XML 43 R20.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Stock-based Compensation | 12 Months Ended
--- | ---
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Stock-based Compensation | Stock-based Compensation Tempur Sealy International has two stock-based compensation plans which provide for grants of non-qualified and incentive stock options, stock appreciation rights, restricted stock and stock unit awards, performance shares, stock grants and performance based awards to employees, non-employee directors, consultants and Company advisors. The plan under which equity awards may be granted in the future is the Amended and Restated 2013 Equity Incentive Plan (the "2013 Plan"). It is the policy of the Company to issue stock out of treasury shares upon issuance or exercise of share-based awards. The Company believes that awards and purchases made under these plans better align the interests of the plan participants with those of its stockholders. On May 11, 2017, the Company's stockholders approved the amendment and restatement of the original 2013 Plan. The 2013 Plan provides for grants of stock options to purchase shares of common stock to employees and directors of the Company. The 2013 Plan may be administered by the Compensation Committee of the Board of Directors, by the Board of Directors directly, or, in certain cases, by an executive officer or officers of the Company designated by the Compensation Committee. The shares issued or to be issued under the 2013 Plan may be either authorized but unissued shares of the Company’s common stock or shares held by the Company in its treasury. Tempur Sealy International may issue a maximum of 8.7 million shares of common stock under the 2013 Plan, subject to certain adjustment provisions. The Amended and Restated 2003 Equity Incentive Plan, as amended (the “2003 Plan”), was administered by the Compensation Committee of the Board of Directors, which, together with the Board of Directors, had the exclusive authority to administer the 2003 Plan, including the power to determine eligibility to receive awards, the types and number of shares of stock subject to the awards, the price and timing of awards and the acceleration or waiver of any vesting and performance of forfeiture restrictions, in each case subject to the terms of the 2003 Plan. Any of the Company’s employees, non-employee directors, consultants and Company advisors, as determined by the Compensation Committee, were eligible to be selected to participate in the 2003 Plan. Tempur Sealy International allowed a maximum of 11.5 million shares of its common stock under the 2003 Plan to be issued. In May 2013, the Company's Board of Directors adopted a resolution that prohibited further grants under the 2003 Plan. In 2010, the Board of Directors approved the terms of a Long-Term Incentive Plan established under the 2003 Plan. In 2013, the Board of Directors approved the terms of another Long-Term Incentive Plan established under the 2013 Plan. Awards under both Long-Term Incentive Plans have typically consisted primarily of a mix of stock options, RSUs and PRSUs. Shares with respect to the PRSUs will be granted and vest following the end of the applicable performance period and achievement of applicable performance metrics as determined by the Compensation Committee of the Board of Directors. The Company’s stock-based compensation expense for the year ended December 31, 2017 included PRSUs, stock options, RSUs and DSUs. A summary of the Company’s stock-based compensation expense is presented below:
| Year Ended December 31,
(in millions) | 2017 |  | 2016 |  | 2015
PRSU (benefit) expense | $ | (6.5 | ) |  | $ | 3.9 |  |  | $ | 13.7 |
Stock option expense | 7.1 |  |  | 5.3 |  |  | 6.6 |
RSU/DSU expense | 12.7 |  |  | 7.0 |  |  | 2.2 |
Total stock-based compensation expense | $ | 13.3 |  |  | $ | 16.2 |  |  | $ | 22.5 |
The Company granted PRSUs during the years ended December 31, 2017, 2016 and 2015. Actual payout under the PRSUs is dependent upon the achievement of certain financial goals. The Company recorded a benefit in the accompanying Consolidated Statements of Income of $9.3 million and $3.8 million for the years ended December 31, 2017 and 2016 after the change in estimate to reduce accumulated performance based stock compensation amortization to actual cost based on updated projected or final financial results. Performance Restricted Stock Units A summary of the Company’s PRSU activity and related information for the years ended December 31, 2017 and 2016 is presented below:
(shares in millions) | Shares |  | Weighted Average Grant Date Fair Value
Awards unvested at December 31, 2015 | 1.9 |  |  | $ | 68.17 |
Granted | 0.2 |  |  | 60.78 |
Vested | (0.1 | ) |  | 51.87 |
Forfeited | (0.3 | ) |  | 70.43 |
Awards unvested at December 31, 2016 | 1.7 |  |  | 68.02 |
Granted | 1.6 |  |  | 59.64 |
Vested | (0.2 | ) |  | 59.39 |
Forfeited | (0.4 | ) |  | 65.48 |
Awards unvested at December 31, 2017 | 2.7 |  |  | $ | 64.13 |
During 2017, the Company granted executive officers and certain members of management PRSUs if the Company achieves a certain level of adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") during four consecutive fiscal quarters as described below (the "2019 Aspirational Plan PRSUs"). Adjusted EBITDA is defined as the Company’s "Consolidated EBITDA" as such term is defined in the Company’s 2016 Credit Agreement. The 2019 Aspirational Plan PRSUs will vest based on the highest Adjusted EBITDA in 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. The Company did not record any stock-based compensation expense related to the 2019 Aspirational Plan PRSUs during the year ended December 31, 2017, 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 $85.5 million, which would be expensed over the remaining service period if achievement of the performance condition becomes probable. As of December 31, 2017, the Company has 1.1 million PRSUs outstanding that will vest if the Company achieves more than $650.0 million of Adjusted EBITDA for 2017 (the "2017 Aspirational Plan PRSUs"). Adjusted EBITDA is defined as the Company’s "Consolidated EBITDA" as such term is defined in the Company’s 2012 Credit Agreement. The Company expects that in early March 2018 the Compensation Committee of the Board of Directors will formally determine that the Company did not have more than $650.0 million in Adjusted EBITDA for 2017. As a result, two-thirds of the total 2017 Aspirational Plan PRSUs will be forfeited as of this date. The remaining one-third of the total 2017 Aspirational Plan PRSUs will vest if the Company achieves more than $650.0 million in Adjusted EBITDA for 2018. All remaining 2017 Aspirational Plan PRSUs will be forfeited if the performance metric is not met in 2018. The Company did not record any stock-based compensation expense related to the 2017 Aspirational Plan PRSUs during the years ended December 31, 2017 and 2016, as it is not considered probable that the Company will achieve the specified performance target as of December 31, 2017 or December 31, 2018. 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 2017 is $74.7 million, which would be expensed over the remaining service period if achievement of the performance condition becomes probable. As of December 31, 2017, the Company has 0.2 million PRSUs outstanding that will vest if the Company achieves certain financial metrics over the three year performance period that ended December 31, 2017. The Company expects that in early March 2018, the Compensation Committee of the Board of Directors will formally determine that the Company did not meet the financial metrics for 2017. As a result, these PRSUs will be forfeited as of this date. During the year ended December 31, 2017, shares granted in 2014 with an aggregate intrinsic value of $2.9 million were paid out from treasury stock following the satisfaction of certain financial metrics over the three year performance period that ended December 31, 2016. The PRSUs were paid out from treasury stock at 71.2% of the target award, out of a maximum potential payout of 300%. During the year ended December 31, 2016, shares granted in 2014 with an aggregate intrinsic value of $5.6 million were paid out from treasury stock following the satisfaction of certain financial metrics over the two year performance period that ended December 31, 2015. The PRSUs were paid out from treasury stock at 79.0% of the target award, out of a maximum potential payout of 200%. The aggregate intrinsic value of PRSUs outstanding as of December 31, 2017 was $173.6 million. Stock Options The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options granted. During the year ended December 31, 2016, no stock options were granted. The assumptions used in the Black-Scholes option-pricing model for the years ended December 31, 2017, 2016 and 2015 are set forth in the following table. Expected volatility is based on the unbiased standard deviation of Tempur Sealy International’s common stock over the option term. The expected life of the options represents the period of time that the Company expects the options granted to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option for the expected term of the instrument. The dividend yield reflects an estimate of dividend payouts over the term of the award. During 2017, the Company adopted a change in accounting policy to recognize forfeitures of awards as they occur instead of estimating potential forfeitures. Historically, the Company estimated the number of awards expected to be forfeited and adjusted the estimate when it was no longer probable that employees would fulfill their service conditions. The Company uses historical data to determine these assumptions.
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Expected volatility range of stock | 37.4% - 40.8% |  | N/A |  | 34.0% - 36.2%
Expected life of option, range in years | 5 |  | N/A |  | 3 - 5
Risk-free interest range rate | 1.8% - 1.9% |  | N/A |  | 0.9% - 1.5%
Expected dividend yield on stock | 0.0% - 0.0% |  | N/A |  | 0.0% - 0.0%
A summary of the Company’s stock option activity under the 2003 Plan and 2013 Plan for the years ended December 31, 2017 and 2016 is presented below:
(in millions, except per share amounts and years) | Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value
Options outstanding at December 31, 2015 | 2.1 |  |  | $ | 42.75 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Released | (0.6 | ) |  | 24.72 |  |  |  |  |
Forfeited | — |  |  | 58.37 |  |  |  |  |
Options outstanding at December 31, 2016 | 1.5 |  |  | $ | 50.46 |  |  |  |  |
Granted | 0.6 |  |  | 69.04 |  |  |  |  |
Released | (0.3 | ) |  | 38.44 |  |  |  |  |
Forfeited | (0.1 | ) |  | 67.45 |  |  |  |  |
Options outstanding at December 31, 2017 | 1.7 |  |  | $ | 58.93 |  |  | 6.98 |  | $ | 1.5 |
Options exercisable at December 31, 2017 | 0.9 |  |  | $ | 51.57 |  |  | 5.66 |  | $ | 10.2 |
The aggregate intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $5.4 million, $23.9 million and $71.8 million, respectively. Cash received from options exercised under all stock-based compensation plans, including cash received from options issued from treasury shares, for the years ended December 31, 2017, 2016 and 2015, was $12.8 million, $15.7 million, and $20.4 million, respectively. A summary of the Company’s unvested shares relating to stock options as of December 31, 2017 and 2016, and changes during the years ended December 31, 2017 and 2016, are presented below:
(shares in millions) | Shares |  | Weighted Average Grant Date Fair Value
Options unvested at December 31, 2015 | 0.8 |  |  | $ | 62.34 |
Granted | — |  |  | — |
Vested | (0.3 | ) |  | 61.28 |
Forfeited | — |  |  | 58.37 |
Options unvested at December 31, 2016 | 0.5 |  |  | $ | 63.09 |
Granted | 0.6 |  |  | 69.04 |
Vested | (0.3 | ) |  | 61.69 |
Forfeited | (0.1 | ) |  | 67.45 |
Options unvested at December 31, 2017 | 0.7 |  |  | $ | 67.95 |
Restricted/Deferred Stock Units A summary of the Company's RSU and DSU activity and related information for the years ended December 31, 2017 and 2016 is presented below:
(in millions, except per share amounts) | Shares |  | Weighted Average Release Price |  | Aggregate Intrinsic Value
Awards outstanding at December 31, 2015 | 0.1 |  |  | $ | 66.41 |  |  |
Granted | 0.3 |  |  | 53.77 |  |  |
Vested | — |  |  | 60.17 |  |  |
Terminated | — |  |  | 53.45 |  |  |
Awards outstanding at December 31, 2016 | 0.4 |  |  | $ | 59.37 |  |  |
Granted | 0.4 |  |  | 68.08 |  |  |
Vested | (0.1 | ) |  | 54.20 |  |  |
Terminated | (0.1 | ) |  | 64.66 |  |  |
Awards outstanding at December 31, 2017 | 0.6 |  |  | $ | 64.94 |  |  | $ | 41.7 |
The aggregate intrinsic value of RSUs and DSUs vested during the year ended December 31, 2017 was $4.6 million. Excluding any potential compensation expense related to the 2017 Aspirational Plan PRSUs and 2019 Aspirational Plan PRSUs discussed above, a summary of total unrecognized stock-based compensation expense based on current performance estimates related to stock options, DSUs, RSUs and PRSUs for the year ended December 31, 2017 is presented below:
(in millions, except years) | December 31, 2017 |  | Weighted Average Remaining Vesting Period (Years)
Unrecognized stock option expense | $ | 12.0 |  |  | 2.66
Unrecognized DSU/RSU expense | 4.8 |  |  | 2.65
Unrecognized PRSU expense | 25.8 |  |  | 2.69
Total unrecognized stock-based compensation expense | $ | 42.6 |  |  | 2.67

X
- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration