NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited)
(1)
Summary of Significant Accounting Policies
(a)
Basis of Presentation and Description of Business.
Tempur Sealy International, Inc., a Delaware corporation, together with its subsidiaries, is a U.S. based, multinational company. The term "Tempur Sealy International" refers to Tempur Sealy International, Inc. only, and the term "Company" refers to Tempur Sealy International, Inc. and its consolidated subsidiaries.
The Company develops, manufactures, markets and sells bedding products, which include mattresses, foundations and adjustable bases, and other products, which include pillows and other accessories. The Company also derives income from royalties by licensing Sealy® and Stearns & Foster® brands, technology and trademarks to other manufacturers. The Company sells its products through
two
sales channels: Wholesale and Direct.
The Company has ownership interests in a group of Asia-Pacific joint ventures to develop markets for Sealy® branded products in those regions. The Company’s ownership interest in these joint ventures is
50.0%
. The equity method of accounting is used for these joint ventures, over which the Company has significant influence but does not have control, and consolidation is not otherwise required. The Company's carrying value in its equity method investments of
$24.6 million
and
$22.5 million
at
June 30, 2019
and
December 31, 2018
, respectively, is recorded in other non-current assets within the accompanying Condensed Consolidated Balance Sheets. The Company’s equity in the net income and losses of these investments is recorded as equity income in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Income.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States ("GAAP") for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended
December 31, 2018
, included in the
2018
Annual Report filed with the Securities and Exchange Commission on February 25, 2019.
The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.
(b)
Adoption of New Accounting Standards.
Leases.
Effective January 1, 2019, the Company adopted Accounting Standards Codification 842, Leases ("ASC 842"). ASC 842 consists of a comprehensive lease accounting standard requiring most leases to be recognized on the Condensed Consolidated Balance Sheet and significant new disclosures. The Company determines if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification.
Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded within the Condensed Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term within the Condensed Consolidated Statement of Income. The lease term is determined by assuming the exercise of renewal options that are reasonably certain. As most leases do not provide an implicit interest rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. When contracts contain lease and non-lease components, the Company generally accounts for both components as a single lease component.
The adoption of ASC 842 resulted in the recognition of right-of-use assets of $
197.2 million
and operating lease liabilities of
$203.3 million
as of January 1, 2019. Results for reporting periods beginning prior to January 1, 2019 continue to be reported in accordance with our historical accounting treatment. The adoption of ASC 842 did not have a material impact on the Company's results of operations, cash flows or debt covenants. For additional information, see Note
8
, "
Leases
" of the Condensed Consolidated Financial Statements.
(c)
Inventories
. Inventories are stated at the lower of cost and net realizable value, determined by the first-in, first-out method, and consist of the following:
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
(in millions)
|
2019
|
|
2018
|
Finished goods
|
$
|
143.4
|
|
|
$
|
148.9
|
|
Work-in-process
|
11.0
|
|
|
11.8
|
|
Raw materials and supplies
|
88.7
|
|
|
61.6
|
|
|
$
|
243.1
|
|
|
$
|
222.3
|
|
(d)
Accrued Sales Returns
. The Company allows product returns through certain sales channels and on certain products. Estimated sales returns are provided at the time of sale based on historical sales channel return rates. Estimated future obligations related to these products are provided by a reduction of sales in the period in which the revenue is recognized. Accrued sales returns are included in accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets.
The Company had the following activity for sales returns from
December 31, 2018
to
June 30, 2019
:
|
|
|
|
|
(in millions)
|
|
Balance as of December 31, 2018
|
$
|
34.3
|
|
Amounts accrued
|
52.0
|
|
Returns charged to accrual
|
(49.4
|
)
|
Balance as of June 30, 2019
|
$
|
36.9
|
|
As of
June 30, 2019
and
December 31, 2018
,
$24.6 million
and
$22.0 million
of accrued sales returns are included as a component of accrued expenses and other current liabilities and
$12.3 million
and
$12.3 million
, of accrued sales returns are included in other non-current liabilities on the Company’s accompanying Condensed Consolidated Balance Sheets, respectively.
(e)
Warranties
. The Company provides warranties on certain products, which vary by segment, product and brand. Estimates of warranty expenses are based primarily on historical claims experience and product testing. Estimated future obligations related to these products are charged to cost of sales in the period in which the related revenue is recognized. The Company considers the impact of recoverable salvage value on warranty costs in determining its estimate of future warranty obligations.
The Company provides warranties on mattresses with varying warranty terms. Tempur-Pedic mattresses sold in the North America segment and all Sealy mattresses have warranty terms ranging from
10
to
25
years, generally non-prorated for the first
10
to
15
years and then prorated for the balance of the warranty term. Tempur-Pedic mattresses sold in the International segment have warranty terms ranging from
5
to
15
years, non-prorated for the first
5
years and then prorated on a straight-line basis for the last
10
years of the warranty term. Tempur-Pedic pillows have a warranty term of
3
years, non-prorated.
The Company had the following activity for its accrued warranty expense from
December 31, 2018
to
June 30, 2019
:
|
|
|
|
|
(in millions)
|
|
Balance as of December 31, 2018
|
$
|
36.4
|
|
Amounts accrued
|
14.3
|
|
Warranties charged to accrual
|
(13.1
|
)
|
Balance as of June 30, 2019
|
$
|
37.6
|
|
As of
June 30, 2019
and
December 31, 2018
,
$15.5 million
and
$14.9 million
of accrued warranty expense is included as a component of accrued expenses and other current liabilities and
$22.1 million
and
$21.5 million
of accrued warranty expense is included in other non-current liabilities in the Company’s accompanying Condensed Consolidated Balance Sheets, respectively.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(f)
Allowance for Doubtful Accounts
. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s accounts receivable. The Company regularly reviews the adequacy of its allowance for doubtful accounts. The Company determines the allowance based on historical write-off experience and current economic conditions and also considers factors such as customer credit, past transaction history with the customer and changes in customer payment terms when determining whether the collection of a customer receivable is reasonably assured. Account balances are charged off against the allowance after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts included in accounts receivable, net in the accompanying Condensed Consolidated Balance Sheets was
$50.9 million
and
$47.6 million
as of
June 30, 2019
and
December 31, 2018
, respectively.
(2)
Recently Issued Accounting Pronouncements
Credit Losses
In June 2016, the FASB issued ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires entities to estimate expected lifetime credit losses on financial assets and provide expanded disclosures. This ASU is effective on January 1, 2020. In transition, entities are required to use a modified retrospective approach for the adoption of the new standard. The ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company is currently evaluating this ASU to determine the impact it will have on the Company's Condensed Consolidated Financial Statements.
(3)
Revenue Recognition
Disaggregation of Revenue
The following table presents the Company's disaggregated revenue by channel, product and geographical region, including a reconciliation of disaggregated revenue by segment, for the
three and six
months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
Channel
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
$
|
528.5
|
|
|
$
|
103.7
|
|
|
$
|
632.2
|
|
|
$
|
1,030.3
|
|
|
$
|
217.8
|
|
|
$
|
1,248.1
|
|
Direct
|
59.6
|
|
|
31.0
|
|
|
90.6
|
|
|
101.8
|
|
|
63.8
|
|
|
165.6
|
|
Net sales
|
$
|
588.1
|
|
|
$
|
134.7
|
|
|
$
|
722.8
|
|
|
$
|
1,132.1
|
|
|
$
|
281.6
|
|
|
$
|
1,413.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
Product
|
|
|
|
|
|
|
|
|
|
|
|
Bedding products
|
$
|
554.2
|
|
|
$
|
108.4
|
|
|
$
|
662.6
|
|
|
$
|
1,068.6
|
|
|
$
|
223.8
|
|
|
$
|
1,292.4
|
|
Other products
|
33.9
|
|
|
26.3
|
|
|
60.2
|
|
|
63.5
|
|
|
57.8
|
|
|
121.3
|
|
Net sales
|
$
|
588.1
|
|
|
$
|
134.7
|
|
|
$
|
722.8
|
|
|
$
|
1,132.1
|
|
|
$
|
281.6
|
|
|
$
|
1,413.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
Geographical region
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
$
|
533.7
|
|
|
$
|
—
|
|
|
$
|
533.7
|
|
|
$
|
1,030.9
|
|
|
$
|
—
|
|
|
$
|
1,030.9
|
|
Canada
|
54.4
|
|
|
—
|
|
|
54.4
|
|
|
101.2
|
|
|
—
|
|
|
101.2
|
|
International
|
—
|
|
|
134.7
|
|
|
134.7
|
|
|
—
|
|
|
281.6
|
|
|
281.6
|
|
Net sales
|
$
|
588.1
|
|
|
$
|
134.7
|
|
|
$
|
722.8
|
|
|
$
|
1,132.1
|
|
|
$
|
281.6
|
|
|
$
|
1,413.7
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table presents the Company's disaggregated revenue by channel, product and geographical region, including a reconciliation of disaggregated revenue by segment, for the
three and six
months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
Channel
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
$
|
494.3
|
|
|
$
|
107.3
|
|
|
$
|
601.6
|
|
|
$
|
948.3
|
|
|
$
|
236.4
|
|
|
$
|
1,184.7
|
|
Direct
|
33.5
|
|
|
24.8
|
|
|
58.3
|
|
|
64.5
|
|
|
48.1
|
|
|
112.6
|
|
Net sales
|
$
|
527.8
|
|
|
$
|
132.1
|
|
|
$
|
659.9
|
|
|
$
|
1,012.8
|
|
|
$
|
284.5
|
|
|
$
|
1,297.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
Product
|
|
|
|
|
|
|
|
|
|
|
|
Bedding products
|
$
|
497.4
|
|
|
$
|
103.9
|
|
|
$
|
601.3
|
|
|
$
|
949.7
|
|
|
$
|
227.6
|
|
|
$
|
1,177.3
|
|
Other products
|
30.4
|
|
|
28.2
|
|
|
58.6
|
|
|
63.1
|
|
|
56.9
|
|
|
120.0
|
|
Net sales
|
$
|
527.8
|
|
|
$
|
132.1
|
|
|
$
|
659.9
|
|
|
$
|
1,012.8
|
|
|
$
|
284.5
|
|
|
$
|
1,297.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
International
|
|
Consolidated
|
|
North America
|
|
International
|
|
Consolidated
|
Geographical region
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
$
|
477.7
|
|
|
$
|
—
|
|
|
$
|
477.7
|
|
|
$
|
917.9
|
|
|
$
|
—
|
|
|
$
|
917.9
|
|
Canada
|
50.1
|
|
|
—
|
|
|
50.1
|
|
|
94.9
|
|
|
—
|
|
|
94.9
|
|
International
|
—
|
|
|
132.1
|
|
|
132.1
|
|
|
—
|
|
|
284.5
|
|
|
284.5
|
|
Net sales
|
$
|
527.8
|
|
|
$
|
132.1
|
|
|
$
|
659.9
|
|
|
$
|
1,012.8
|
|
|
$
|
284.5
|
|
|
$
|
1,297.3
|
|
The North America and International segments sell product through
two
channels: Wholesale and Direct. The Wholesale channel includes all product sales to third party retailers, including third party distribution, hospitality and healthcare. The Direct channel includes product sales through company-owned stores, e-commerce and call centers. The North America and International segments classify products into
two
major categories: Bedding and Other. Bedding products include mattresses, foundations and adjustable foundations. Other products include pillows, mattress covers, sheets, cushions and various other comfort products.
The Wholesale channel also includes income from royalties derived by licensing Sealy® and Stearns & Foster® brands, technology and trademarks to other manufacturers. The licenses include rights for the licensees to use trademarks as well as current proprietary or patented technology that the Company utilizes. The Company also provides its licensees with product specifications, research and development, statistical services and marketing programs. The Company recognizes royalty income based on the occurrence of sales of Sealy® and Stearns & Foster® branded products by various licensees.
For product sales in each of the Company's channels, the Company recognizes a sale when the obligations under the terms of the contract with the customer is satisfied, which is generally when control of the product has transferred to the customer. Transferring control of each product sold is considered a separate performance obligation. The Company transfers control and recognizes a sale when the customer receives the product. Each unit sold is considered an independent, unbundled performance obligation. The Company does not have any additional performance obligations other than product sales that are material in the context of the contract. The Company also offers assurance type warranties on certain of its products, which is not accounted for as separate performance obligations under the revenue model.
The transaction price is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives, and correspondingly, the revenue that is recognized, varies due to sales incentives and returns the Company offers to its Wholesale and Direct channel customers. Specifically, the Company extends volume discounts, as well as promotional allowances, floor sample discounts, commissions paid to retail associates and slotting fees to its Wholesale channel customers and reflects these amounts as a reduction of sales at the time revenue is recognized based on historical experience. The Company allows returns following a sale, depending on the channel and promotion. The Company reduces revenue and cost of sales for its estimate of the expected returns, which is primarily based on the level of historical sales returns. The Company does not offer extended payment terms beyond one year to customers. As such, the Company does not adjust its consideration for financing arrangements.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
In certain jurisdictions, the Company is subject to certain non-income taxes including, but not limited to, sales tax, value added tax, excise tax and other taxes. These taxes are excluded from the transaction price, and therefore, excluded from revenue. The Company has elected to account for shipping and handling activities as a fulfillment cost as permitted by Topic 606. Accordingly, the Company reflects all amounts billed to customers for shipping and handling in revenue and the costs of fulfillment in cost of sales.
(4)
Discontinued Operations
The Company presents the financial position and results of operations of certain businesses in the Latin American region as discontinued operations in the accompanying Condensed Consolidated Financial Statements. In December 2018, the Company divested of the net assets of certain subsidiaries in the Latin American region.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Components of amounts reflected in the Condensed Consolidated Statements of Income related to discontinued operations are presented in the following table for each of the periods ended
June 30
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net sales
|
$
|
—
|
|
|
$
|
9.8
|
|
|
$
|
0.2
|
|
|
$
|
20.4
|
|
Cost of sales
|
—
|
|
|
6.5
|
|
|
0.2
|
|
|
13.9
|
|
Gross profit
|
—
|
|
|
3.3
|
|
|
—
|
|
|
6.5
|
|
Selling and marketing expenses
|
—
|
|
|
4.1
|
|
|
0.1
|
|
|
7.6
|
|
General, administrative and other expenses
|
1.2
|
|
|
1.7
|
|
|
1.8
|
|
|
3.2
|
|
Operating loss
|
(1.2
|
)
|
|
(2.5
|
)
|
|
(1.9
|
)
|
|
(4.3
|
)
|
|
|
|
|
|
|
|
|
Interest expense (income), net and other
|
—
|
|
|
3.1
|
|
|
(0.3
|
)
|
|
4.1
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations before income taxes
|
(1.2
|
)
|
|
(5.6
|
)
|
|
(1.6
|
)
|
|
(8.4
|
)
|
Income tax provision
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Net loss from discontinued operations, net of tax
|
$
|
(1.2
|
)
|
|
$
|
(5.4
|
)
|
|
$
|
(1.6
|
)
|
|
$
|
(8.2
|
)
|
(5)
Acquisitions
Acquisition of Innovative Mattress Solutions, LLC ("iMS")
On January 11, 2019, iMS filed for bankruptcy and the Company provided debtor-in-possession financing in connection with the iMS Chapter 11 proceedings. On April 1, 2019, the Company acquired substantially all of the net assets of iMS in a transaction valued at approximately
$24 million
, including assumed liabilities of approximately
$11 million
as of March 31, 2019 (referred to as the "Sleep Outfitters Acquisition"). The acquisition of this regional bedding retailer furthers the Company’s North American retail strategy, which is focused on meeting customer demand through geographic representation and sales expertise.
The Company accounted for this transaction as a business combination. Total cash consideration was
$13.2 million
, less cash acquired of
$5.1 million
, resulting in a purchase price of
$8.1 million
. The preliminary allocation of the purchase price is based on estimates of the fair values of the assets acquired and liabilities assumed as of April 1, 2019, which primarily includes the following:
|
|
|
|
|
(in millions)
|
|
Working capital (accounts receivable and inventory, net of accounts payable and accrued liabilities)
|
$
|
(2.3
|
)
|
Property and equipment
|
5.0
|
|
Goodwill
|
2.1
|
|
Other intangible assets
|
3.3
|
|
Operating lease right-of-use assets
|
28.5
|
|
Long-term operating lease liabilities
|
(28.5
|
)
|
Net purchase price
|
$
|
8.1
|
|
Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the growth opportunities and synergistic benefits to be realized from the acquisition. The goodwill is deductible for income tax purposes and will be included within the North American reporting unit for goodwill impairment assessments.
As a result of the acquisition, the Company acquired trade names and customer database of
$3.3 million
.
Acquisition in the International segment
On April 1, 2019, the Company acquired the net assets of an entity in the International segment. The acquisition was valued at
$7.1 million
, and the purchase price allocation primarily included working capital, property, plant and equipment and inventory. Additionally, the Company recognized goodwill of
$2.9 million
and other intangible assets of
$2.9 million
.
(6)
Goodwill
The following summarizes changes to the Company’s goodwill, by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
North America
|
|
International
|
|
Consolidated
|
Balance as of December 31, 2018
|
$
|
571.1
|
|
|
151.9
|
|
|
$
|
723.0
|
|
Goodwill resulting from acquisitions
|
2.1
|
|
|
5.4
|
|
|
7.5
|
|
Foreign currency translation and other
|
2.5
|
|
|
(0.7
|
)
|
|
1.8
|
|
Balance as of June 30, 2019
|
$
|
575.7
|
|
|
$
|
156.6
|
|
|
$
|
732.3
|
|
(7)
Debt
Debt for the Company consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
(in millions, except percentages)
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Maturity Date
|
2016 Credit Agreement
|
|
|
|
|
|
|
|
|
|
Term A Facility
|
$
|
435.0
|
|
|
(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
|
93.9
|
|
|
(3)
|
|
9.1
|
|
|
(3)
|
|
April 6, 2021
|
Finance/capital lease obligations
(4)
|
65.9
|
|
|
|
|
66.7
|
|
|
|
|
Various
|
Other
|
7.7
|
|
|
|
|
3.0
|
|
|
|
|
Various
|
Total debt
|
1,652.5
|
|
|
|
|
1,653.8
|
|
|
|
|
|
Less: deferred financing costs
|
6.9
|
|
|
|
|
7.6
|
|
|
|
|
|
Total debt, net
|
1,645.6
|
|
|
|
|
1,646.2
|
|
|
|
|
|
Less: current portion
|
60.1
|
|
|
|
|
47.1
|
|
|
|
|
|
Total long-term debt, net
|
$
|
1,585.5
|
|
|
|
|
$
|
1,599.1
|
|
|
|
|
|
|
|
|
(1)
|
Interest at LIBOR plus applicable margin of 1.75% as of June 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.
|
2016 Credit Agreement
On April 6, 2016, the Company entered into the 2016 Credit Agreement with a syndicate of banks. The 2016 Credit Agreement requires compliance with certain financial covenants providing for maintenance of a minimum consolidated interest coverage ratio, maintenance of a maximum consolidated total net leverage ratio, and maintenance of a maximum consolidated secured net leverage ratio. As of
June 30, 2019
, domestic qualified cash was
$20.7 million
and foreign qualified cash was
$9.4 million
. During the six months ended
June 30, 2019
, the Company prepaid
$75.0 million
on the Term A Facility.
The Company was in compliance with all applicable covenants as of
June 30, 2019
.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Securitized Debt
On April 12, 2017, the Company and certain of its subsidiaries entered into a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization"). On April 5, 2019, the Company and its subsidiaries entered into a new amendment to the Accounts Receivable Securitization. The amendment, among other things, extended the maturity date of the Accounts Receivable Securitization to April 6, 2021.
Fair Value of Financial Instruments
Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable, and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value using Level 1 inputs because of the short-term maturity of those instruments. Borrowings under the 2016 Credit Agreement and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair value of the following material financial instruments were based on Level 2 inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of debt instruments. The fair values of these material financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
(in millions)
|
|
June 30, 2019
|
|
December 31, 2018
|
2023 Senior Notes
|
|
$
|
466.2
|
|
|
$
|
435.6
|
|
2026 Senior Notes
|
|
623.4
|
|
|
549.3
|
|
(8)
Leases
ASC 842 Summary
The Company leases retail stores, manufacturing and distribution facilities, office space and equipment under operating lease agreements. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to several years, with the longest renewal period extending through 2043. The exercise of lease renewal options are at the Company's sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Condensed Consolidated Balance Sheet as of
June 30, 2019
:
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
June 30, 2019
|
Assets
|
|
|
|
|
Operating lease assets
|
|
Operating lease right-of-use assets
|
|
$
|
228.1
|
|
Finance lease assets
|
|
Property, plant and equipment, net
|
|
57.3
|
|
Total leased assets
|
|
|
|
$
|
285.4
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Short-term:
|
|
|
|
|
Operating lease obligations
|
|
Accrued expenses and other current liabilities
|
|
$
|
49.0
|
|
Finance lease obligations
|
|
Current portion of long-term debt
|
|
7.5
|
|
Long-term:
|
|
|
|
|
Operating lease obligations
|
|
Long-term operating lease obligations
|
|
186.7
|
|
Finance lease obligations
|
|
Long-term debt, net
|
|
58.4
|
|
Total lease obligations
|
|
|
|
$
|
301.6
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes the classification of lease expense in the Company's Condensed Consolidated Statement of Income for the
three and six
months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
(in millions)
|
|
June 30, 2019
|
|
June 30, 2019
|
Operating lease expense
(1)
|
|
$
|
22.2
|
|
|
$
|
41.2
|
|
Finance lease expense:
|
|
|
|
|
Amortization of right-of-use assets
|
|
2.3
|
|
|
4.2
|
|
Interest on lease obligations
|
|
1.2
|
|
|
2.4
|
|
Total lease expense
|
|
$
|
25.7
|
|
|
$
|
47.8
|
|
|
|
|
(1)
|
Includes short-term leases and variable lease expenses, which are immaterial.
|
The following table sets forth the scheduled maturities of lease obligations as of
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
Year Ended December 31,
|
|
|
|
|
|
|
2019 (excluding the six months ended June 30, 2019)
|
|
$
|
32.1
|
|
|
$
|
5.8
|
|
|
$
|
37.9
|
|
2020
|
|
56.0
|
|
|
11.7
|
|
|
67.7
|
|
2021
|
|
47.3
|
|
|
11.4
|
|
|
58.7
|
|
2022
|
|
39.9
|
|
|
9.5
|
|
|
49.4
|
|
2023
|
|
31.0
|
|
|
7.6
|
|
|
38.6
|
|
Thereafter
|
|
75.9
|
|
|
43.3
|
|
|
119.2
|
|
Total lease payments
|
|
282.2
|
|
|
89.3
|
|
|
371.5
|
|
Less: Interest
|
|
46.5
|
|
|
23.4
|
|
|
69.9
|
|
Present value of lease obligations
|
|
$
|
235.7
|
|
|
$
|
65.9
|
|
|
$
|
301.6
|
|
The following table provides lease term and discount rate information related to operating and finance leases as of
June 30, 2019
:
|
|
|
|
|
|
|
June 30, 2019
|
Weighted average remaining lease term (years):
|
|
|
Operating leases
|
|
6.29
|
|
Finance leases
|
|
9.63
|
|
|
|
|
Weighted average discount rate:
|
|
|
Operating leases
|
|
5.50
|
%
|
Finance leases
|
|
6.32
|
%
|
The following table provides supplemental information related to the Company's Condensed Consolidated Statement of Cash Flows for the
six
months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
Six Months Ended
|
(in millions)
|
|
June 30, 2019
|
Cash paid for amounts included in the measurement of lease obligations:
|
|
|
Operating cash flows paid for operating leases
|
|
$
|
27.8
|
|
Financing cash flows paid for finance leases
|
|
3.3
|
|
|
|
|
Right-of-use assets obtained in exchange for new operating lease obligations
|
|
$
|
55.0
|
|
(9)
Stockholders' Equity
(a)
Common and Preferred Stock.
Tempur Sealy International has
300.0 million
authorized shares of common stock with
$0.01
per share par value and
10.0 million
authorized shares of preferred stock with
$0.01
per share par value. The holders of common stock are entitled to
one
vote for each share held of record on all matters submitted to a vote of stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, holders of common stock are entitled to receive ratably such dividends as may be declared from time to time by the Company's Board of Directors (the "Board") out of funds legally available for that purpose. In the event of liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.
The Board is authorized, subject to any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of preferred stock in one or more series. Each such series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as determined by the Board, which may include, among others, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(b)
Treasury Stock.
As of
June 30, 2019
, the Company had approximately
$224.6 million
remaining under the existing share repurchase authorization for repurchases of Tempur Sealy International's common stock. The Company repurchased
24,170
shares for approximately
$1.5 million
and
39,901
shares for approximately
$2.3 million
during the
three and six
months ended
June 30, 2019
, respectively. The Company did not repurchase any shares during the
three and six
months ended
June 30, 2018
.
In addition, the Company acquired an insignificant amount of shares upon the vesting of certain restricted stock units ("RSUs"), which were withheld to satisfy tax withholding obligations during each of the
three and six
months ended
June 30, 2019
and
2018
. The shares withheld were valued at the closing price of the stock on the New York Stock Exchange on the vesting date or first business day thereafter, resulting in approximately
$0.3 million
and
$0.1 million
in treasury stock acquired during the
three months ended
June 30, 2019
and
2018
, respectively. The Company acquired approximately
$3.2 million
and
$3.0 million
in treasury stock during the
six
months ended
June 30, 2019
and
2018
, respectively.
(c)
AOCL.
AOCL consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Foreign Currency Translation
|
|
|
|
|
|
|
|
Balance at beginning of period
|
$
|
(87.7
|
)
|
|
$
|
(67.8
|
)
|
|
$
|
(91.7
|
)
|
|
$
|
(72.8
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
(1)
|
3.0
|
|
|
(16.1
|
)
|
|
7.0
|
|
|
(11.1
|
)
|
Balance at end of period
|
$
|
(84.7
|
)
|
|
$
|
(83.9
|
)
|
|
$
|
(84.7
|
)
|
|
$
|
(83.9
|
)
|
|
|
|
|
|
|
|
|
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.
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(10)
Other Items
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
(in millions)
|
June 30, 2019
|
|
December 31, 2018
|
Taxes
|
$
|
135.5
|
|
|
$
|
136.8
|
|
Advertising
|
57.3
|
|
|
46.1
|
|
Wages and benefits
|
54.3
|
|
|
43.7
|
|
Operating lease obligations
|
49.0
|
|
|
—
|
|
Sales returns
|
24.6
|
|
|
22.0
|
|
Warranty
|
15.5
|
|
|
14.9
|
|
Rebates
|
9.2
|
|
|
11.6
|
|
Other
|
91.0
|
|
|
84.1
|
|
|
$
|
436.4
|
|
|
$
|
359.2
|
|
(11)
Stock-Based Compensation
The Company’s stock-based compensation expense for the
three and six
months ended
June 30, 2019
and
2018
included performance restricted stock units ("PRSUs"), non-qualified stock options, RSUs and deferred stock units ("DSUs"). A summary of the Company’s stock-based compensation expense is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
PRSU expense
|
$
|
0.4
|
|
|
$
|
0.7
|
|
|
$
|
0.7
|
|
|
$
|
1.5
|
|
Option expense
|
1.2
|
|
|
1.9
|
|
|
2.4
|
|
|
3.8
|
|
RSU/DSU expense
|
5.0
|
|
|
4.2
|
|
|
10.1
|
|
|
7.8
|
|
Total stock-based compensation expense
|
$
|
6.6
|
|
|
$
|
6.8
|
|
|
$
|
13.2
|
|
|
$
|
13.1
|
|
The Company grants PRSUs to executive officers and certain members of management. Actual payout under the PRSUs is dependent upon the achievement of certain financial goals.
In March 2019, the Compensation Committee of the Board formally determined that the Company did not meet the performance metric of
$650.0 million
of adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") for payout under the PRSUs granted in 2017 (the "2017 Aspirational Plan PRSUs"). As a result, the remaining one-third of the 2017 Aspirational Plan PRSUs previously granted with a performance period for 2018 were forfeited as of this date.
At June 30, 2019, the Company had
1.6 million
PRSUs granted in 2018 outstanding that will vest if the Company achieves a certain level of Adjusted EBITDA during four consecutive fiscal quarters as described below (the "2019 Aspirational Plan PRSUs").
The 2019 Aspirational Plan PRSUs will vest based on the highest Adjusted EBITDA for any four consecutive fiscal quarter period ending between (and including) March 31, 2018 and December 31, 2019 (the "First Designated Period"). If the highest Adjusted EBITDA in the First Designated Period is
$600.0 million
,
66%
will vest; if the highest Adjusted EBITDA equals or exceeds
$650.0 million
, then
100%
will vest; if the highest Adjusted EBITDA is between
$600.0 million
and
$650.0 million
then a pro rata portion will vest; and if the highest Adjusted EBITDA is less than
$600.0 million
then one-half of the 2019 Aspirational Plan PRSUs will no longer be available for vesting based on performance and the remaining one-half will remain available for vesting based on the highest Adjusted EBITDA in any four consecutive fiscal quarter period ending between (and including) March 31, 2020 and December 31, 2020 (the "Second Designated Period"). If the highest Adjusted EBITDA in the Second Designated Period is
$600.0 million
then
66%
of the remaining 2019 Aspirational Plan PRSUs will vest; if the Adjusted EBITDA is
$650.0 million
or more
100%
will vest; if Adjusted EBITDA is between
$600.0 million
and
$650.0 million
then a pro rata portion will vest; and if Adjusted EBITDA is below
$600.0 million
then all of the remaining 2019 Aspirational Plan PRSUs will be forfeited. Adjusted EBITDA is defined for purposes of the 2019 Aspirational PRSUs as the Company’s "Consolidated EBITDA" as such term is defined in the 2016 Credit Agreement.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The Company did not record any stock-based compensation expense related to the 2019 Aspirational Plan PRSUs during the
three and six
months ended
June 30, 2019
, as it is not considered probable that the Company will achieve the specified performance target for either the First Designated Period or Second Designated Period. The Company will continue to evaluate the probability of achieving the performance condition in future periods and record the appropriate expense if necessary. Based on the price of the Company’s common stock on the grant date, the total unrecognized compensation expense related to this award if the performance target is met for the First Designated Period is
$93.3 million
, which would be a non-cash expense over the remaining service period if achievement of the performance condition becomes probable.
(12)
Commitments and Contingencies
(a) Myla Gardner v. Scott L. Thompson, Barry A. Hytinen, Evelyn S. Dilsaver, John A. Heil, Jon L. Luther, Usman Nabi, Richard W. Neu, Robert B. Trussell, Jr. and Tempur Sealy International, Inc., filed July 10, 2017; Joseph L. Doherty v. Scott L. Thompson, Barry A. Hytinen, Evelyn S. Dilsaver, John A. Heil, Jon L. Luther, Usman Nabi, Richard W. Neu, Robert B. Trussell, Jr. and Tempur Sealy International, Inc., filed July 20, 2017; and Paul Onesti v. Scott L. Thompson, Barry A. Hytinen, Evelyn S. Dilsaver, John A. Heil, Jon L. Luther, Usman Nabi, Richard W. Neu, Robert B. Trussell, Jr. and Tempur Sealy International, Inc., filed July 21, 2017.
During July 2017,
three
putative shareholder derivative suits were filed against the Company, each member of its Board and
two
of its officers. Each complaint alleges that the Board and officers caused the Company to make materially false and misleading statements regarding its business and financial prospects, including those with one of its retailers, Mattress Firm, which was a violation of the fiduciary duties they owed to the Company. The Plaintiffs in each of the cases agreed to stay their respective actions until after a decision was rendered on the Motion to Dismiss in a suit filed on March 24, 2017 against Tempur Sealy International, Inc. and
two
of its officers on behalf of a proposed class of stockholders (the "Buehring Case"). Following the Company's Motion to Dismiss in the Buehring Case being granted in March 2019, the plaintiffs in each of these cases voluntarily dismissed their lawsuits. As such, the cases are now closed.
(b)
Other.
The Company is involved in various other legal and administrative proceedings incidental to the operations of its business. The Company believes that the outcome of all such other pending proceedings in the aggregate will not have a material adverse effect on its business, financial condition, liquidity, or operating results.
(13)
Income Taxes
The Company’s effective tax rate for the three months ended
June 30, 2019
and
2018
was
27.0%
and
24.9%
, respectively. The Company’s income tax rate for the six months ended
June 30, 2019
and
2018
was
31.3%
and
26.5%
, respectively. The Company's income tax rate for the three and six months ended June 30, 2019 and 2018 differed from the U.S. federal statutory rate of
21.0%
principally due to subpart F income (i.e., GILTI earned by the Company’s foreign subsidiaries), certain foreign income tax rate differentials, state and local taxes, changes in the Company’s uncertain tax positions, the excess tax deficiency (or benefit) related to stock-based compensation and certain other permanent items.
The Company has been involved in a dispute with the Danish Tax Authority ("SKAT") regarding the royalty paid by a U.S. subsidiary of Tempur Sealy International to a Danish subsidiary (the "Danish Tax Matter") for tax years 2001 through current. The royalty is paid by the U.S. subsidiary for the right to utilize certain intangible assets owned by the Danish subsidiary in the U.S. production process.
During 2018, the Company reached agreements with both SKAT and the U.S. Internal Revenue Service ("IRS") (the "Settlement") with respect to the adjusted amount of royalties for tax years 2001 through 2011. The Company and SKAT are currently discussing the appropriate administrative process required to implement the Settlement as it relates to both tax and interest. During this process, the Company continues to maintain a liability on its balance sheet for tax and interest under the terms of the Settlement. At
June 30, 2019
and December 31, 2018, the Danish liability related to the Settlement is DKK
847.3 million
(approximately
$129.0 million
and
$130.0 million
using the applicable exchange rates at
June 30, 2019
and December 31, 2018, respectively) and is included in accrued expenses and other current liabilities within the Company’s Condensed Consolidated Balance Sheet. At June 30, 2019 and December 31, 2018, respectively the Company had on deposit with SKAT DKK
970.1 million
(approximately
$147.8 million
using the applicable exchange rate at June 30, 2019) and DKK
962.3 million
(approximately
$147.7 million
using the applicable exchange rate at December 31, 2018) for the satisfaction of the anticipated liability for both tax and interest once the administrative process is concluded. The deposit held by SKAT is included in "Prepaid expenses and other current assets" within the Company's Condensed Consolidated Balance Sheet.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
SKAT has issued preliminary income tax assessments for the years 2012 through 2017, asserting an increase in the royalty earned by the Danish subsidiary. The Company expects to continue to receive preliminary income tax assessments from SKAT for the tax years 2018 and forward, asserting the royalties paid by the U.S. to the Danish subsidiary were too low, which the Company disputes.
The Company entered into the Advance Pricing Agreement program (the "APA Program") for the tax years 2012 through 2022 (the "Post-2011 Years") in which the IRS, on the Company’s behalf, will negotiate directly with SKAT for a mutually agreeable royalty due from the U.S. subsidiary to the Danish Subsidiary (the "APA"). That APA is in the early stages of negotiations. Such negotiations are not expected to be concluded in the near term. The Company anticipates such negotiations will result in an increase in the amount of royalties due from the U.S subsidiary to the Danish subsidiary (the "Post-2011 Years Adjustment") for the years 2012 - 2018 as well as the six month period ended June 30, 2019 (the "2012 to Current Period"). It is expected that the Post-2011 Years Adjustment will result in additional income tax in Denmark and a reduction of tax in the United States for the 2012 to Current Period. Consequently, the Company maintains an uncertain income tax liability for its estimate of the potential Danish income tax liability and a deferred tax asset for the associated United States tax benefit for the Post-2011 Years Adjustment. As of June 30, 2019 and December 31, 2018, the Company had accrued Danish tax and interest for Post-2011 Years of approximately DKK
246.2 million
and DKK
230.3 million
(
$37.5 million
and
$35.3 million
using the applicable exchange rates at June 30, 2019 and December 31, 2018, respectively) as an uncertain income tax liability, which is included in other non-current liabilities on the Company's Condensed Consolidated Balance Sheet as of June 30, 2019 and December 31, 2018. The deferred tax asset for the U.S. correlative benefit associated with the accrual of Danish tax for the Post-2011 Years as of June 30, 2019 and December 31, 2018 is approximately
$5.5 million
and
$4.2 million
, respectively.
The Company’s uncertain income tax position associated with the Danish Tax Matter is derived using the cumulative probability analysis with possible outcomes based on the Company's updated evaluation of the facts and circumstances regarding this matter and applying the technical requirements applicable to U.S., Danish, and international transfer pricing standards as required by GAAP, taking into account both the U.S. and Danish income tax implications of such outcomes. Both the uncertain income tax position and the deferred tax asset discussed herein reflects the Company’s best judgment of the facts, circumstances and information available through
June 30, 2019
. If the Company is not successful in resolving the Danish Tax Matter for the Post-2011 Years or there is a change in facts and circumstances, the Company may be required to further increase its uncertain income tax position associated with this matter, or decrease its deferred tax asset, also related to this matter, which could have a material impact on the Company's reported earnings.
The amount of unrecognized tax benefits that would impact the effective tax rate if recognized at
June 30, 2019
and
December 31, 2018
would be
$98.5
million and
$91.4 million
(exclusive of interest and penalties and translated at the applicable exchange rates), respectively. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense. It is reasonably possible that there could be material changes to the amount of uncertain income tax positions due to activities of the taxing authorities, settlement of audit issues, reassessment of existing uncertain tax positions, including the Danish tax matter, or the expiration of applicable statute of limitations; however, the Company is not able to estimate the impact of these items at this time.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(14)
Earnings Per Common Share
The following table sets forth the components of the numerator and denominator for the computation of basic and diluted earnings per share for net income attributable to Tempur Sealy International.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 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
|
$
|
42.8
|
|
|
$
|
28.2
|
|
|
$
|
71.6
|
|
|
$
|
54.1
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per common share-weighted average shares
|
54.7
|
|
|
54.4
|
|
|
54.7
|
|
|
54.4
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
Employee stock-based compensation
|
1.3
|
|
|
0.5
|
|
|
0.9
|
|
|
0.6
|
|
Denominator for diluted earnings per common share-adjusted weighted average shares
|
56.0
|
|
|
54.9
|
|
|
55.6
|
|
|
55.0
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share for continuing operations
|
$
|
0.78
|
|
|
$
|
0.52
|
|
|
$
|
1.31
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share for continuing operations
|
$
|
0.76
|
|
|
$
|
0.52
|
|
|
$
|
1.29
|
|
|
$
|
0.98
|
|
The Company excluded
1.1 million
and
1.6 million
shares issuable upon exercise of outstanding stock options for the
three months ended
June 30, 2019
and
2018
, respectively, from the diluted earnings per common share computation because their exercise price was greater than the average market price of Tempur Sealy International’s common stock or they were otherwise anti-dilutive. The Company excluded
1.1 million
and
1.6 million
shares issuable upon exercise of outstanding stock options for the
six months ended
June 30, 2019
and
2018
, respectively, from the diluted earnings per common share computation because their exercise price was greater than the average market price of Tempur Sealy International’s common stock or they were otherwise anti-dilutive.
(15)
Business Segment Information
The Company operates in
two
segments: North America and International. Corporate operating expenses are not included in either of the segments and are presented separately as a reconciling item to consolidated results. These segments are strategic business units that are managed separately based on geography. The North America segment consists of Tempur and Sealy manufacturing and distribution subsidiaries and licensees located in the U.S. and Canada. The International segment consists of Tempur and Sealy manufacturing and distribution subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America. The Company evaluates segment performance based on net sales, gross profit and operating income.
The Company’s North America and International segment assets include investments in subsidiaries that are appropriately eliminated in the Company’s accompanying Condensed Consolidated Financial Statements. The remaining inter-segment eliminations are comprised of intercompany accounts receivable and payable.
The following table summarizes total assets by segment:
|
|
|
|
|
|
|
|
|
(in millions)
|
June 30, 2019
|
|
December 31, 2018
|
North America
|
$
|
3,129.5
|
|
|
$
|
2,788.1
|
|
International
|
631.2
|
|
|
604.8
|
|
Corporate
|
$
|
525.7
|
|
|
$
|
569.0
|
|
Inter-segment eliminations
|
(1,239.7
|
)
|
|
(1,246.5
|
)
|
Total assets
|
$
|
3,046.7
|
|
|
$
|
2,715.4
|
|
The following table summarizes property, plant and equipment, net by segment:
|
|
|
|
|
|
|
|
|
(in millions)
|
June 30, 2019
|
|
December 31, 2018
|
North America
|
$
|
324.3
|
|
|
$
|
317.5
|
|
International
|
52.9
|
|
|
51.1
|
|
Corporate
|
52.8
|
|
|
52.2
|
|
Total property, plant and equipment, net
|
$
|
430.0
|
|
|
$
|
420.8
|
|
The following table summarizes segment information for the three months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
$
|
588.1
|
|
|
$
|
134.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
722.8
|
|
|
|
|
|
|
|
|
|
|
|
Inter-segment sales
|
$
|
0.9
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
(1.0
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
1.0
|
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Gross profit
|
240.0
|
|
|
73.4
|
|
|
—
|
|
|
—
|
|
|
313.4
|
|
Operating income (loss)
|
80.1
|
|
|
27.4
|
|
|
(26.5
|
)
|
|
—
|
|
|
81.0
|
|
Income (loss) from continuing operations before income taxes
|
78.6
|
|
|
23.2
|
|
|
(43.3
|
)
|
|
—
|
|
|
58.5
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(1)
|
$
|
15.6
|
|
|
$
|
3.5
|
|
|
$
|
9.5
|
|
|
$
|
—
|
|
|
$
|
28.6
|
|
Capital expenditures
|
14.4
|
|
|
3.1
|
|
|
3.3
|
|
|
—
|
|
|
20.8
|
|
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
The following table summarizes segment information for the three months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
$
|
527.8
|
|
|
$
|
132.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
659.9
|
|
|
|
|
|
|
|
|
|
|
|
Inter-segment sales
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
0.8
|
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Gross profit
|
203.4
|
|
|
69.4
|
|
|
—
|
|
|
—
|
|
|
272.8
|
|
Operating income (loss)
|
64.2
|
|
|
20.9
|
|
|
(27.1
|
)
|
|
—
|
|
|
58.0
|
|
Income (loss) from continuing operations before income taxes
|
63.4
|
|
|
18.3
|
|
|
(46.3
|
)
|
|
—
|
|
|
35.4
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(1)
|
$
|
13.8
|
|
|
$
|
3.3
|
|
|
$
|
10.7
|
|
|
$
|
—
|
|
|
$
|
27.8
|
|
Capital expenditures
|
14.1
|
|
|
3.1
|
|
|
1.5
|
|
|
—
|
|
|
18.7
|
|
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the
six
months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
$
|
1,132.1
|
|
|
$
|
281.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,413.7
|
|
|
|
|
|
|
|
|
|
|
|
Inter-segment sales
|
$
|
1.9
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
(2.3
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
2.0
|
|
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Gross profit
|
444.4
|
|
|
150.8
|
|
|
—
|
|
|
—
|
|
|
595.2
|
|
Operating income (loss)
|
144.4
|
|
|
52.6
|
|
|
(55.5
|
)
|
|
—
|
|
|
141.5
|
|
Income (loss) from continuing operations before income taxes
|
141.0
|
|
|
53.0
|
|
|
(89.6
|
)
|
|
—
|
|
|
104.4
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(1)
|
$
|
30.6
|
|
|
$
|
6.8
|
|
|
$
|
19.3
|
|
|
$
|
—
|
|
|
$
|
56.7
|
|
Capital expenditures
|
27.3
|
|
|
6.0
|
|
|
6.6
|
|
|
—
|
|
|
39.9
|
|
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
The following table summarizes segment information for the
six
months ended
June 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
North America
|
|
International
|
|
Corporate
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
$
|
1,012.8
|
|
|
$
|
284.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,297.3
|
|
|
|
|
|
|
|
|
|
|
|
Inter-segment sales
|
$
|
1.2
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
(1.4
|
)
|
|
$
|
—
|
|
Inter-segment royalty expense (income)
|
1.3
|
|
|
(1.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Gross profit
|
387.4
|
|
|
150.1
|
|
|
—
|
|
|
—
|
|
|
537.5
|
|
Operating income (loss)
|
118.1
|
|
|
49.7
|
|
|
(54.1
|
)
|
|
—
|
|
|
113.7
|
|
Income (loss) from continuing operations before income taxes
|
115.2
|
|
|
47.6
|
|
|
(91.8
|
)
|
|
—
|
|
|
71.0
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(1)
|
$
|
27.2
|
|
|
$
|
6.9
|
|
|
$
|
20.8
|
|
|
$
|
—
|
|
|
$
|
54.9
|
|
Capital expenditures
|
30.9
|
|
|
6.0
|
|
|
3.6
|
|
|
—
|
|
|
40.5
|
|
|
|
(1)
|
Depreciation and amortization includes stock-based compensation amortization expense.
|
The following table summarizes property, plant and equipment, net by geographic region:
|
|
|
|
|
|
|
|
|
(in millions)
|
June 30, 2019
|
|
December 31, 2018
|
United States
|
$
|
358.4
|
|
|
$
|
350.7
|
|
Canada
|
18.7
|
|
|
19.1
|
|
Other International
|
52.9
|
|
|
51.0
|
|
Total property, plant and equipment, net
|
$
|
430.0
|
|
|
$
|
420.8
|
|
Total International
|
$
|
71.6
|
|
|
$
|
70.1
|
|
The following table summarizes net sales by geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
June 30,
|
|
June 30,
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
United States
|
$
|
533.7
|
|
|
$
|
477.7
|
|
|
$
|
1,030.9
|
|
|
$
|
917.9
|
|
Canada
|
54.4
|
|
|
50.1
|
|
|
101.2
|
|
|
94.9
|
|
Other International
|
134.7
|
|
|
132.1
|
|
|
281.6
|
|
|
284.5
|
|
Total net sales
|
$
|
722.8
|
|
|
$
|
659.9
|
|
|
$
|
1,413.7
|
|
|
$
|
1,297.3
|
|
Total International
|
$
|
189.1
|
|
|
$
|
182.2
|
|
|
$
|
382.8
|
|
|
$
|
379.4
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(16)
Guarantor/Non-Guarantor Financial Information
The
$450.0 million
and
$600.0 million
aggregate principal amount of 2023 Senior Notes and 2026 Senior Notes (collectively the "Senior Notes"), respectively, are general unsecured senior obligations of Tempur Sealy International and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by all of Tempur Sealy International’s
100%
directly or indirectly owned current and future domestic subsidiaries (the "Combined Guarantor Subsidiaries"), subject to certain exceptions. The foreign subsidiaries (the "Combined Non-Guarantor Subsidiaries") represent the foreign operations of the Company and do not guarantee the Senior Notes. A subsidiary guarantor will be released from its obligations under the applicable indenture governing the Senior Notes when: (a) the subsidiary guarantor is sold or sells all or substantially all of its assets; (b) the subsidiary is declared "unrestricted" under the applicable indenture governing the Senior Notes; (c) the subsidiary’s guarantee of indebtedness under the 2016 Credit Agreement (as it may be amended, refinanced or replaced) is released (other than a discharge through repayment); or (d) the requirements for legal or covenant defeasance or discharge of the applicable indenture have been satisfied. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Company’s wholly-owned subsidiary guarantors and non-guarantor subsidiaries. The Company has accounted for its investments in its subsidiaries under the equity method.
The following supplemental financial information presents the Condensed Consolidated Statements of Income and Comprehensive Income for the
three and six
months ended
June 30, 2019
and
2018
, the Condensed Consolidated Balance Sheets as of
June 30, 2019
and December 31,
2018
, and the Condensed Consolidated Statements of Cash Flows for the
six
months ended
June 30, 2019
and
2018
for Tempur Sealy International, Combined Guarantor Subsidiaries and Combined Non-Guarantor Subsidiaries.
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Statements of Income and Comprehensive Income
Three Months Ended
June 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
550.3
|
|
|
$
|
187.9
|
|
|
$
|
(15.4
|
)
|
|
$
|
722.8
|
|
Cost of sales
|
—
|
|
|
318.0
|
|
|
106.8
|
|
|
(15.4
|
)
|
|
409.4
|
|
Gross profit
|
—
|
|
|
232.3
|
|
|
81.1
|
|
|
—
|
|
|
313.4
|
|
Selling and marketing expenses
|
2.7
|
|
|
114.8
|
|
|
45.8
|
|
|
—
|
|
|
163.3
|
|
General, administrative and other expenses
|
4.2
|
|
|
55.8
|
|
|
13.9
|
|
|
(1.2
|
)
|
|
72.7
|
|
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(3.6
|
)
|
|
—
|
|
|
(3.6
|
)
|
Operating (loss) income
|
(6.9
|
)
|
|
61.7
|
|
|
25.0
|
|
|
1.2
|
|
|
81.0
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party interest expense, net
|
14.1
|
|
|
6.9
|
|
|
1.5
|
|
|
—
|
|
|
22.5
|
|
Intercompany interest (income) expense, net
|
(2.5
|
)
|
|
3.2
|
|
|
(0.7
|
)
|
|
—
|
|
|
—
|
|
Interest expense, net
|
11.6
|
|
|
10.1
|
|
|
0.8
|
|
|
—
|
|
|
22.5
|
|
Other (income) expense, net
|
—
|
|
|
(3.7
|
)
|
|
3.7
|
|
|
—
|
|
|
—
|
|
Total other expense, net
|
11.6
|
|
|
6.4
|
|
|
4.5
|
|
|
—
|
|
|
22.5
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity investees
|
56.3
|
|
|
14.3
|
|
|
—
|
|
|
(70.6
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
37.8
|
|
|
69.6
|
|
|
20.5
|
|
|
(69.4
|
)
|
|
58.5
|
|
Income tax benefit (provision)
|
3.7
|
|
|
(13.3
|
)
|
|
(6.2
|
)
|
|
—
|
|
|
(15.8
|
)
|
Income from continuing operations
|
41.5
|
|
|
56.3
|
|
|
14.3
|
|
|
(69.4
|
)
|
|
42.7
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
|
(1.2
|
)
|
Net income before non-controlling interest
|
41.5
|
|
|
56.3
|
|
|
14.3
|
|
|
(70.6
|
)
|
|
41.5
|
|
Less: Net income attributable to non-controlling interest
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
0.1
|
|
|
(0.1
|
)
|
Net income attributable to Tempur Sealy International, Inc.
|
$
|
41.6
|
|
|
$
|
56.3
|
|
|
$
|
14.4
|
|
|
$
|
(70.7
|
)
|
|
$
|
41.6
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
44.6
|
|
|
$
|
55.5
|
|
|
$
|
18.2
|
|
|
$
|
(73.7
|
)
|
|
$
|
44.6
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Statements of Income and Comprehensive Income
Three Months Ended
June 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
482.7
|
|
|
$
|
202.9
|
|
|
$
|
(25.7
|
)
|
|
$
|
659.9
|
|
Cost of sales
|
—
|
|
|
289.4
|
|
|
120.1
|
|
|
(22.4
|
)
|
|
387.1
|
|
Gross profit
|
—
|
|
|
193.3
|
|
|
82.8
|
|
|
(3.3
|
)
|
|
272.8
|
|
Selling and marketing expenses
|
2.1
|
|
|
103.5
|
|
|
51.8
|
|
|
(4.1
|
)
|
|
153.3
|
|
General, administrative and other expenses
|
5.0
|
|
|
45.6
|
|
|
16.4
|
|
|
(1.7
|
)
|
|
65.3
|
|
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(3.8
|
)
|
|
—
|
|
|
(3.8
|
)
|
Operating (loss) income
|
(7.1
|
)
|
|
44.2
|
|
|
18.4
|
|
|
2.5
|
|
|
58.0
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party interest expense, net
|
14.9
|
|
|
7.5
|
|
|
2.1
|
|
|
(1.3
|
)
|
|
23.2
|
|
Intercompany interest (income) expense, net
|
(1.7
|
)
|
|
2.1
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
Interest expense, net
|
13.2
|
|
|
9.6
|
|
|
1.7
|
|
|
(1.3
|
)
|
|
23.2
|
|
Other (income) expense, net
|
—
|
|
|
(3.5
|
)
|
|
4.7
|
|
|
(1.8
|
)
|
|
(0.6
|
)
|
Total other expense, net
|
13.2
|
|
|
6.1
|
|
|
6.4
|
|
|
(3.1
|
)
|
|
22.6
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity investees
|
37.2
|
|
|
7.8
|
|
|
—
|
|
|
(45.0
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
16.9
|
|
|
45.9
|
|
|
12.0
|
|
|
(39.4
|
)
|
|
35.4
|
|
Income tax benefit (provision)
|
4.3
|
|
|
(8.7
|
)
|
|
(4.2
|
)
|
|
(0.2
|
)
|
|
(8.8
|
)
|
Income from continuing operations
|
21.2
|
|
|
37.2
|
|
|
7.8
|
|
|
(39.6
|
)
|
|
26.6
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.4
|
)
|
|
(5.4
|
)
|
Net income before non-controlling interest
|
21.2
|
|
|
37.2
|
|
|
7.8
|
|
|
(45.0
|
)
|
|
21.2
|
|
Less: Net loss attributable to non-controlling interest
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
|
1.6
|
|
|
(1.6
|
)
|
Net income attributable to Tempur Sealy International, Inc.
|
$
|
22.8
|
|
|
$
|
37.2
|
|
|
$
|
9.4
|
|
|
$
|
(46.6
|
)
|
|
$
|
22.8
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
6.7
|
|
|
$
|
36.9
|
|
|
$
|
(6.7
|
)
|
|
$
|
(30.2
|
)
|
|
$
|
6.7
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Statements of Income and Comprehensive Income
Six
Months Ended
June 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
1,064.2
|
|
|
$
|
381.2
|
|
|
$
|
(31.7
|
)
|
|
$
|
1,413.7
|
|
Cost of sales
|
—
|
|
|
634.3
|
|
|
215.9
|
|
|
(31.7
|
)
|
|
818.5
|
|
Gross profit
|
—
|
|
|
429.9
|
|
|
165.3
|
|
|
—
|
|
|
595.2
|
|
Selling and marketing expenses
|
5.5
|
|
|
216.1
|
|
|
95.3
|
|
|
(0.1
|
)
|
|
316.8
|
|
General, administrative and other expenses
|
8.5
|
|
|
108.5
|
|
|
28.2
|
|
|
(1.8
|
)
|
|
143.4
|
|
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(6.5
|
)
|
|
—
|
|
|
(6.5
|
)
|
Operating (loss) income
|
(14.0
|
)
|
|
105.3
|
|
|
48.3
|
|
|
1.9
|
|
|
141.5
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Other expense, net:
|
|
|
|
|
|
|
|
|
|
Third party interest expense, net
|
28.2
|
|
|
14.5
|
|
|
2.2
|
|
|
—
|
|
|
44.9
|
|
Intercompany interest (income) expense, net
|
(5.1
|
)
|
|
5.4
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
Interest expense, net
|
23.1
|
|
|
19.9
|
|
|
1.9
|
|
|
—
|
|
|
44.9
|
|
Other income, net
|
—
|
|
|
(6.6
|
)
|
|
(1.5
|
)
|
|
0.3
|
|
—
|
|
(7.8
|
)
|
Total other expense, net
|
23.1
|
|
|
13.3
|
|
|
0.4
|
|
|
0.3
|
|
|
37.1
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity investees
|
100.5
|
|
|
36.4
|
|
|
—
|
|
|
(136.9
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
63.4
|
|
|
128.4
|
|
|
47.9
|
|
|
(135.3
|
)
|
|
104.4
|
|
Income tax benefit (provision)
|
6.7
|
|
|
(27.9
|
)
|
|
(11.5
|
)
|
|
—
|
|
|
(32.7
|
)
|
Income from continuing operations
|
70.1
|
|
|
100.5
|
|
|
36.4
|
|
|
(135.3
|
)
|
|
71.7
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
(1.6
|
)
|
Net income before non-controlling interest
|
70.1
|
|
|
100.5
|
|
|
36.4
|
|
|
(136.9
|
)
|
|
70.1
|
|
Less: Net income attributable to non-controlling interest
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
0.1
|
|
Net income attributable to Tempur Sealy International, Inc.
|
$
|
70.0
|
|
|
$
|
100.5
|
|
|
$
|
36.3
|
|
|
$
|
(136.8
|
)
|
|
$
|
70.0
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
77.0
|
|
|
$
|
102.0
|
|
|
$
|
41.8
|
|
|
$
|
(143.8
|
)
|
|
$
|
77.0
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Statements of Income and Comprehensive Income
Six
Months Ended
June 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
923.3
|
|
|
$
|
427.7
|
|
|
$
|
(53.7
|
)
|
|
$
|
1,297.3
|
|
Cost of sales
|
—
|
|
|
555.8
|
|
|
251.2
|
|
|
(47.2
|
)
|
|
759.8
|
|
Gross profit
|
—
|
|
|
367.5
|
|
|
176.5
|
|
|
(6.5
|
)
|
|
537.5
|
|
Selling and marketing expenses
|
4.0
|
|
|
196.6
|
|
|
105.7
|
|
|
(7.6
|
)
|
|
298.7
|
|
General, administrative and other expenses
|
9.7
|
|
|
93.0
|
|
|
33.3
|
|
|
(3.2
|
)
|
|
132.8
|
|
Equity income in earnings of unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(7.7
|
)
|
|
—
|
|
|
(7.7
|
)
|
Operating (loss) income
|
(13.7
|
)
|
|
77.9
|
|
|
45.2
|
|
|
4.3
|
|
|
113.7
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party interest expense, net
|
29.9
|
|
|
14.5
|
|
|
3.0
|
|
|
(1.5
|
)
|
|
45.9
|
|
Intercompany interest (income) expense, net
|
(3.6
|
)
|
|
3.9
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
Interest expense, net
|
26.3
|
|
|
18.4
|
|
|
2.7
|
|
|
(1.5
|
)
|
|
45.9
|
|
Other (income) expense, net
|
—
|
|
|
(5.8
|
)
|
|
5.2
|
|
|
(2.6
|
)
|
|
(3.2
|
)
|
Total other expense, net
|
26.3
|
|
|
12.6
|
|
|
7.9
|
|
|
(4.1
|
)
|
|
42.7
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity investees
|
76.3
|
|
|
26.8
|
|
|
—
|
|
|
(103.1
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
36.3
|
|
|
92.1
|
|
|
37.3
|
|
|
(94.7
|
)
|
|
71.0
|
|
Income tax benefit (provision)
|
7.7
|
|
|
(15.8
|
)
|
|
(10.5
|
)
|
|
(0.2
|
)
|
|
(18.8
|
)
|
Income from continuing operations
|
44.0
|
|
|
76.3
|
|
|
26.8
|
|
|
(94.9
|
)
|
|
52.2
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(8.2
|
)
|
|
(8.2
|
)
|
Net income before non-controlling interest
|
44.0
|
|
|
76.3
|
|
|
26.8
|
|
|
(103.1
|
)
|
|
44.0
|
|
Less: Net loss attributable to non-controlling interest
|
(1.9
|
)
|
|
—
|
|
|
(1.9
|
)
|
|
1.9
|
|
|
(1.9
|
)
|
Net income attributable to Tempur Sealy International, Inc.
|
$
|
45.9
|
|
|
$
|
76.3
|
|
|
$
|
28.7
|
|
|
$
|
(105.0
|
)
|
|
$
|
45.9
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Tempur Sealy International, Inc.
|
$
|
34.2
|
|
|
$
|
75.4
|
|
|
$
|
17.6
|
|
|
$
|
(93.0
|
)
|
|
$
|
34.2
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Balance Sheets
June 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
13.5
|
|
|
$
|
24.8
|
|
|
$
|
—
|
|
|
$
|
38.3
|
|
Accounts receivable, net
|
0.1
|
|
|
17.0
|
|
|
310.2
|
|
|
59.0
|
|
|
386.3
|
|
Inventories
|
—
|
|
|
180.2
|
|
|
62.9
|
|
|
—
|
|
|
243.1
|
|
Prepaid expenses and other current assets
|
286.3
|
|
|
61.1
|
|
|
159.3
|
|
|
(282.7
|
)
|
|
224.0
|
|
Total Current Assets
|
286.4
|
|
|
271.8
|
|
|
557.2
|
|
|
(223.7
|
)
|
|
891.7
|
|
Property, plant and equipment, net
|
—
|
|
|
358.4
|
|
|
71.6
|
|
|
—
|
|
|
430.0
|
|
Goodwill
|
—
|
|
|
510.9
|
|
|
221.4
|
|
|
—
|
|
|
732.3
|
|
Other intangible assets, net
|
—
|
|
|
570.8
|
|
|
79.8
|
|
|
—
|
|
|
650.6
|
|
Operating lease right-of-use assets
|
—
|
|
|
179.7
|
|
|
48.4
|
|
|
—
|
|
|
228.1
|
|
Deferred income taxes
|
14.1
|
|
|
—
|
|
|
12.6
|
|
|
(14.2
|
)
|
|
12.5
|
|
Other non-current assets
|
—
|
|
|
53.9
|
|
|
47.6
|
|
|
—
|
|
|
101.5
|
|
Net investment in subsidiaries
|
752.7
|
|
|
184.2
|
|
|
—
|
|
|
(936.9
|
)
|
|
—
|
|
Due from affiliates
|
423.0
|
|
|
152.8
|
|
|
13.2
|
|
|
(589.0
|
)
|
|
—
|
|
Total Assets
|
$
|
1,476.2
|
|
|
$
|
2,282.5
|
|
|
$
|
1,051.8
|
|
|
$
|
(1,763.8
|
)
|
|
$
|
3,046.7
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
126.2
|
|
|
$
|
50.3
|
|
|
$
|
59.0
|
|
|
$
|
235.5
|
|
Accrued expenses and other current liabilities
|
6.8
|
|
|
217.2
|
|
|
212.4
|
|
|
—
|
|
|
436.4
|
|
Current portion of long-term debt
|
—
|
|
|
52.4
|
|
|
7.7
|
|
|
—
|
|
|
60.1
|
|
Income taxes payable
|
—
|
|
|
279.9
|
|
|
9.5
|
|
|
(282.7
|
)
|
|
6.7
|
|
Total Current Liabilities
|
6.8
|
|
|
675.7
|
|
|
279.9
|
|
|
(223.7
|
)
|
|
738.7
|
|
Long-term debt, net
|
1,043.7
|
|
|
447.7
|
|
|
94.1
|
|
|
—
|
|
|
1,585.5
|
|
Long-term operating lease obligations
|
—
|
|
|
153.3
|
|
|
33.4
|
|
|
—
|
|
|
186.7
|
|
Deferred income taxes
|
—
|
|
|
115.2
|
|
|
16.0
|
|
|
(14.2
|
)
|
|
117.0
|
|
Other non-current liabilities
|
1.3
|
|
|
56.5
|
|
|
55.1
|
|
|
—
|
|
|
112.9
|
|
Due to affiliates
|
118.5
|
|
|
81.4
|
|
|
389.1
|
|
|
(589.0
|
)
|
|
—
|
|
Total Liabilities
|
1,170.3
|
|
|
1,529.8
|
|
|
867.6
|
|
|
(826.9
|
)
|
|
2,740.8
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity
|
305.9
|
|
|
752.7
|
|
|
184.2
|
|
|
(936.9
|
)
|
|
305.9
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
1,476.2
|
|
|
$
|
2,282.5
|
|
|
$
|
1,051.8
|
|
|
$
|
(1,763.8
|
)
|
|
$
|
3,046.7
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Balance Sheets
December 31, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
0.1
|
|
|
$
|
6.2
|
|
|
$
|
39.5
|
|
|
$
|
—
|
|
|
$
|
45.8
|
|
Accounts receivable, net
|
—
|
|
|
15.2
|
|
|
303.3
|
|
|
3.0
|
|
|
321.5
|
|
Inventories
|
—
|
|
|
159.4
|
|
|
62.9
|
|
|
—
|
|
|
222.3
|
|
Prepaid expenses and other current assets
|
276.9
|
|
|
65.4
|
|
|
148.1
|
|
|
(274.6
|
)
|
|
215.8
|
|
Total Current Assets
|
277.0
|
|
|
246.2
|
|
|
553.8
|
|
|
(271.6
|
)
|
|
805.4
|
|
Property, plant and equipment, net
|
—
|
|
|
350.7
|
|
|
70.1
|
|
|
—
|
|
|
420.8
|
|
Goodwill
|
—
|
|
|
508.8
|
|
|
214.2
|
|
|
—
|
|
|
723.0
|
|
Other intangible assets, net
|
—
|
|
|
572.7
|
|
|
76.6
|
|
|
—
|
|
|
649.3
|
|
Deferred income taxes
|
15.0
|
|
|
—
|
|
|
22.6
|
|
|
(15.0
|
)
|
|
22.6
|
|
Other non-current assets
|
—
|
|
|
49.2
|
|
|
45.1
|
|
|
—
|
|
|
94.3
|
|
Net investment in subsidiaries
|
661.7
|
|
|
210.0
|
|
|
—
|
|
|
(871.7
|
)
|
|
—
|
|
Due from affiliates
|
422.1
|
|
|
153.8
|
|
|
15.4
|
|
|
(591.3
|
)
|
|
—
|
|
Total Assets
|
$
|
1,375.8
|
|
|
$
|
2,091.4
|
|
|
$
|
997.8
|
|
|
$
|
(1,749.6
|
)
|
|
$
|
2,715.4
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
186.7
|
|
|
$
|
63.3
|
|
|
$
|
3.0
|
|
|
$
|
253.0
|
|
Accrued expenses and other current liabilities
|
6.7
|
|
|
143.9
|
|
|
208.6
|
|
|
—
|
|
|
359.2
|
|
Current portion of long-term debt
|
—
|
|
|
44.0
|
|
|
3.1
|
|
|
—
|
|
|
47.1
|
|
Income taxes payable
|
—
|
|
|
274.7
|
|
|
9.6
|
|
|
(274.6
|
)
|
|
9.7
|
|
Total Current Liabilities
|
6.7
|
|
|
649.3
|
|
|
284.6
|
|
|
(271.6
|
)
|
|
669.0
|
|
Long-term debt, net
|
1,043.0
|
|
|
547.1
|
|
|
9.0
|
|
|
—
|
|
|
1,599.1
|
|
Deferred income taxes
|
—
|
|
|
118.0
|
|
|
14.5
|
|
|
(15.0
|
)
|
|
117.5
|
|
Other non-current liabilities
|
1.9
|
|
|
58.2
|
|
|
52.2
|
|
|
—
|
|
|
112.3
|
|
Due from affiliates
|
106.7
|
|
|
57.1
|
|
|
427.5
|
|
|
(591.3
|
)
|
|
—
|
|
Total Liabilities
|
1,158.3
|
|
|
1,429.7
|
|
|
787.8
|
|
|
(877.9
|
)
|
|
2,497.9
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Equity
|
217.5
|
|
|
661.7
|
|
|
210.0
|
|
|
(871.7
|
)
|
|
217.5
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
1,375.8
|
|
|
$
|
2,091.4
|
|
|
$
|
997.8
|
|
|
$
|
(1,749.6
|
)
|
|
$
|
2,715.4
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Statements of Cash Flows
Six Months Ended
June 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
Net cash (used in) provided by operating activities from continuing operations
|
$
|
(24.3
|
)
|
|
$
|
63.6
|
|
|
$
|
4.6
|
|
|
$
|
2.0
|
|
|
$
|
45.9
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
—
|
|
|
(33.5
|
)
|
|
(6.4
|
)
|
|
—
|
|
|
(39.9
|
)
|
Acquisition of business
|
—
|
|
|
(9.0
|
)
|
|
(8.1
|
)
|
|
—
|
|
|
(17.1
|
)
|
Other
|
—
|
|
|
0.1
|
|
|
10.2
|
|
|
—
|
|
|
10.3
|
|
Contributions received from (paid to) subsidiaries and affiliates
|
—
|
|
|
65.8
|
|
|
(65.8
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by (used in) investing activities from continuing operations
|
—
|
|
|
23.4
|
|
|
(70.1
|
)
|
|
—
|
|
|
(46.7
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings under long-term debt obligations
|
—
|
|
|
161.9
|
|
|
347.3
|
|
|
—
|
|
|
509.2
|
|
Repayments of borrowings under long-term debt obligations
|
—
|
|
|
(251.9
|
)
|
|
(257.9
|
)
|
|
—
|
|
|
(509.8
|
)
|
Net activity in investment in and advances from (to) subsidiaries and affiliates
|
24.2
|
|
|
13.6
|
|
|
(37.8
|
)
|
|
—
|
|
|
—
|
|
Proceeds from issuance of stock options
|
5.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.5
|
|
Treasury stock repurchased
|
(5.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.5
|
)
|
Other
|
—
|
|
|
(3.3
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
(3.4
|
)
|
Net cash provided by (used in) financing activities from continuing operations
|
24.2
|
|
|
(79.7
|
)
|
|
51.5
|
|
|
—
|
|
|
(4.0
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by continuing operations
|
(0.1
|
)
|
|
7.3
|
|
|
(14.0
|
)
|
|
2.0
|
|
|
(4.8
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH USED IN DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
|
|
|
Operating cash flows, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|
(2.0
|
)
|
Investing cash flows, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Financing cash flows, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net cash used in discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|
—
|
|
|
(0.7
|
)
|
(Decrease)/increase in cash and cash equivalents
|
(0.1
|
)
|
|
7.3
|
|
|
(14.7
|
)
|
|
—
|
|
|
(7.5
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
0.1
|
|
|
6.2
|
|
|
39.5
|
|
|
—
|
|
|
45.8
|
|
CASH AND CASH EQUIVALENTS, end of period
|
$
|
—
|
|
|
$
|
13.5
|
|
|
$
|
24.8
|
|
|
$
|
—
|
|
|
$
|
38.3
|
|
TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Supplemental Condensed Consolidated Statements of Cash Flows
Six Months Ended
June 30, 2018
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tempur Sealy International, Inc. (Ultimate Parent)
|
|
Combined Guarantor Subsidiaries
|
|
Combined Non-Guarantor Subsidiaries
|
|
Reclassifications and Eliminations
|
|
Consolidated
|
Net cash (used in) provided by operating activities from continuing operations
|
$
|
(30.0
|
)
|
|
$
|
4.1
|
|
|
$
|
27.5
|
|
|
$
|
15.8
|
|
|
$
|
17.4
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
—
|
|
|
(34.1
|
)
|
|
(6.5
|
)
|
|
0.1
|
|
|
(40.5
|
)
|
Other
|
—
|
|
|
0.1
|
|
|
0.5
|
|
|
—
|
|
|
0.6
|
|
Contributions received from (paid to) subsidiaries and affiliates
|
—
|
|
|
50.9
|
|
|
(50.9
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by (used in) investing activities from continuing operations
|
—
|
|
|
16.9
|
|
|
(56.9
|
)
|
|
0.1
|
|
|
(39.9
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings under long-term debt obligations
|
—
|
|
|
335.6
|
|
|
396.6
|
|
|
—
|
|
|
732.2
|
|
Repayments of borrowings under long-term debt obligations
|
—
|
|
|
(350.6
|
)
|
|
(347.2
|
)
|
|
—
|
|
|
(697.8
|
)
|
Net activity in investment in and advances from (to) subsidiaries and affiliates
|
30.3
|
|
|
(4.3
|
)
|
|
(26.0
|
)
|
|
—
|
|
|
—
|
|
Proceeds from exercise of stock options
|
2.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
Treasury stock repurchased
|
(3.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.0
|
)
|
Other
|
—
|
|
|
(2.7
|
)
|
|
(0.7
|
)
|
|
—
|
|
|
(3.4
|
)
|
Net cash provided by (used in) financing activities from continuing operations
|
29.9
|
|
|
(22.0
|
)
|
|
22.7
|
|
|
—
|
|
|
30.6
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by continuing operations
|
(0.1
|
)
|
|
(1.0
|
)
|
|
(6.7
|
)
|
|
15.9
|
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
CASH USED IN DISCONTINUED OPERATIONS
|
|
|
|
|
|
|
|
|
|
Operating cash flows, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(15.8
|
)
|
|
(15.8
|
)
|
Investing cash flows, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Financing cash flows, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net cash used in discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(15.9
|
)
|
|
(15.9
|
)
|
|
|
|
|
|
|
|
|
|
|
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
—
|
|
|
—
|
|
|
(1.5
|
)
|
|
—
|
|
|
(1.5
|
)
|
Decrease in cash and cash equivalents
|
(0.1
|
)
|
|
(1.0
|
)
|
|
(8.2
|
)
|
|
—
|
|
|
(9.3
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
0.1
|
|
|
12.3
|
|
|
29.5
|
|
|
—
|
|
|
41.9
|
|
CASH AND CASH EQUIVALENTS, end of period
|
—
|
|
|
11.3
|
|
|
21.3
|
|
|
—
|
|
|
32.6
|
|
LESS: CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS
|
—
|
|
|
—
|
|
|
1.6
|
|
|
—
|
|
|
1.6
|
|
CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS
|
$
|
—
|
|
|
$
|
11.3
|
|
|
$
|
19.7
|
|
|
$
|
—
|
|
|
$
|
31.0
|
|