Guarantor/Non-Guarantor Financial Information

3 Months Ended

Mar. 31, 2019

Condensed Financial Information Disclosure [Abstract]

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 months ended March 31, 2019 and 2018, the Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 for Tempur Sealy International, Combined Guarantor Subsidiaries and Combined Non-Guarantor Subsidiaries.

Supplemental Condensed Consolidated Statements of Income and Comprehensive Income

Three Months Ended March 31, 2019

(in millions)



	Tempur Sealy International, Inc. (Ultimate Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Reclassifications and Eliminations			Consolidated
Net sales	$	—		$	514.0		$	193.3		$	(16.4	)	$	690.9
Cost of sales	—			316.3			109.2			(16.4		)	409.1
Gross profit	—			197.7			84.1			—			281.8
Selling and marketing expenses	2.8			101.4			49.4			(0.1		)	153.5
General, administrative and other expenses	4.3			52.6			14.4			(0.6		)	70.7
Equity income in earnings of unconsolidated affiliates	—			—			(2.9		)	—			(2.9		)
Operating (loss) income	(7.1		)	43.7			23.2			0.7			60.5

Other expense, net:
Third party interest expense, net	14.1			7.7			0.6			—			22.4
Intercompany interest (income) expense, net	(2.6		)	2.4			0.2			—			—
Interest expense, net	11.5			10.1			0.8			—			22.4
Other income, net	—			(3.0		)	(5.1		)	0.3			(7.8		)
Total other expense (income), net	11.5			7.1			(4.3		)	0.3			14.6

Income from equity investees	44.3			22.1			—			(66.4		)	—

Income from continuing operations before income taxes	25.7			58.7			27.5			(66.0		)	45.9
Income tax benefit (provision)	2.9			(14.4		)	(5.4		)	—			(16.9		)
Income from continuing operations	28.6			44.3			22.1			(66.0		)	29.0
Loss from discontinued operations, net of tax	—			—			—			(0.4		)	(0.4		)
Net income before non-controlling interest	28.6			44.3			22.1			(66.4		)	28.6
Less: Net income attributable to non-controlling interest	0.2			—			0.2			(0.2		)	0.2
Net income attributable to Tempur Sealy International, Inc.	$	28.4		$	44.3		$	21.9		$	(66.2	)	$	28.4

Comprehensive income attributable to Tempur Sealy International, Inc.	$	32.4		$	46.6		$	23.6		$	(70.2	)	$	32.4

Supplemental Condensed Consolidated Statements of Income and Comprehensive Income

Three Months Ended March 31, 2018

(in millions)



	Tempur Sealy International, Inc. (Ultimate Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Reclassifications and Eliminations			Consolidated
Net sales	$	—		$	440.7		$	224.8		$	(28.1	)	$	637.4
Cost of sales	—			266.4			131.2			(24.9		)	372.7
Gross profit	—			174.3			93.6			(3.2		)	264.7
Selling and marketing expenses	1.9			93.1			53.9			(3.5		)	145.4
General, administrative and other expenses	4.7			47.5			16.8			(1.5		)	67.5
Equity income in earnings of unconsolidated affiliates	—			—			(3.9		)	—			(3.9		)
Operating (loss) income	(6.6		)	33.7			26.8			1.8			55.7

Other expense, net:
Third party interest expense, net	14.9			6.9			1.1			(0.2		)	22.7
Intercompany interest (income) expense, net	(1.8		)	1.8			—			—			—
Interest expense, net	13.1			8.7			1.1			(0.2		)	22.7
Other (income) expense, net	—			(2.2		)	0.4			(0.8		)	(2.6		)
Total other expense, net	13.1			6.5			1.5			(1.0		)	20.1

Income from equity investees	39.1			19.0			—			(58.1		)	—

Income from continuing operations before income taxes	19.4			46.2			25.3			(55.3		)	35.6
Income tax benefit (provision)	3.4			(7.1		)	(6.3		)	—			(10.0		)
Income from continuing operations	22.8			39.1			19.0			(55.3		)	25.6
Loss from discontinued operations, net of tax	—			—			—			(2.8		)	(2.8		)
Net income before non-controlling interest	22.8			39.1			19.0			(58.1		)	22.8
Less: Net loss attributable to non-controlling interest	(0.3		)	—			(0.3		)	0.3			(0.3		)
Net income attributable to Tempur Sealy International, Inc.	$	23.1		$	39.1		$	19.3		$	(58.4	)	$	23.1

Comprehensive income attributable to Tempur Sealy International, Inc.	$	27.5		$	38.5		$	24.3		$	(62.8	)	$	27.5

Supplemental Condensed Consolidated Balance Sheets

March 31, 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	$	0.3	$	11.3	$	28.0	$	—		$	39.6
Accounts receivable, net	—		15.1		294.4		46.9			356.4
Inventories	—		172.0		67.7		—			239.7
Prepaid expenses and other current assets	282.1		65.2		149.1		(279.1		)	217.3
Total Current Assets	282.4		263.6		539.2		(232.2		)	853.0
Property, plant and equipment, net	—		349.4		69.1		—			418.5
Goodwill	—		508.8		216.7		—			725.5
Other intangible assets, net	—		569.7		77.2		—			646.9
Operating lease right-of-use assets	—		145.0		46.9		—			191.9
Deferred income taxes	13.4		—		21.9		(13.4		)	21.9
Other non-current assets	0.6		63.1		44.3		—			108.0
Net investment in subsidiaries	710.8		166.8		—		(877.6		)	—
Due from affiliates	425.4		144.9		15.9		(586.2		)	—
Total Assets	$	1,432.6	$	2,211.3	$	1,031.2	$	(1,709.4	)	$	2,965.7

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	—	$	141.6	$	57.2	$	46.9		$	245.7
Accrued expenses and other current liabilities	20.5		166.6		214.7		—			401.8
Current portion of long-term debt	—		48.0		7.5		—			55.5
Income taxes payable	—		290.6		11.0		(279.1		)	22.5
Total Current Liabilities	20.5		646.8		290.4		(232.2		)	725.5
Long-term debt, net	1,043.3		484.8		76.0		—			1,604.1
Long-term operating lease obligations	—		124.7		32.5		—			157.2
Deferred income taxes	—		116.6		12.3		(13.4		)	115.5
Other non-current liabilities	0.1		57.0		52.8		—			109.9
Due to affiliates	115.2		70.6		400.4		(586.2		)	—
Total Liabilities	1,179.1		1,500.5		864.4		(831.8		)	2,712.2

Total Stockholders' Equity	253.5		710.8		166.8		(877.6		)	253.5
Total Liabilities and Stockholders’ Equity	$	1,432.6	$	2,211.3	$	1,031.2	$	(1,709.4	)	$	2,965.7

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

Supplemental Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2019

(in millions)



	Tempur Sealy International, Inc. (Ultimate Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Reclassifications and Eliminations			Consolidated
Net cash provided by (used in)operating activities from continuing operations	$	1.4		$	(2.3	)	$	4.8		$	0.7		$	4.6

CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:
Purchases of property, plant and equipment	—			(15.9		)	(3.2		)	—			(19.1		)
Debtor-in-possession financing arrangement	—			(9.5		)	—			—			(9.5		)
Other	—			0.1			8.2			—			8.3
Contributions received from (paid to) subsidiaries and affiliates	—			65.1			(65.1		)	—			—
Net cash provided by (used in) investing activities from continuing operations	—			39.8			(60.1		)	—			(20.3		)

CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:
Proceeds from borrowings under long-term debt obligations	—			—			212.6			—			212.6
Repayments of borrowings under long-term debt obligations	—			(57.5		)	(141.2		)	—			(198.7		)
Net activity in investment in and advances from (to) subsidiaries and affiliates	0.1			26.7			(26.8		)	—			—
Proceeds from issuance of stock options	2.4			—			—			—			2.4
Treasury stock repurchased	(3.7		)	—			—			—			(3.7		)
Other	—			(1.6		)	—			—			(1.6		)
Net cash (used in) provided by financing activities from continuing operations	(1.2		)	(32.4		)	44.6			—			11.0

Net cash provided by (used in) continuing operations	0.2			5.1			(10.7		)	0.7			(4.7		)

CASH USED IN DISCONTINUED OPERATIONS
Operating cash flows, net	—			—			—			(0.7		)	(0.7		)
Investing cash flows, net	—			—			—			—			—
Financing cash flows, net	—			—			—			—			—
Net cash used in discontinued operations	—			—			—			(0.7		)	(0.7		)

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—			—			(0.8		)	—			(0.8		)
Increase/(decrease) in cash and cash equivalents	0.2			5.1			(11.5		)	—			(6.2		)
CASH AND CASH EQUIVALENTS, beginning of period	0.1			6.2			39.5						45.8
CASH AND CASH EQUIVALENTS, end of period	$	0.3		$	11.3		$	28.0		$	—		$	39.6

Supplemental Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2018

(in millions)



	Tempur Sealy International, Inc. (Ultimate Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Reclassifications and Eliminations			Consolidated
Net cash provided by (used in) operating activities from continuing operations	$	1.0		$	(18.2	)	$	7.5		$	10.6		$	0.9

CASH FLOWS FROM INVESTING ACTIVITIES FROM CONTINUING OPERATIONS:
Purchases of property, plant and equipment	—			(18.7		)	(3.1		)	—			(21.8		)
Other	—			—			4.2			—			4.2
Contributions received from (paid to) subsidiaries and affiliates	—			35.2			(35.2		)	—			—
Net cash provided by (used in) investing activities from continuing operations	—			16.5			(34.1		)	—			(17.6		)

CASH FLOWS FROM FINANCING ACTIVITIES FROM CONTINUING OPERATIONS:
Proceeds from borrowings under long-term debt obligations	—			185.3			231.8			—			417.1
Repayments of borrowings under long-term debt obligations	—			(191.8		)	(203.0		)	—			(394.8		)
Net activity in investment in and advances (to) from subsidiaries and affiliates	(0.1		)	5.0			(4.9		)	—			—
Proceeds from exercise of stock options	1.9			—			—			—			1.9
Treasury stock repurchased	(2.9		)	—			—			—			(2.9		)
Other	—			(1.3		)	(0.5		)	—			(1.8		)
Net cash (used in) provided by financing activities from continuing operations	(1.1		)	(2.8		)	23.4			—			19.5

Net cash (used in) provided by continuing operations	(0.1		)	(4.5		)	(3.2		)	10.6			2.8

CASH USED IN DISCONTINUED OPERATIONS
Operating cash flows, net	—			—			—			(10.6		)	(10.6		)
Investing cash flows, net	—			—			—			—			—
Financing cash flows, net	—			—			—			—			—
Net cash used in discontinued operations	—			—			—			(10.6		)	(10.6		)

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—			—			0.4			—			0.4
Decrease in cash and cash equivalents	(0.1		)	(4.5		)	(2.8		)				(7.4		)
CASH AND CASH EQUIVALENTS, beginning of period	0.1			12.3			29.5			—			41.9
CASH AND CASH EQUIVALENTS, end of period	—			7.8			26.7			—			34.5
LESS: CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS	—			—			1.1			—			1.1
CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS	$	—		$	7.8		$	25.6		$	—		$	33.4