, 2018
|
$
|
36.4
|
|
Amounts accrued
|
23.6
|
|
|
Warranties charged to accrual
|
(18.8
|
)
|
|
Balance as of September 30, 2019
|
$
|
41.2
|
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
||||||||||||||||||||
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale
|
$
|
602.2
|
|
|
$
|
107.9
|
|
|
$
|
710.1
|
|
|
$
|
1,632.5
|
|
|
$
|
325.7
|
|
|
$
|
1,958.2
|
|
Direct
|
79.8
|
|
|
31.1
|
|
|
110.9
|
|
|
181.6
|
|
|
94.9
|
|
|
276.5
|
|
||||||
Net sales
|
$
|
682.0
|
|
|
$
|
139.0
|
|
|
$
|
821.0
|
|
|
$
|
1,814.1
|
|
|
$
|
420.6
|
|
|
$
|
2,234.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Product
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Bedding products
|
$
|
640.6
|
|
|
$
|
111.6
|
|
|
$
|
752.2
|
|
|
$
|
1,709.2
|
|
|
$
|
335.4
|
|
|
$
|
2,044.6
|
|
Other products
|
41.4
|
|
|
27.4
|
|
|
68.8
|
|
|
104.9
|
|
|
85.2
|
|
|
190.1
|
|
||||||
Net sales
|
$
|
682.0
|
|
|
$
|
139.0
|
|
|
$
|
821.0
|
|
|
$
|
1,814.1
|
|
|
$
|
420.6
|
|
|
$
|
2,234.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
||||||||||||
Geographical region
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
621.4
|
|
|
$
|
—
|
|
|
$
|
621.4
|
|
|
$
|
1,652.3
|
|
|
$
|
—
|
|
|
$
|
1,652.3
|
|
Canada
|
60.6
|
|
|
—
|
|
|
60.6
|
|
|
161.8
|
|
|
—
|
|
|
161.8
|
|
||||||
International
|
—
|
|
|
139.0
|
|
|
139.0
|
|
|
—
|
|
|
420.6
|
|
|
420.6
|
|
||||||
Net sales
|
$
|
682.0
|
|
|
$
|
139.0
|
|
|
$
|
821.0
|
|
|
$
|
1,814.1
|
|
|
$
|
420.6
|
|
|
$
|
2,234.7
|
|
|
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,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net sales
|
$
|
—
|
|
|
$
|
6.4
|
|
|
$
|
0.2
|
|
|
$
|
26.8
|
|
Cost of sales
|
—
|
|
|
5.0
|
|
|
0.2
|
|
|
18.9
|
|
||||
Gross profit
|
—
|
|
|
1.4
|
|
|
—
|
|
|
7.9
|
|
||||
Selling and marketing expenses
|
—
|
|
|
2.6
|
|
|
0.1
|
|
|
10.2
|
|
||||
General, administrative and other expenses
|
0.3
|
|
|
1.6
|
|
|
2.1
|
|
|
4.8
|
|
||||
Operating loss
|
(0.3
|
)
|
|
(2.8
|
)
|
|
(2.2
|
)
|
|
(7.1
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest (income) expense, net and other
|
(1.2
|
)
|
|
(0.3
|
)
|
|
(1.5
|
)
|
|
3.8
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income (loss) from discontinued operations before income taxes
|
0.9
|
|
|
(2.5
|
)
|
|
(0.7
|
)
|
|
(10.9
|
)
|
||||
Income tax provision
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
—
|
|
||||
Income (loss) from discontinued operations, net of tax
|
$
|
0.8
|
|
|
$
|
(2.7
|
)
|
|
$
|
(0.8
|
)
|
|
$
|
(10.9
|
)
|
(in millions)
|
|
||
Working capital (accounts receivable and inventory, net of accounts payable and accrued liabilities)
|
$
|
(2.3
|
)
|
Property and equipment
|
5.0
|
|
|
Goodwill
|
3.3
|
|
|
Other intangible assets
|
2.1
|
|
|
Operating lease right-of-use assets
|
28.5
|
|
|
Long-term operating lease liabilities
|
(28.5
|
)
|
|
Net purchase price
|
$
|
8.1
|
|
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
||||||
Balance as of December 31, 2018
|
$
|
571.1
|
|
|
151.9
|
|
|
$
|
723.0
|
|
|
Goodwill resulting from acquisitions
|
3.3
|
|
|
5.4
|
|
|
8.7
|
|
|||
Foreign currency translation and other
|
1.9
|
|
|
(3.2
|
)
|
|
(1.3
|
)
|
|||
Balance as of September 30, 2019
|
$
|
576.3
|
|
|
$
|
154.1
|
|
|
$
|
730.4
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
||||||||
(in millions, except percentages)
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Maturity Date
|
||||
2016 Credit Agreement
|
|
|
|
|
|
|
|
|
|
||||
Term A Facility
|
$
|
423.8
|
|
|
(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
|
33.9
|
|
|
(3)
|
|
9.1
|
|
|
(3)
|
|
April 6, 2021
|
||
Finance/capital lease obligations (4)
|
65.0
|
|
|
|
|
66.7
|
|
|
|
|
Various
|
||
Other
|
3.4
|
|
|
|
|
3.0
|
|
|
|
|
Various
|
||
Total debt
|
1,576.1
|
|
|
|
|
1,653.8
|
|
|
|
|
|
||
Less: deferred financing costs
|
6.5
|
|
|
|
|
7.6
|
|
|
|
|
|
||
Total debt, net
|
1,569.6
|
|
|
|
|
1,646.2
|
|
|
|
|
|
||
Less: current portion
|
60.1
|
|
|
|
|
47.1
|
|
|
|
|
|
||
Total long-term debt, net
|
$
|
1,509.5
|
|
|
|
|
$
|
1,599.1
|
|
|
|
|
|
(1)
|
Interest at LIBOR plus applicable margin of 1.75% as of September 30, 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)
|
Finance/capital lease obligations are a non-cash financing activity.
|
|
|
Fair Value
|
||||||
(in millions)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
2023 Senior Notes
|
|
$
|
463.8
|
|
|
$
|
435.6
|
|
2026 Senior Notes
|
|
627.2
|
|
|
549.3
|
|
(in millions)
|
|
|
|
September 30, 2019
|
||
Assets
|
|
|
|
|
||
Operating lease assets
|
|
Operating lease right-of-use assets
|
|
$
|
227.2
|
|
Finance lease assets
|
|
Property, plant and equipment, net
|
|
55.4
|
|
|
Total leased assets
|
|
|
|
$
|
282.6
|
|
|
|
|
|
|
||
Liabilities
|
|
|
|
|
||
Short-term:
|
|
|
|
|
||
Operating lease obligations
|
|
Accrued expenses and other current liabilities
|
|
$
|
49.7
|
|
Finance lease obligations
|
|
Current portion of long-term debt
|
|
8.0
|
|
|
Long-term:
|
|
|
|
|
||
Operating lease obligations
|
|
Long-term operating lease obligations
|
|
186.2
|
|
|
Finance lease obligations
|
|
Long-term debt, net
|
|
57.0
|
|
|
Total lease obligations
|
|
|
|
$
|
300.9
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(in millions)
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Operating lease expense (1)
|
|
$
|
24.0
|
|
|
$
|
65.2
|
|
Finance lease expense:
|
|
|
|
|
||||
Amortization of right-of-use assets
|
|
2.1
|
|
|
6.3
|
|
||
Interest on lease obligations
|
|
1.2
|
|
|
3.6
|
|
||
Total lease expense
|
|
$
|
27.3
|
|
|
$
|
75.1
|
|
(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 nine months ended September 30, 2019)
|
|
$
|
16.0
|
|
|
$
|
3.0
|
|
|
$
|
19.0
|
|
2020
|
|
58.5
|
|
|
11.9
|
|
|
70.4
|
|
|||
2021
|
|
50.2
|
|
|
11.7
|
|
|
61.9
|
|
|||
2022
|
|
42.4
|
|
|
9.6
|
|
|
52.0
|
|
|||
2023
|
|
32.6
|
|
|
7.7
|
|
|
40.3
|
|
|||
Thereafter
|
|
77.3
|
|
|
43.9
|
|
|
121.2
|
|
|||
Total lease payments
|
|
277.0
|
|
|
87.8
|
|
|
364.8
|
|
|||
Less: Interest
|
|
41.1
|
|
|
22.8
|
|
|
63.9
|
|
|||
Present value of lease obligations
|
|
$
|
235.9
|
|
|
$
|
65.0
|
|
|
$
|
300.9
|
|
|
|
September 30, 2019
|
|
Weighted average remaining lease term (years):
|
|
|
|
Operating leases
|
|
5.78
|
|
Finance leases
|
|
9.38
|
|
|
|
|
|
Weighted average discount rate:
|
|
|
|
Operating leases
|
|
5.47
|
%
|
Finance leases
|
|
6.29
|
%
|
|
|
Nine Months Ended
|
||
(in millions)
|
|
September 30, 2019
|
||
Cash paid for amounts included in the measurement of lease obligations:
|
|
|
||
Operating cash flows paid for operating leases
|
|
$
|
42.5
|
|
Financing cash flows paid for finance leases
|
|
5.9
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for new operating lease obligations
|
|
$
|
66.1
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Foreign Currency Translation
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
(84.7
|
)
|
|
$
|
(83.9
|
)
|
|
$
|
(91.7
|
)
|
|
$
|
(72.8
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments (1)
|
(6.7
|
)
|
|
2.4
|
|
|
0.3
|
|
|
(8.7
|
)
|
||||
Balance at end of period
|
$
|
(91.4
|
)
|
|
$
|
(81.5
|
)
|
|
$
|
(91.4
|
)
|
|
$
|
(81.5
|
)
|
|
|
|
|
|
|
|
|
||||||||
Pensions
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
(3.6
|
)
|
|
$
|
(3.3
|
)
|
|
$
|
(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
|
)
|
|
$
|
(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)
|
September 30, 2019
|
|
December 31, 2018
|
||||
Taxes
|
$
|
132.2
|
|
|
$
|
136.8
|
|
Wages and benefits
|
65.5
|
|
|
43.7
|
|
||
Advertising
|
62.0
|
|
|
46.1
|
|
||
Operating lease obligations
|
49.7
|
|
|
—
|
|
||
Sales returns
|
27.2
|
|
|
22.0
|
|
||
Warranty
|
19.0
|
|
|
14.9
|
|
||
Rebates
|
13.9
|
|
|
11.6
|
|
||
Other
|
116.9
|
|
|
84.1
|
|
||
|
$
|
486.4
|
|
|
$
|
359.2
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
PRSU expense
|
$
|
0.3
|
|
|
$
|
0.7
|
|
|
$
|
1.0
|
|
|
$
|
2.2
|
|
Option expense
|
1.3
|
|
|
1.6
|
|
|
3.7
|
|
|
5.4
|
|
||||
RSU/DSU expense
|
5.2
|
|
|
4.2
|
|
|
15.3
|
|
|
12.0
|
|
||||
Total stock-based compensation expense
|
$
|
6.8
|
|
|
$
|
6.5
|
|
|
$
|
20.0
|
|
|
$
|
19.6
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions, except per common share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations, net of loss attributable to non-controlling interest
|
$
|
72.5
|
|
|
$
|
45.0
|
|
|
$
|
144.1
|
|
|
$
|
99.1
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|||||
Denominator for basic earnings per common share-weighted average shares
|
54.6
|
|
|
54.5
|
|
|
54.7
|
|
|
54.4
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Employee stock-based compensation
|
1.2
|
|
|
0.6
|
|
|
1.3
|
|
|
0.6
|
|
||||
Denominator for diluted earnings per common share-adjusted weighted average shares
|
55.8
|
|
|
55.1
|
|
|
56.0
|
|
|
55.0
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic earnings per common share for continuing operations
|
$
|
1.33
|
|
|
$
|
0.83
|
|
|
$
|
2.63
|
|
|
$
|
1.82
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per common share for continuing operations
|
$
|
1.30
|
|
|
$
|
0.82
|
|
|
$
|
2.57
|
|
|
$
|
1.80
|
|
(in millions)
|
September 30, 2019
|
|
December 31, 2018
|
||||
North America
|
$
|
3,187.8
|
|
|
$
|
2,788.1
|
|
International
|
605.8
|
|
|
604.8
|
|
||
Corporate
|
503.3
|
|
|
569.0
|
|
||
Inter-segment eliminations
|
(1,193.8
|
)
|
|
(1,246.5
|
)
|
||
Total assets
|
$
|
3,103.1
|
|
|
$
|
2,715.4
|
|
(in millions)
|
September 30, 2019
|
|
December 31, 2018
|
||||
North America
|
$
|
326.6
|
|
|
$
|
317.5
|
|
International
|
49.9
|
|
|
51.1
|
|
||
Corporate
|
55.0
|
|
|
52.2
|
|
||
Total property, plant and equipment, net
|
$
|
431.5
|
|
|
$
|
420.8
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
682.0
|
|
|
$
|
139.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
821.0
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
1.2
|
|
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
286.8
|
|
|
73.8
|
|
|
—
|
|
|
—
|
|
|
360.6
|
|
|||||
Operating income (loss)
|
119.8
|
|
|
27.3
|
|
|
(26.5
|
)
|
|
—
|
|
|
120.6
|
|
|||||
Income (loss) from continuing operations before income taxes
|
117.8
|
|
|
24.0
|
|
|
(43.3
|
)
|
|
—
|
|
|
98.5
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization (1)
|
$
|
17.1
|
|
|
$
|
3.4
|
|
|
$
|
9.5
|
|
|
$
|
—
|
|
|
$
|
30.0
|
|
Capital expenditures
|
15.0
|
|
|
2.0
|
|
|
5.0
|
|
|
—
|
|
|
22.0
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
(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
|
$
|
1,814.1
|
|
|
$
|
420.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,234.7
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inter-segment sales
|
$
|
2.5
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
(2.9
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
3.2
|
|
|
(3.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Gross profit
|
731.2
|
|
|
224.6
|
|
|
—
|
|
|
—
|
|
|
955.8
|
|
|||||
Operating income (loss)
|
264.2
|
|
|
79.9
|
|
|
(82.0
|
)
|
|
—
|
|
|
262.1
|
|
|||||
Income (loss) from continuing operations before income taxes
|
258.8
|
|
|
77.0
|
|
|
(132.9
|
)
|
|
—
|
|
|
202.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization (1)
|
$
|
47.7
|
|
|
$
|
10.2
|
|
|
$
|
28.8
|
|
|
$
|
—
|
|
|
$
|
86.7
|
|
Capital expenditures
|
42.3
|
|
|
8.0
|
|
|
11.6
|
|
|
—
|
|
|
61.9
|
|
(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)
|
September 30, 2019
|
|
December 31, 2018
|
||||
United States
|
$
|
363.8
|
|
|
$
|
350.7
|
|
Canada
|
17.8
|
|
|
19.1
|
|
||
Other International
|
49.9
|
|
|
51.0
|
|
||
Total property, plant and equipment, net
|
$
|
431.5
|
|
|
$
|
420.8
|
|
Total International
|
$
|
67.7
|
|
|
$
|
70.1
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
United States
|
$
|
621.4
|
|
|
$
|
536.8
|
|
|
$
|
1,652.3
|
|
|
$
|
1,454.6
|
|
Canada
|
60.6
|
|
|
59.0
|
|
|
161.8
|
|
|
154.0
|
|
||||
Other International
|
139.0
|
|
|
133.7
|
|
|
420.6
|
|
|
418.2
|
|
||||
Total net sales
|
$
|
821.0
|
|
|
$
|
729.5
|
|
|
$
|
2,234.7
|
|
|
$
|
2,026.8
|
|
Total International
|
$
|
199.6
|
|
|
$
|
192.7
|
|
|
$
|
582.4
|
|
|
$
|
572.2
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
641.9
|
|
|
$
|
200.1
|
|
|
$
|
(21.0
|
)
|
|
$
|
821.0
|
|
Cost of sales
|
—
|
|
|
366.5
|
|
|
114.9
|
|
|
(21.0
|
)
|
|
460.4
|
|
|||||
Gross profit
|
—
|
|
|
275.4
|
|
|
85.2
|
|
|
—
|
|
|
360.6
|
|
|||||
Selling and marketing expenses
|
2.8
|
|
|
119.8
|
|
|
46.0
|
|
|
—
|
|
|
168.6
|
|
|||||
General, administrative and other expenses
|
4.3
|
|
|
57.1
|
|
|
14.2
|
|
|
(0.3
|
)
|
|
75.3
|
|
|||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(3.9
|
)
|
|
—
|
|
|
(3.9
|
)
|
|||||
Operating (loss) income
|
(7.1
|
)
|
|
98.5
|
|
|
28.9
|
|
|
0.3
|
|
|
120.6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other expense (income), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third party interest expense, net
|
14.0
|
|
|
6.4
|
|
|
0.4
|
|
|
—
|
|
|
20.8
|
|
|||||
Intercompany interest (income) expense, net
|
(2.4
|
)
|
|
3.4
|
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|||||
Interest expense (income), net
|
11.6
|
|
|
9.8
|
|
|
(0.6
|
)
|
|
—
|
|
|
20.8
|
|
|||||
Other expense (income), net
|
—
|
|
|
1.5
|
|
|
(1.4
|
)
|
|
1.2
|
|
|
1.3
|
|
|||||
Total other expense (income), net
|
11.6
|
|
|
11.3
|
|
|
(2.0
|
)
|
|
1.2
|
|
|
22.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from equity investees
|
88.8
|
|
|
21.6
|
|
|
—
|
|
|
(110.4
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
70.1
|
|
|
108.8
|
|
|
30.9
|
|
|
(111.3
|
)
|
|
98.5
|
|
|||||
Income tax benefit (provision)
|
3.1
|
|
|
(20.0
|
)
|
|
(9.3
|
)
|
|
0.1
|
|
|
(26.1
|
)
|
|||||
Income from continuing operations
|
73.2
|
|
|
88.8
|
|
|
21.6
|
|
|
(111.2
|
)
|
|
72.4
|
|
|||||
Income from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
0.8
|
|
|||||
Net income before non-controlling interest
|
73.2
|
|
|
88.8
|
|
|
21.6
|
|
|
(110.4
|
)
|
|
73.2
|
|
|||||
Less: Net loss attributable to non-controlling interest
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
0.1
|
|
|
(0.1
|
)
|
|||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
73.3
|
|
|
$
|
88.8
|
|
|
$
|
21.7
|
|
|
$
|
(110.5
|
)
|
|
$
|
73.3
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
66.6
|
|
|
$
|
92.8
|
|
|
$
|
11.0
|
|
|
$
|
(103.8
|
)
|
|
$
|
66.6
|
|
|
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
|
$
|
—
|
|
|
$
|
1,706.3
|
|
|
$
|
581.3
|
|
|
$
|
(52.9
|
)
|
|
$
|
2,234.7
|
|
|
Cost of sales
|
—
|
|
|
1,001.1
|
|
|
330.7
|
|
|
(52.9
|
)
|
|
1,278.9
|
|
||||||
Gross profit
|
—
|
|
|
705.2
|
|
|
250.6
|
|
|
—
|
|
|
955.8
|
|
||||||
Selling and marketing expenses
|
8.4
|
|
|
335.9
|
|
|
141.2
|
|
|
(0.1
|
)
|
|
485.4
|
|
||||||
General, administrative and other expenses
|
12.8
|
|
|
165.4
|
|
|
42.6
|
|
|
(2.1
|
)
|
|
218.7
|
|
||||||
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(10.4
|
)
|
|
—
|
|
|
(10.4
|
)
|
||||||
Operating (loss) income
|
(21.2
|
)
|
|
203.9
|
|
|
77.2
|
|
|
2.2
|
|
|
262.1
|
|
||||||
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||
Other expense (income), net:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Third party interest expense, net
|
42.2
|
|
|
21.0
|
|
|
2.5
|
|
|
—
|
|
|
65.7
|
|
||||||
Intercompany interest (income) expense, net
|
(7.5
|
)
|
|
8.8
|
|
|
(1.3
|
)
|
|
—
|
|
|
—
|
|
||||||
Interest expense, net
|
34.7
|
|
|
29.8
|
|
|
1.2
|
|
|
—
|
|
|
65.7
|
|
||||||
Other income, net
|
—
|
|
|
(5.1
|
)
|
|
(2.9
|
)
|
|
1.5
|
|
—
|
|
(6.5
|
)
|
|||||
Total other expense (income), net
|
34.7
|
|
|
24.7
|
|
|
(1.7
|
)
|
|
1.5
|
|
|
59.2
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from equity investees
|
189.3
|
|
|
58.0
|
|
|
—
|
|
|
(247.3
|
)
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations before income taxes
|
133.4
|
|
|
237.2
|
|
|
78.9
|
|
|
(246.6
|
)
|
|
202.9
|
|
||||||
Income tax benefit (provision)
|
9.9
|
|
|
(47.9
|
)
|
|
(20.9
|
)
|
|
0.1
|
|
|
(58.8
|
)
|
||||||
Income from continuing operations
|
143.3
|
|
|
189.3
|
|
|
58.0
|
|
|
(246.5
|
)
|
|
144.1
|
|
||||||
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
(0.8
|
)
|
||||||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
143.3
|
|
|
$
|
189.3
|
|
|
$
|
58.0
|
|
|
$
|
(247.3
|
)
|
|
$
|
143.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
143.6
|
|
|
$
|
194.8
|
|
|
$
|
52.8
|
|
|
$
|
(247.6
|
)
|
|
$
|
143.6
|
|
|
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
|
||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
14.2
|
|
|
$
|
38.7
|
|
|
$
|
—
|
|
|
$
|
52.9
|
|
Accounts receivable, net
|
1.0
|
|
|
23.1
|
|
|
379.2
|
|
|
27.9
|
|
|
431.2
|
|
|||||
Inventories
|
—
|
|
|
210.5
|
|
|
60.3
|
|
|
—
|
|
|
270.8
|
|
|||||
Prepaid expenses and other current assets
|
289.0
|
|
|
66.3
|
|
|
136.7
|
|
|
(286.4
|
)
|
|
205.6
|
|
|||||
Total Current Assets
|
290.0
|
|
|
314.1
|
|
|
614.9
|
|
|
(258.5
|
)
|
|
960.5
|
|
|||||
Property, plant and equipment, net
|
—
|
|
|
363.8
|
|
|
67.7
|
|
|
—
|
|
|
431.5
|
|
|||||
Goodwill
|
—
|
|
|
512.1
|
|
|
218.3
|
|
|
—
|
|
|
730.4
|
|
|||||
Other intangible assets, net
|
—
|
|
|
567.7
|
|
|
76.3
|
|
|
—
|
|
|
644.0
|
|
|||||
Operating lease right-of-use assets
|
—
|
|
|
179.6
|
|
|
47.6
|
|
|
—
|
|
|
227.2
|
|
|||||
Deferred income taxes
|
13.6
|
|
|
—
|
|
|
13.6
|
|
|
(13.6
|
)
|
|
13.6
|
|
|||||
Other non-current assets
|
3.8
|
|
|
52.5
|
|
|
39.6
|
|
|
—
|
|
|
95.9
|
|
|||||
Net investment in subsidiaries
|
819.7
|
|
|
317.5
|
|
|
—
|
|
|
(1,137.2
|
)
|
|
—
|
|
|||||
Due from affiliates
|
382.7
|
|
|
135.1
|
|
|
24.3
|
|
|
(542.1
|
)
|
|
—
|
|
|||||
Total Assets
|
$
|
1,509.8
|
|
|
$
|
2,442.4
|
|
|
$
|
1,102.3
|
|
|
$
|
(1,951.4
|
)
|
|
$
|
3,103.1
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable
|
$
|
—
|
|
|
$
|
194.7
|
|
|
$
|
53.6
|
|
|
$
|
27.9
|
|
|
$
|
276.2
|
|
Accrued expenses and other current liabilities
|
21.4
|
|
|
250.3
|
|
|
214.7
|
|
|
—
|
|
|
486.4
|
|
|||||
Current portion of long-term debt
|
—
|
|
|
56.7
|
|
|
3.4
|
|
|
—
|
|
|
60.1
|
|
|||||
Income taxes payable
|
—
|
|
|
296.4
|
|
|
15.3
|
|
|
(286.4
|
)
|
|
25.3
|
|
|||||
Total Current Liabilities
|
21.4
|
|
|
798.1
|
|
|
287.0
|
|
|
(258.5
|
)
|
|
848.0
|
|
|||||
Long-term debt, net
|
1,044.0
|
|
|
431.3
|
|
|
34.2
|
|
|
—
|
|
|
1,509.5
|
|
|||||
Long-term operating lease obligations
|
—
|
|
|
152.8
|
|
|
33.4
|
|
|
—
|
|
|
186.2
|
|
|||||
Deferred income taxes
|
—
|
|
|
108.6
|
|
|
15.1
|
|
|
(13.6
|
)
|
|
110.1
|
|
|||||
Other non-current liabilities
|
—
|
|
|
56.7
|
|
|
56.1
|
|
|
—
|
|
|
112.8
|
|
|||||
Due to affiliates
|
107.9
|
|
|
75.2
|
|
|
359.0
|
|
|
(542.1
|
)
|
|
—
|
|
|||||
Total Liabilities
|
1,173.3
|
|
|
1,622.7
|
|
|
784.8
|
|
|
(814.2
|
)
|
|
2,766.6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Stockholders' Equity
|
336.5
|
|
|
819.7
|
|
|
317.5
|
|
|
(1,137.2
|
)
|
|
336.5
|
|
|||||
Total Liabilities and Stockholders’ Equity
|
$
|
1,509.8
|
|
|
$
|
2,442.4
|
|
|
$
|
1,102.3
|
|
|
$
|
(1,951.4
|
)
|
|
$
|
3,103.1
|
|
•
|
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 12.5% to $821.0 million from $729.5 million in the third quarter of 2018. On a constant currency basis, which is a non-GAAP financial measure, total net sales increased 13.4%, with an increase of 14.6% in the North America business segment and an increase of 8.0% in the International business segment.
|
•
|
Gross margin was 43.9% as compared to 41.1% in the third quarter of 2018.
|
•
|
Operating income increased 42.4% to $120.6 million as compared to $84.7 million in the third quarter of 2018. Adjusted operating income, which is a non-GAAP financial measure, was $97.8 million in the third quarter of 2018. There were no adjustments to operating income in the third quarter of 2019.
|
•
|
Net income increased 73.3% to $73.3 million as compared to $42.3 million in the third quarter of 2018. Adjusted net income, which is a non-GAAP financial measure, increased 29.2% to $72.5 million as compared to $56.1 million in the third quarter of 2018.
|
•
|
Earnings before interest, tax, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure, increased 33.7% to $150.7 million as compared to $112.7 million for the third quarter of 2018. Adjusted EBITDA, which is a non-GAAP financial measure, increased 17.4% to $149.9 million as compared to $127.7 million in the third quarter of 2018.
|
•
|
Earnings per diluted share ("EPS") increased 70.1% to $1.31 as compared to $0.77 in the third quarter of 2018. Adjusted EPS, which is a non-GAAP financial measure, increased 27.5% to $1.30 as compared to $1.02 in the third quarter of 2018.
|
|
Three Months Ended September 30,
|
||||||||||||
(in millions, except percentages and per share amounts)
|
2019
|
|
2018
|
||||||||||
Net sales
|
$
|
821.0
|
|
|
100.0
|
%
|
|
$
|
729.5
|
|
|
100.0
|
%
|
Cost of sales
|
460.4
|
|
|
56.1
|
|
|
429.5
|
|
|
58.9
|
|
||
Gross profit
|
360.6
|
|
|
43.9
|
|
|
300.0
|
|
|
41.1
|
|
||
Selling and marketing expenses
|
168.6
|
|
|
20.5
|
|
|
145.9
|
|
|
20.0
|
|
||
General, administrative and other expenses
|
75.3
|
|
|
9.2
|
|
|
73.2
|
|
|
10.0
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(3.9
|
)
|
|
(0.5
|
)
|
|
(3.8
|
)
|
|
(0.5
|
)
|
||
Operating income
|
120.6
|
|
|
14.7
|
|
|
84.7
|
|
|
11.6
|
|
||
|
|
|
|
|
|
|
|
||||||
Other expense, net:
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
20.8
|
|
|
2.5
|
|
|
23.6
|
|
|
3.2
|
|
||
Other expense, net
|
1.3
|
|
|
0.2
|
|
|
1.4
|
|
|
0.2
|
|
||
Total other expense, net
|
22.1
|
|
|
2.7
|
|
|
25.0
|
|
|
3.4
|
|
||
|
|
|
|
|
|
|
|
||||||
Income from continuing operations before income taxes
|
98.5
|
|
|
12.0
|
|
|
59.7
|
|
|
8.2
|
|
||
Income tax provision
|
(26.1
|
)
|
|
(3.2
|
)
|
|
(15.6
|
)
|
|
(2.1
|
)
|
||
Income from continuing operations
|
72.4
|
|
|
8.8
|
|
|
44.1
|
|
|
6.0
|
|
||
Income (loss) from discontinued operations, net of tax
|
0.8
|
|
|
0.1
|
|
|
(2.7
|
)
|
|
(0.4
|
)
|
||
Net income before non-controlling interest
|
73.2
|
|
|
8.9
|
|
|
41.4
|
|
|
5.7
|
|
||
Less: Net loss attributable to non-controlling interest
|
(0.1
|
)
|
|
—
|
|
|
(0.9
|
)
|
|
(0.1
|
)
|
||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
73.3
|
|
|
8.9
|
%
|
|
$
|
42.3
|
|
|
5.8
|
%
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
1.33
|
|
|
|
|
$
|
0.83
|
|
|
|
||
Earnings (loss) per share for discontinued operations
|
0.01
|
|
|
|
|
(0.05
|
)
|
|
|
||||
Earnings per share
|
$
|
1.34
|
|
|
|
|
$
|
0.78
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
1.30
|
|
|
|
|
$
|
0.82
|
|
|
|
||
Earnings (loss) per share for discontinued operations
|
0.01
|
|
|
|
|
(0.05
|
)
|
|
|
||||
Earnings per share
|
$
|
1.31
|
|
|
|
|
$
|
0.77
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||
Basic
|
54.6
|
|
|
|
|
54.5
|
|
|
|
||||
Diluted
|
55.8
|
|
|
|
|
55.1
|
|
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
||||||||||||||||||
Net sales by channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale channel
|
$
|
710.1
|
|
|
$
|
660.9
|
|
|
$
|
602.2
|
|
|
$
|
553.6
|
|
|
$
|
107.9
|
|
|
$
|
107.3
|
|
Direct channel
|
110.9
|
|
|
68.6
|
|
|
79.8
|
|
|
42.2
|
|
|
31.1
|
|
|
26.4
|
|
||||||
Total net sales
|
$
|
821.0
|
|
|
$
|
729.5
|
|
|
$
|
682.0
|
|
|
$
|
595.8
|
|
|
$
|
139.0
|
|
|
$
|
133.7
|
|
•
|
North America net sales increased $86.2 million, or 14.5%. Net sales in the Wholesale channel increased $48.6 million, or 8.8%, driven by continued success of Tempur and Sealy products and expanded distribution of our Sealy products. Net sales in the Direct channel increased $37.6 million, or 89.1%, primarily driven by growth from company-owned stores, including the Sleep Outfitters Acquisition, and our e-commerce business. Excluding Sleep Outfitters, the Wholesale channel increased approximately 11% and the Direct channel increased approximately 37%. On a constant currency basis, North America net sales increased 14.6%.
|
•
|
International net sales increased $5.3 million, or 4.0%. On a constant currency basis, International net sales increased 8.0%, driven primarily by Direct channel growth. Net sales in the Wholesale channel increased 4.8% on a constant currency basis. Net sales in the Direct channel increased 21.2% on a constant currency basis, primarily driven by growth from e-commerce and company-owned stores.
|
|
|
Three Months Ended September 30,
|
|
|
|||||||||||||
|
|
2019
|
|
2018
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
286.8
|
|
|
42.1
|
%
|
|
$
|
229.2
|
|
|
38.5
|
%
|
|
3.6
|
%
|
International
|
|
73.8
|
|
|
53.1
|
%
|
|
70.8
|
|
|
53.0
|
%
|
|
0.1
|
%
|
||
Consolidated gross margin
|
|
$
|
360.6
|
|
|
43.9
|
%
|
|
$
|
300.0
|
|
|
41.1
|
%
|
|
2.8
|
%
|
•
|
North America gross margin improved 360 basis points. The improvement in gross margin was primarily driven by favorable Tempur merchandising mix of 140 basis points, favorable pricing of 140 basis points, and favorable commodity costs of 120 basis points. Additionally, in 2018, we 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 favorable impact of 130 basis points. These improvements were partially offset by inefficiencies associated with new distribution of 110 basis points.
|
•
|
International gross margin improved 10 basis points. The improvement in gross margin is primarily driven by favorable commodity costs.
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
|
Corporate
|
||||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Advertising expenses
|
$
|
75.0
|
|
|
$
|
69.1
|
|
|
$
|
65.8
|
|
|
$
|
59.2
|
|
|
$
|
9.2
|
|
|
$
|
9.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other selling and marketing expenses
|
93.6
|
|
|
76.8
|
|
|
60.5
|
|
|
45.7
|
|
|
30.2
|
|
|
28.9
|
|
|
2.9
|
|
|
2.2
|
|
||||||||
General, administrative and other expenses
|
75.3
|
|
|
73.2
|
|
|
40.7
|
|
|
42.4
|
|
|
11.0
|
|
|
10.0
|
|
|
23.6
|
|
|
20.8
|
|
||||||||
Total operating expenses
|
$
|
243.9
|
|
|
$
|
219.1
|
|
|
$
|
167.0
|
|
|
$
|
147.3
|
|
|
$
|
50.4
|
|
|
$
|
48.8
|
|
|
$
|
26.5
|
|
|
$
|
23.0
|
|
•
|
North America operating expenses increased $19.7 million, or 13.4%, and decreased 20 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by advertising and selling and marketing investments, variable compensation expense and incremental operating expense associated with a higher number of company-owned stores. Additionally, in 2018, we recorded $4.1 million of restructuring charges related to our acquisition of the remaining interest in a joint venture, as well as, incremental bad debt expense related to the bankruptcy of a department store retailer, which was not repeated in the same period in 2019. We will plan to continue to invest in advertising in the fourth quarter of 2019 now that the Tempur and Stearns & Foster product launches are complete.
|
•
|
International operating expenses increased $1.6 million, or 3.3%, and decreased 20 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by selling and marketing investments and variable compensation expense. Additionally, in 2018, we recognized $0.4 million of costs associated with our International simplification efforts, which were not repeated in the same period in 2019.
|
•
|
Corporate operating expenses increased $3.5 million, or 15.2%. The increase in operating expenses was primarily driven by variable compensation expense.
|
|
|
Three Months Ended September 30,
|
|
|
|||||||||||||
|
|
2019
|
|
2018
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Operating Income
|
|
Operating Margin
|
|
Operating Income
|
|
Operating Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
119.8
|
|
|
17.6
|
%
|
|
$
|
81.9
|
|
|
13.7
|
%
|
|
3.9
|
%
|
International
|
|
27.3
|
|
|
19.6
|
%
|
|
25.8
|
|
|
19.3
|
%
|
|
0.3
|
%
|
||
|
|
147.1
|
|
|
|
|
107.7
|
|
|
|
|
|
|||||
Corporate expenses
|
|
(26.5
|
)
|
|
|
|
(23.0
|
)
|
|
|
|
|
|||||
Total operating income
|
|
$
|
120.6
|
|
|
14.7
|
%
|
|
$
|
84.7
|
|
|
11.6
|
%
|
|
3.1
|
%
|
•
|
North America operating income increased $37.9 million and operating margin improved 390 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 360 basis points. Additionally, in 2018, we recorded $4.1 million of restructuring charges related to our acquisition of the remaining interest in a joint venture, as well as, incremental bad debt expense related to the bankruptcy of a department store retailer, which were not repeated in the same period in 2019. These improvements were partially offset by increased variable compensation expense.
|
•
|
International operating income increased $1.5 million and operating margin improved 30 basis points. The improvement in operating margin was primarily driven by improved operating expense leverage and the improvement in gross margin. Additionally, in 2018, we recognized $0.4 million of costs associated with our International simplification efforts, which was not repeated in the same period in 2019.
|
•
|
Corporate operating expenses increased $3.5 million, which negatively impacted our consolidated operating margin by 40 basis points.
|
|
Three Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
2019
|
|
2018
|
|
% Change
|
|||||
Interest expense, net
|
$
|
20.8
|
|
|
$
|
23.6
|
|
|
(11.9
|
)%
|
|
|
Three Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
|
2019
|
|
2018
|
|
% Change
|
|||||
Income tax provision
|
|
$
|
26.1
|
|
|
$
|
15.6
|
|
|
67.3
|
%
|
Effective tax rate
|
|
26.5
|
%
|
|
26.1
|
%
|
|
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions, except percentages and per share amounts)
|
2019
|
|
2018
|
||||||||||
Net sales
|
$
|
2,234.7
|
|
|
100.0
|
%
|
|
$
|
2,026.8
|
|
|
100.0
|
%
|
Cost of sales
|
1,278.9
|
|
|
57.2
|
|
|
1,189.3
|
|
|
58.7
|
|
||
Gross profit
|
955.8
|
|
|
42.8
|
|
|
837.5
|
|
|
41.3
|
|
||
Selling and marketing expenses
|
485.4
|
|
|
21.7
|
|
|
444.6
|
|
|
21.9
|
|
||
General, administrative and other expenses
|
218.7
|
|
|
9.8
|
|
|
206.0
|
|
|
10.2
|
|
||
Equity income in earnings of unconsolidated affiliates
|
(10.4
|
)
|
|
(0.5
|
)
|
|
(11.5
|
)
|
|
(0.6
|
)
|
||
Operating income
|
262.1
|
|
|
11.7
|
|
|
198.4
|
|
|
9.8
|
|
||
|
|
|
|
|
|
|
|
|
|||||
Other expense, net:
|
|
|
|
|
|
|
|
||||||
Interest expense, net
|
65.7
|
|
|
2.9
|
|
|
69.5
|
|
|
3.4
|
|
||
Other income, net
|
(6.5
|
)
|
|
(0.3
|
)
|
|
(1.8
|
)
|
|
(0.1
|
)
|
||
Total other expense, net
|
59.2
|
|
|
2.6
|
|
|
67.7
|
|
|
3.3
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations before income taxes
|
202.9
|
|
|
9.1
|
|
|
130.7
|
|
|
6.4
|
|
||
Income tax provision
|
(58.8
|
)
|
|
(2.6
|
)
|
|
(34.4
|
)
|
|
(1.7
|
)
|
||
Income from continuing operations
|
144.1
|
|
|
6.4
|
|
|
96.3
|
|
|
4.8
|
|
||
Loss from discontinued operations, net of tax
|
(0.8
|
)
|
|
—
|
|
|
(10.9
|
)
|
|
(0.5
|
)
|
||
Net income before non-controlling interest
|
143.3
|
|
|
6.4
|
|
|
85.4
|
|
|
4.2
|
|
||
Less: Net loss attributable to non-controlling interest
|
—
|
|
|
—
|
|
|
(2.8
|
)
|
|
(0.1
|
)
|
||
Net income attributable to Tempur Sealy International, Inc.
|
$
|
143.3
|
|
|
6.4
|
%
|
|
$
|
88.2
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
2.63
|
|
|
|
|
$
|
1.82
|
|
|
|
||
Loss per share for discontinued operations
|
(0.01
|
)
|
|
|
|
(0.20
|
)
|
|
|
||||
Earnings per share
|
$
|
2.62
|
|
|
|
|
$
|
1.62
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
|
|
||||||
Earnings per share for continuing operations
|
$
|
2.57
|
|
|
|
|
$
|
1.80
|
|
|
|
||
Loss per share for discontinued operations
|
(0.01
|
)
|
|
|
|
(0.20
|
)
|
|
|
||||
Earnings per share
|
$
|
2.56
|
|
|
|
|
$
|
1.60
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||
Basic
|
54.7
|
|
|
|
|
54.4
|
|
|
|
||||
Diluted
|
56.0
|
|
|
|
|
55.0
|
|
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
||||||||||||||||||
Net sales by channel
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wholesale channel
|
$
|
1,958.2
|
|
|
$
|
1,845.6
|
|
|
$
|
1,632.5
|
|
|
$
|
1,501.9
|
|
|
$
|
325.7
|
|
|
$
|
343.7
|
|
Direct channel
|
276.5
|
|
|
181.2
|
|
|
181.6
|
|
|
106.7
|
|
|
94.9
|
|
|
74.5
|
|
||||||
Total net sales
|
$
|
2,234.7
|
|
|
$
|
2,026.8
|
|
|
$
|
1,814.1
|
|
|
$
|
1,608.6
|
|
|
$
|
420.6
|
|
|
$
|
418.2
|
|
•
|
North America net sales increased $205.5 million, or 12.8%. Net sales in the Wholesale channel increased $130.6 million, or 8.7%, driven primarily by new Tempur product introductions. Net sales in our Direct channel increased $74.9 million, or 70.2%, primarily driven by growth from company-owned stores, including the Sleep Outfitters Acquisition, and our e-commerce business. Excluding Sleep Outfitters, the Wholesale channel increased approximately 11% and the Direct channel increased approximately 61%. On a constant currency basis, North America net sales increased 13.1%.
|
•
|
International net sales increased $2.4 million, or 0.6%. On a constant currency basis, International net sales increased 5.8%, driven primarily by Direct channel growth. Net sales in the Wholesale channel decreased 0.2% on a constant currency basis, primarily driven by country specific conditions. Net sales in the Direct channel increased 33.4% on a constant currency basis, primarily driven by growth from company-owned stores.
|
|
|
Nine Months Ended September 30,
|
|
|
|||||||||||||
|
|
2019
|
|
2018
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Gross Profit
|
|
Gross Margin
|
|
Gross Profit
|
|
Gross Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
731.2
|
|
|
40.3
|
%
|
|
$
|
616.7
|
|
|
38.3
|
%
|
|
2.0
|
%
|
International
|
|
224.6
|
|
|
53.4
|
%
|
|
220.8
|
|
|
52.8
|
%
|
|
0.6
|
%
|
||
Consolidated gross margin
|
|
$
|
955.8
|
|
|
42.8
|
%
|
|
$
|
837.5
|
|
|
41.3
|
%
|
|
1.5
|
%
|
•
|
North America gross margin improved 200 basis points. The improvement in gross margin was primarily driven by favorable pricing of 140 basis points and favorable product and brand mix of 100 basis points. Additionally, in 2018, we 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 a favorable impact of 50 basis points. These improvements were partially offset by inefficiencies associated with new distribution and unfavorable channel mix.
|
•
|
International gross margin improved 60 basis points. The improvement in gross margin was primarily driven by lower commodity costs.
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
(in millions)
|
Consolidated
|
|
North America
|
|
International
|
|
Corporate
|
||||||||||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Advertising expenses
|
$
|
203.0
|
|
|
$
|
198.8
|
|
|
$
|
174.6
|
|
|
$
|
167.8
|
|
|
$
|
28.4
|
|
|
$
|
31.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other selling and marketing expenses
|
282.4
|
|
|
245.8
|
|
|
180.6
|
|
|
145.8
|
|
|
93.4
|
|
|
93.7
|
|
|
8.4
|
|
|
6.3
|
|
||||||||
General, administrative and other expenses
|
218.7
|
|
|
206.0
|
|
|
111.8
|
|
|
103.0
|
|
|
33.3
|
|
|
32.1
|
|
|
73.6
|
|
|
70.9
|
|
||||||||
Total operating expenses
|
$
|
704.1
|
|
|
$
|
650.6
|
|
|
$
|
467.0
|
|
|
$
|
416.6
|
|
|
$
|
155.1
|
|
|
$
|
156.8
|
|
|
$
|
82.0
|
|
|
$
|
77.2
|
|
•
|
North America operating expenses increased $50.4 million, or 12.1%, and decreased 20 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by advertising and selling and marketing investments, variable compensation expense and incremental operating expense associated with a higher number of company-owned stores. Additionally, in 2018, we recorded $4.1 million of restructuring charges related to our acquisition of the remaining interest in a joint venture, as well as, incremental bad debt expense related to the bankruptcy of a department store retailer, which were not repeated in the same period in 2019. We plan to continue to invest in advertising in the fourth quarter of 2019 now that the Tempur and Stearns & Foster product launches are complete.
|
•
|
International operating expenses decreased $1.7 million, or 1.1% and decreased 60 basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by decreased advertising costs, offset by an increase in variable compensation expense. Additionally, in 2018, we recognized $3.8 million of costs associated with our International simplification efforts, which were not repeated in the same period in 2019.
|
•
|
Corporate operating expenses increased $4.8 million, or 6.2%. The increase in operating expenses was primarily driven by variable compensation expense and $4.1 million of professional fees primarily related to the Sleep Outfitters Acquisition. Additionally, in 2018, we recorded $2.0 million of professional fees associated with our International simplification efforts, which were not repeated in the same period in 2019.
|
|
|
Nine Months Ended September 30,
|
|
|
|||||||||||||
|
|
2019
|
|
2018
|
|
|
|||||||||||
(in millions, except percentages)
|
|
Operating Income
|
|
Operating Margin
|
|
Operating Income
|
|
Operating Margin
|
|
Margin Change
|
|||||||
North America
|
|
$
|
264.2
|
|
|
14.6
|
%
|
|
$
|
200.1
|
|
|
12.4
|
%
|
|
2.2
|
%
|
International
|
|
79.9
|
|
|
19.0
|
%
|
|
75.5
|
|
|
18.1
|
%
|
|
0.9
|
%
|
||
|
|
344.1
|
|
|
|
|
275.6
|
|
|
|
|
|
|||||
Corporate expenses
|
|
(82.0
|
)
|
|
|
|
(77.2
|
)
|
|
|
|
|
|||||
Total operating income
|
|
$
|
262.1
|
|
|
11.7
|
%
|
|
$
|
198.4
|
|
|
9.8
|
%
|
|
1.9
|
%
|
•
|
North America operating income increased $64.1 million and operating margin improved 220 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 200 basis points. Additionally, in 2018, we recorded $4.1 million of restructuring charges related to our acquisition of the remaining interest in a joint venture, as well as, incremental bad debt expense related to the bankruptcy of a department store retailer, which were not repeated in the same period in 2019.
|
•
|
International operating income increased $4.4 million and operating margin improved 90 basis points. The improvement in operating margin was driven by the improvement in gross margin of 60 basis points. Additionally, in 2018, we recognized $3.8 million of costs associated with our International simplification efforts, which were not repeated in the same period in 2019.
|
•
|
Corporate operating expenses increased $4.8 million, which negatively impacted our consolidated operating margin by 20 basis points.
|
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
|
2019
|
|
2018
|
|
% Change
|
|||||
Interest expense, net
|
|
$
|
65.7
|
|
|
$
|
69.5
|
|
|
(5.5
|
)%
|
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions, except percentages)
|
|
2019
|
|
2018
|
|
% Change
|
|||||
Income tax provision
|
|
$
|
58.8
|
|
|
$
|
34.4
|
|
|
70.9
|
%
|
Effective tax rate
|
|
29.0
|
%
|
|
26.3
|
%
|
|
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
|
2019
|
|
2018
|
||||
Net cash provided by (used in) continuing operations:
|
|
|
|
|
||||
Operating activities
|
|
$
|
201.7
|
|
|
$
|
130.6
|
|
Investing activities
|
|
(64.0
|
)
|
|
(55.5
|
)
|
||
Financing activities
|
|
(124.8
|
)
|
|
(63.7
|
)
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
|
2019
|
|
2018
|
||||
Net cash used in discontinued operations:
|
|
|
|
|
||||
Operating activities
|
|
$
|
(1.7
|
)
|
|
$
|
(17.6
|
)
|
Investing activities
|
|
—
|
|
|
(0.2
|
)
|
||
Financing activities
|
|
—
|
|
|
—
|
|
|
Three Months Ended
|
||||||
(in millions, except per share amounts)
|
September 30, 2019
|
|
September 30, 2018
|
||||
Net income
|
$
|
73.3
|
|
|
$
|
42.3
|
|
(Income) loss from discontinued operations, net of tax (1)
|
(0.8
|
)
|
|
2.7
|
|
||
Restructuring costs (2)
|
—
|
|
|
10.4
|
|
||
Supply chain transition costs (3)
|
—
|
|
|
4.5
|
|
||
Tax adjustments (4)
|
—
|
|
|
(3.8
|
)
|
||
Adjusted net income
|
$
|
72.5
|
|
|
$
|
56.1
|
|
|
|
|
|
||||
Adjusted earnings per common share, diluted
|
$
|
1.30
|
|
|
$
|
1.02
|
|
|
|
|
|
||||
Diluted shares outstanding
|
55.8
|
|
|
55.1
|
|
(1)
|
Certain subsidiaries in the International business segment are accounted for as discontinued operations and have been designated as unrestricted subsidiaries in the 2019 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 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 $1.0 million of other expense. Restructuring costs also included $0.4 million of expenses in the International business segment related to 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, including $0.8 million of other expense.
|
(4)
|
Tax adjustments represent adjustments associated with the aforementioned items and other discrete income tax events.
|
|
Three Months Ended September 30, 2019
|
|||||||||||||||||||||||
(in millions, except percentages)
|
Consolidated
|
|
Margin
|
|
North America
|
|
Margin
|
|
International
|
|
Margin
|
|
Corporate
|
|||||||||||
Net sales
|
$
|
821.0
|
|
|
|
|
$
|
682.0
|
|
|
|
|
$
|
139.0
|
|
|
|
|
$
|
—
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit
|
$
|
360.6
|
|
|
43.9
|
%
|
|
$
|
286.8
|
|
|
42.1
|
%
|
|
$
|
73.8
|
|
|
53.1
|
%
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (expense)
|
$
|
120.6
|
|
|
14.7
|
%
|
|
$
|
119.8
|
|
|
17.6
|
%
|
|
$
|
27.3
|
|
|
19.6
|
%
|
|
$
|
(26.5
|
)
|
|
Three Months Ended September 30, 2018
|
|||||||||||||||||||||||
(in millions, except percentages)
|
Consolidated
|
|
Margin
|
|
North America
|
|
Margin
|
|
International
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Restructuring costs (1)
|
4.9
|
|
|
|
|
4.9
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Supply chain transition costs (2)
|
3.7
|
|
|
|
|
3.7
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Total 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Restructuring costs (1)
|
9.4
|
|
|
|
|
9.0
|
|
|
|
|
0.4
|
|
|
|
|
—
|
|
|||||||
Supply chain transition costs (2)
|
3.7
|
|
|
|
|
3.7
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|||||||
Total 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)
|
In the third quarter of 2018, we recorded $9.4 million of restructuring costs in operating income, including $4.9 million in cost of sales. These costs included $9.0 million of charges related to the operational alignment of a joint venture that was wholly acquired in the North America business segment. Restructuring costs also included $0.4 million of expenses in the International business segment related to International simplification efforts, including headcount reduction and professional fees.
|
(2)
|
In the third quarter of 2018, we recorded $3.7 million of supply chain transition costs in cost of sales, which represent charges incurred to consolidate certain manufacturing and distribution facilities.
|
•
|
Net income to EBITDA and Adjusted EBITDA
|
•
|
Ratio of consolidated indebtedness less netted cash to Adjusted EBITDA
|
•
|
Total debt, net to consolidated indebtedness less netted cash
|
|
Three Months Ended
|
||||||
(in millions)
|
September 30, 2019
|
|
September 30, 2018
|
||||
Net income
|
$
|
73.3
|
|
|
$
|
42.3
|
|
Interest expense, net
|
20.8
|
|
|
23.6
|
|
||
Income taxes
|
26.1
|
|
|
15.6
|
|
||
Depreciation and amortization
|
30.5
|
|
|
31.2
|
|
||
EBITDA
|
$
|
150.7
|
|
|
$
|
112.7
|
|
Adjustments:
|
|
|
|
||||
(Income) loss from discontinued operations, net of tax (1)
|
$
|
(0.8
|
)
|
|
$
|
2.7
|
|
Restructuring costs (2)
|
—
|
|
|
7.8
|
|
||
Supply chain transition costs (3)
|
—
|
|
|
4.5
|
|
||
Adjusted EBITDA
|
$
|
149.9
|
|
|
$
|
127.7
|
|
(1)
|
Certain subsidiaries in the International business segment are accounted for as discontinued operations and have been designated as unrestricted subsidiaries in the 2019 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 $7.8 million of restructuring costs. These costs included $7.4 million of charges related to the operational alignment of a joint venture that was wholly acquired in the North America business segment. Restructuring costs also included $0.4 million of expenses in the International business segment related to 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, including $0.8 million of other expense.
|
|
|
Trailing Twelve Months Ended
|
||
(in millions)
|
|
September 30, 2019
|
||
Net income
|
|
$
|
155.6
|
|
Interest expense, net
|
|
88.5
|
|
|
Income taxes
|
|
74.0
|
|
|
Depreciation and amortization
|
|
115.8
|
|
|
EBITDA
|
|
$
|
433.9
|
|
Adjustments:
|
|
|
||
Loss from discontinued operations, net of tax (1)
|
|
7.7
|
|
|
Customer-related charges (2)
|
|
21.2
|
|
|
Restructuring costs (3)
|
|
9.1
|
|
|
Acquisition-related costs and other (4)
|
|
6.1
|
|
|
Supply chain transition costs (5)
|
|
2.8
|
|
|
Other income (6)
|
|
(7.2
|
)
|
|
Adjusted EBITDA
|
|
$
|
473.6
|
|
|
|
|
||
Consolidated indebtedness less netted cash
|
|
$
|
1,524.9
|
|
|
|
|
||
Ratio of consolidated indebtedness less netted cash to Adjusted EBITDA
|
|
3.22 times
|
(1)
|
Certain subsidiaries in the International business segment are accounted for as discontinued operations and have been designated as unrestricted subsidiaries in the 2019 Credit Agreement. Therefore, these subsidiaries are excluded from our adjusted financial measures for covenant compliance purposes.
|
(2)
|
On January 11, 2019, Innovative Mattress Solutions ("iMS"), a customer prior to its April 1, 2019 acquisition, 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 at that time.
|
(3)
|
In the fourth quarter of 2018, we recorded $9.1 million of restructuring costs. These costs included $4.7 million of expenses in the International business segment related to International simplification efforts, including headcount reduction, professional fees, store closures and other costs, and $2.9 million of Corporate professional fees related to restructuring activities. Restructuring costs also included $1.5 million of charges related to the operational alignment of a joint venture that was wholly acquired in the North America business segment, including $0.2 million of other expense, net.
|
(4)
|
In the first half of 2019, we recorded $6.1 million of acquisition-related and other costs, primarily related to post acquisition restructuring charges and professional fees incurred in the Sleep Outfitters Acquisition.
|
(5)
|
In the fourth quarter of 2018, we recorded $2.8 million of supply chain transition costs which represent charges incurred to consolidate certain manufacturing and distribution facilities.
|
(6)
|
In the first quarter of 2019, we recorded $7.2 million of other income related to the sale of our interest in a subsidiary of the Asia-Pacific joint venture.
|
(in millions)
|
September 30, 2019
|
||
Total debt, net
|
$
|
1,569.6
|
|
Plus: Deferred financing costs (1)
|
6.5
|
|
|
Consolidated indebtedness
|
1,576.1
|
|
|
Less: netted cash (2)
|
51.2
|
|
|
Consolidated indebtedness less netted cash
|
$
|
1,524.9
|
|
(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)
|
Netted cash includes cash and cash equivalents for domestic and foreign subsidiaries designated as restricted subsidiaries in the 2019 Credit Agreement.
|
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, 2019 - July 31, 2019
|
|
—
|
(1)
|
—
|
|
—
|
|
$224.6
|
August 1, 2019 - August 31, 2019
|
|
339,885
|
(1)
|
$77.01
|
|
339,885
|
|
$198.4
|
September 1, 2019 - September 30, 2019
|
|
311,744
|
(1)
|
$76.58
|
|
310,746
|
|
$174.6
|
Total
|
|
651,629
|
|
|
|
650,631
|
|
|
(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 7, 2019
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
TEMPUR SEALY INTERNATIONAL, INC., as Issuer
|
|
By:
|
/s/ James M. Schockett
|
|
Name: James M. Schockett
|
|
Title: Vice President, Treasurer and
Assistant Secretary
|
TEMPUR FRANCHISING US, LLC
SLEEP OUTFITTERS USA, LLC
COMFORT REVOLUTION, LLC,
as Guarantors
|
|
By:
|
/s/ James M. Schockett
|
|
Name: James M. Schockett
|
|
Title: Vice President, Treasurer and
Assistant Secretary
|
BURLINGTON MATTRESS CO. LLC,
as Guarantor
|
|
By:
|
/s/ James M. Schockett
|
|
Name: James M. Schockett
|
|
Title: Treasurer and Assistant
Secretary
|
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
|
|
By:
|
/s/ Karen Yu
|
|
Name: Karen Yu
|
|
Title: Vice President
|
TEMPUR SEALY INTERNATIONAL, INC., as Issuer
|
|
By:
|
/s/ James M. Schockett
|
|
Name: James M. Schockett
|
|
Title: Vice President, Treasurer and
Assistant Secretary
|
TEMPUR FRANCHISING US, LLC
SLEEP OUTFITTERS USA, LLC
COMFORT REVOLUTION, LLC,
as Guarantors
|
|
By:
|
/s/ James M. Schockett
|
|
Name: James M. Schockett
|
|
Title: Vice President, Treasurer and
Assistant Secretary
|
BURLINGTON MATTRESS CO. LLC,
as Guarantor
|
|
By:
|
/s/ James M. Schockett
|
|
Name: James M. Schockett
|
|
Title: Treasurer and Assistant
Secretary
|
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
|
|
By:
|
/s/ Karen Yu
|
|
Name: Karen Yu
|
|
Title: Vice President
|
Date: November 7, 2019
|
By:
|
/s/ SCOTT L. THOMPSON
|
|
|
Scott L. Thompson
|
|
|
Chairman, President and Chief Executive Officer
|
Date: November 7, 2019
|
By:
|
/s/ BHASKAR RAO
|
|
|
Bhaskar Rao
|
|
|
Executive Vice President and Chief Financial Officer
|
Date: November 7, 2019
|
By:
|
/s/ SCOTT L. THOMPSON
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Scott L. Thompson
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Chairman, President and Chief Executive Officer
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Date: November 7, 2019
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By:
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/s/ BHASKAR RAO
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Bhaskar Rao
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Executive Vice President and Chief Financial Officer
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