TEMPUR SEALY INTERNATIONAL INC
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
SGI$64.17-5.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001206264-24-000096
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001206264-24-000135
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 113 previous paragraphs and 143 current paragraphs.
72 unchanged; 37 reworded; 25 added; 4 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 20 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
On July 2, 2024, the FTC filed a complaint for temporary restraining order and preliminary injunction in the United States District Court for the Southern District of Texas (the "Court") and an administrative complaint (together with the complaint filed with the Court, the "Actions") to challenge our proposed acquisition of Mattress Firm. Refer to Note 8, "Commitments and Contingencies" in the "Notes to Condensed Consolidated Financial Statements," under Part I, ITEM 1 of this Report for further details.
Current report
•Gross margin was 44.9% as compared to 42.7% in the second quarter of 2023.
Current report
•Net income increased 14.8% to $106.1 million as compared to $92.4 million in the second quarter of 2023. Adjusted net income, which is a non-GAAP financial measure, increased 9.5% to $111.7 million as compared to $102.0 million in the second quarter of 2023.
Current report
•North America net sales decreased $38.4 million, or 3.8%. Net sales in the Wholesale channel decreased $41.2 million, or 4.6%, primarily driven by continued macroeconomic pressures impacting U.S. consumer behavior. Net sales in the Direct channel increased $2.8 million, or 2.3%, as compared to the second quarter of 2023.
Current report
•North America gross margin improved 220 basis points. The improvement in gross margin was primarily driven by favorable commodity costs of 130 basis points, operational efficiencies of 120 basis points and favorable product launch costs of 110 basis points. These improvements were partially offset by the mix impact of the new distribution win for our OEM business of 140 basis points.
Current report
•International gross margin improved 170 basis points. The improvement in gross margin was primarily driven by operational efficiencies of 110 basis points and favorable product launch costs of 80 basis points.
Current report
Operating expenses decreased $3.7 million, or 1.0%, and increased 60 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
Current report
•North America operating expenses increased $0.1 million, consistent with prior year, and increased 80 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives, partially offset by decreased variable compensation expense.
Current report
•International operating expenses increased $6.5 million, or 6.0%, and increased 210 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
Current report
•Corporate operating expenses decreased $10.3 million, or 20.9%. The decrease in operating expenses was primarily driven by decreased variable compensation expense and transaction costs related to the pending acquisition of Mattress Firm.
Current report
•International operating income decreased $2.1 million and operating margin declined 90 basis points. The decline in operating margin was driven by operating expense deleverage of 210 basis points and Asia joint venture performance, partially offset by the improvement in gross margin of 170 basis points.
Current report
•Corporate operating expenses decreased $10.3 million, which positively impacted our consolidated operating margin.
Current report
Interest expense, net, decreased $0.2 million, or 0.6%. The decrease in interest expense, net, was primarily driven by reduced average levels of outstanding variable rate debt.
Current report
SIX MONTHS ENDED JUNE 30, 2023
Current report
NET SALES
Current report
•International net sales increased $2.1 million, or 0.4%. On a constant currency basis, International net sales were consistent with the prior year. Net sales in the Wholesale channel increased 2.7% on a constant currency basis. Net sales in the Direct channel decreased 1.6% on a constant currency basis.
Current report
GROSS PROFIT
Current report
•International gross margin improved 150 basis points. The improvement in gross margin was primarily driven by operational efficiencies of 90 basis points and favorable commodity costs.
Current report
OPERATING EXPENSES
Current report
•North America operating expenses increased $10.5 million, or 2.4%, and increased 120 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
Current report
Research and development expenses were $15.8 million for the six months ended June 30, 2024 as compared to $14.8 million for the six months ended June 30, 2023, an increase of $1.0 million, or 6.8%.
Current report
OPERATING INCOME
Current report
•International operating income decreased $1.5 million and operating margin declined 30 basis points. The decline in operating margin was primarily driven by operating expense deleverage of 160 basis points, partially offset by the improvement in gross margin of 150 basis points.
Current report
INTEREST EXPENSE, NET
Current report
INCOME TAX PROVISION
Removed paragraphs (4)
Previous report
•Gross margin was 43.1% as compared to 41.4% in the first quarter of 2023. Adjusted gross margin, which is a non-GAAP financial measure, was 43.4% as compared to 41.8% in the first quarter of 2023.
Previous report
•Net income decreased 10.6% to $76.3 million as compared to $85.3 million in the first quarter of 2023. Adjusted net income, which is a non-GAAP financial measure, decreased 3.4% to $89.7 million as compared to $92.9 million in the first quarter of 2023.
Previous report
•International gross margin improved 140 basis points. The improvement in gross margin was primarily driven by favorable commodity costs of 70 basis points and operational efficiencies of 60 basis points.
Previous report
•International operating expenses increased $3.6 million, or 3.1%, and increased 130 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
Reworded paragraphs (37)
Previous wording
The following discussion and analysis should be read in conjunction with the 2023 Annual Report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in ITEM 7 of Part II of the 2023 Annual Report, and the accompanying Condensed Consolidated Financial Statements and notes thereto included in this Report. Unless otherwise noted, all of the financial information in this Report is consolidated financial information for the Company. The forward-looking statements in this discussion regarding the mattress and pillow industries, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are subject to numerous risks and uncertainties. See "Special Note Regarding Forward-Looking Statements" elsewhere in this Report and in the 2023 Annual Report, the section titled "Risk Factors" contained in ITEM 1A of Part I of the 2023 Annual Report. Our actual results may differ materially from those contained in any forward-looking statements.
Current wording
The following discussion and analysis should be read in conjunction with the 2023 Annual Report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in ITEM 7 of Part II of the 2023 Annual Report, and the accompanying Condensed Consolidated Financial Statements and notes thereto included in this Report. Unless otherwise noted, all of the financial information in this Report is consolidated financial information for the Company. The forward-looking statements in this discussion regarding the mattress and pillow industries, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are subject to numerous risks and uncertainties. See "Special Note Regarding Forward-Looking Statements" elsewhere in this Report and in the 2023 Annual Report, the section titled "Risk Factors" contained in ITEM 1A of Part I of the 2023 Annual Report and in ITEM 1A of Part II of this Report. Our actual results may differ materially from those contained in any forward-looking statements.
Previous wording
In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three months ended March 31, 2024, including the following topics:
Current wording
In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three and six months ended June 30, 2024, including the following topics:
Previous wording
In 2024, we expect a continuation of the current macroeconomic environment, which includes the impact of inflation and interest rate pressures on the consumer. These macroeconomic pressures on the consumer continue to challenge the global bedding industry. Ongoing geopolitical conflicts may also introduce further uncertainty for the consumer. We expect to outperform the bedding industry, amid these macroeconomic headwinds, as a result of our successful new product launches and recent distribution gains in the U.S.
Current wording
In the second half of 2024, we expect a continuation of the current macroeconomic environment, which includes the impact of inflation and interest rate pressures on the consumer. These macroeconomic pressures on the consumer continue to challenge the global bedding industry. Ongoing geopolitical conflicts may also introduce further uncertainty for the consumer. We expect to outperform the bedding industry, amid these macroeconomic headwinds, as a result of our successful new product launches and recent distribution gains in the U.S.
Previous wording
We expect the transaction to close in the second half of 2024, subject to the satisfaction of customary closing conditions, including applicable regulatory approvals. Following the close of the transaction, Mattress Firm is expected to operate as a separate business unit.
Current wording
We believe that a successful litigation process can be completed in the coming months, which would allow the transaction to close in late 2024 or early 2025. Following the close of the transaction, Mattress Firm is expected to operate as a separate business unit.
Previous wording
In our International segment in 2024, we plan to complete the rollout of the new line of Tempur® products in over 90 markets through our wholly-owned subsidiaries and third-party distributors. This new line of products will broaden Tempur®'s price range, with the super-premium price point ceiling maintained and the floor expanded into the premium category to broaden our global addressable market.
Current wording
In our International segment in 2024, we completed the rollout of the new line of Tempur® products in over 90 markets through our wholly-owned subsidiaries and third-party distributors. This new line of products will broaden Tempur®'s price range, with the super-premium price point ceiling maintained and the floor expanded into the premium category to broaden our global addressable market.
Previous wording
•Total net sales decreased 1.5% to $1,189.4 million as compared to $1,208.1 million in the first quarter of 2023, with a decrease of 2.0% in the North America business segment and a decrease of 0.1% in the International business segment. On a constant currency basis, which is a non-GAAP financial measure, total net sales decreased 2.1%, with a decrease of 2.3% in the North America business segment and an decrease of 1.6% in the International business segment.
Current wording
•Total net sales decreased 2.8% to $1,233.6 million as compared to $1,269.7 million in the second quarter of 2023, with a decrease of 3.8% in the North America business segment and consistent sales in the International business segment. On a constant currency basis, which is a non-GAAP financial measure, total net sales decreased 2.6%, with a decrease of 3.8% in the North America business segment and an increase of 1.9% in the International business segment.
Previous wording
•Operating income decreased 8.2% to $131.5 million as compared to $143.3 million in the first quarter of 2023. Adjusted operating income, which is a non-GAAP financial measure, decreased 2.6% to $149.4 million as compared to $153.4 million in the first quarter of 2023.
Current wording
•Operating income increased 9.1% to $173.3 million as compared to $158.8 million in the second quarter of 2023. Adjusted operating income, which is a non-GAAP financial measure, increased 5.1% to $180.6 million as compared to $171.8 million in the second quarter of 2023.
Previous wording
•Earnings per diluted share ("EPS") decreased 10.4% to $0.43 as compared to $0.48 in the first quarter of 2023. Adjusted EPS, which is a non-GAAP financial measure, decreased 5.7% to $0.50 as compared to $0.53 in the first quarter of 2023.
Current wording
•Earnings per diluted share ("EPS") increased 15.4% to $0.60 as compared to $0.52 in the second quarter of 2023. Adjusted EPS, which is a non-GAAP financial measure, increased 8.6% to $0.63 as compared to $0.58 in the second quarter of 2023.
Previous wording
Net sales decreased 1.5%, and on a constant currency basis decreased 2.1%. The change in net sales was driven by the following:
Current wording
Net sales decreased 2.8%, and on a constant currency basis decreased 2.6%. The change in net sales was driven by the following:
Previous wording
•International net sales decreased $0.2 million, or 0.1%. On a constant currency basis, International net sales decreased 1.6%. Net sales in the Wholesale channel increased 0.9% on a constant currency basis. Net sales in the Direct channel decreased 3.2% on a constant currency basis.
Current wording
•International net sales increased $2.3 million, or 0.9%. On a constant currency basis, International net sales increased 1.9%. Net sales in the Wholesale channel increased 4.8% on a constant currency basis. Net sales in the Direct channel increased 0.1% on a constant currency basis.
Previous wording
Gross margin improved 170 basis points. The primary drivers of changes in gross margin by segment are discussed below:
Current wording
Gross margin improved 220 basis points. The primary drivers of changes in gross margin by segment are discussed below:
Previous wording
Research and development expenses for the three months ended March 31, 2024 were $8.1 million compared to $7.5 million for the three months ended March 31, 2023, an increase of $0.6 million or 8.0%.
Current wording
Research and development expenses for the three months ended June 30, 2024 were $7.7 million compared to $7.3 million for the three months ended June 30, 2023, an increase of $0.4 million, or 5.5%.
Previous wording
Operating income decreased $11.8 million and operating margin declined 80 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
Current wording
Operating income increased $14.5 million and operating margin improved 150 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
Previous wording
•North America operating income decreased $1.6 million and operating margin improved 10 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 180 basis points, offset by operating expense deleverage of 160 basis points.
Current wording
•North America operating income increased $6.3 million and operating margin improved 130 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 220 basis points, partially offset by operating expense deleverage of 80 basis points.
Previous wording
•North America net sales decreased $18.5 million, or 2.0%, primarily driven by continued macroeconomic pressures impacting U.S. consumer behavior. On a constant currency basis, North America net sales decreased 2.3%. Net sales in the Wholesale channel decreased $27.4 million, or 3.4%. Net sales in the Direct channel increased $8.9 million, or 7.7%, driven by strength in our e-commerce business.
Current wording
•North America net sales decreased $56.9 million, or 2.9%. Net sales in the Wholesale channel decreased $68.6 million, or 4.0%, primarily driven by continued macroeconomic pressures impacting U.S. consumer behavior. Net sales in the Direct channel increased $11.7 million, or 5.0%, primarily driven by strength in our e-commerce business.
Previous wording
•North America gross margin improved 180 basis points. The improvement in gross margin was primarily driven by favorable commodity costs of 200 basis points and operational efficiencies of 70 basis points. These improvements were partially offset by production line changeover to support new OEM distribution and product launch costs.
Current wording
•North America gross margin improved 200 basis points. The improvement in gross margin was primarily driven by favorable commodity costs of 150 basis points, operational efficiencies of 70 basis points and favorable product launch costs. These improvements were partially offset by the mix impact of the new distribution win for our OEM business of 70 basis points.
Previous wording
Operating expenses increased $24.8 million, or 6.9%, and increased 260 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
Current wording
Operating expenses increased $21.1 million, or 2.8%, and increased 160 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
Previous wording
•North America operating expenses increased $10.4 million, or 5.0%, and increased 160 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
Current wording
•International operating expenses increased $10.1 million, or 4.5%, and increased 160 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
Previous wording
•Corporate operating expenses increased $10.8 million, or 29.3%, primarily driven by $14.8 million of transaction costs related to the pending acquisition of Mattress Firm.
Current wording
•Corporate operating expenses increased $0.5 million, or 0.6%. The increase in operating expenses was primarily driven by transaction costs related to the pending acquisition of Mattress Firm, partially offset by decreased variable compensation expense.
Previous wording
•International operating income increased $0.6 million and operating margin improved 20 basis points. The improvement in operating margin was driven by the improvement in gross margin of 140 basis points, offset by operating expense deleverage of 130 basis points.
Current wording
•North America operating income increased $4.7 million and operating margin improved 70 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 200 basis points, partially offset by operating expense deleverage of 120 basis points.
Previous wording
•Corporate operating expenses increased $10.8 million, which negatively impacted our consolidated operating margin.
Current wording
•Corporate operating expenses increased $0.5 million, which negatively impacted our consolidated operating margin.
Previous wording
Interest expense, net, increased $1.5 million, or 4.6%. The increase in interest expense, net, was primarily driven by higher interest rates on our variable rate debt.
Current wording
Interest expense, net, increased $1.3 million, or 2.0%. The increase in interest expense, net, was primarily driven by higher interest rates on our variable rate debt.
Previous wording
Our income tax provision decreased $3.8 million due to a decrease in income before income taxes. Our effective tax rate for the three months ended March 31, 2024 as compared to the prior year declined by 100 basis points. The effective tax rates as compared to the U.S. federal statutory rates for the three months ended March 31, 2024 and 2023 included the favorable impact of the deductibility of stock compensation in the U.S. and a net unfavorable impact of other discrete items.
Current wording
Our income tax provision decreased $2.0 million. Our effective tax rate for the six months ended June 30, 2024 as compared to the prior year declined 110 basis points. The effective tax rates as compared to the U.S. federal statutory rates for the six months ended June 30, 2024 and 2023 included the net favorable impact of the deductibility of stock compensation in the U.S., which was offset by the unfavorable impact of discrete items.
Previous wording
As of March 31, 2024, we had net working capital of $203.7 million, including cash and cash equivalents of $92.5 million, as compared to a working capital of $195.0 million, including cash and cash equivalents of $74.9 million, as of December 31, 2023. The amount of cash and cash equivalents held by subsidiaries outside of the U.S. and not readily convertible into the U.S. Dollar or other major foreign currencies is not material to our overall liquidity or financial position.
Current wording
As of June 30, 2024, we had net working capital of $203.9 million, including cash and cash equivalents of $95.8 million, as compared to a working capital of $195.0 million, including cash and cash equivalents of $74.9 million, as of December 31, 2023. The amount of cash and cash equivalents held by subsidiaries outside of the U.S. and not readily convertible into the U.S. Dollar or other major foreign currencies is not material to our overall liquidity or financial position.
Previous wording
Cash provided by operating activities increased $30.4 million in the three months ended March 31, 2024 as compared to the same period in 2023. The increase in cash provided by operating activities was driven by a $30.3 million increase in cash provided by changes in operating assets and liabilities.
Current wording
Cash provided by operating activities increased $30.3 million in the six months ended June 30, 2024 as compared to the same period in 2023. The increase in cash provided by operating activities was primarily driven by a $14.1 million increase in cash provided by changes in operating assets and liabilities and a $13.3 million increase in depreciation expense associated with our new Tempur manufacturing facility.
Previous wording
Cash used in investing activities decreased $20.8 million in the three months ended March 31, 2024 as compared to the same period in 2023. The decrease in cash used in investing activities was driven by decreased capital expenditures related to our manufacturing capacity expansion projects in 2023.
Current wording
Cash used in investing activities decreased $52.6 million in the six months ended June 30, 2024 as compared to the same period in 2023. The decrease in cash used in investing activities was primarily driven by decreased capital expenditures related to our manufacturing capacity expansion projects in 2023.
Previous wording
Cash used in financing activities increased $49.5 million in the three months ended March 31, 2024 as compared to the same period in 2023. For the three months ended March 31, 2024, we had net repayments of $3.7 million on our credit facilities as compared to net borrowings of $32.4 million in the same period in 2023. During the three months ended March 31, 2024 and 2023, we repurchased $43.8 million and $35.7 million, respectively, of our common stock. Additionally, we paid dividends to shareholders of $24.9 million and $20.8 million, during the three months ended March 31, 2024 and 2023, respectively.
Current wording
Cash used in financing activities increased $83.6 million in the six months ended June 30, 2024 as compared to the same period in 2023. For the six months ended June 30, 2024, we had net repayments of $93.7 million on our credit facilities as compared to $27.6 million in the same period in 2023. We repurchased $43.8 million and $35.9 million of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans during the six months ended June 30, 2024 and 2023, respectively. Additionally, we paid dividends to shareholders of $47.5 million and $39.8 million, during the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Capital expenditures totaled $31.5 million and $52.1 million for the three months ended March 31, 2024 and 2023, respectively. We currently expect our 2024 capital expenditures to be approximately $150 million, which includes maintenance capital expenditures of $110 million.
Current wording
Capital expenditures totaled $60.0 million and $112.7 million for the six months ended June 30, 2024 and 2023, respectively. We currently expect our 2024 capital expenditures to be approximately $140 million, which includes maintenance capital expenditures of $110 million.
Previous wording
Our total debt increased slightly to $2,594.4 million as of March 31, 2024 from $2,593.6 million as of December 31, 2023. Total availability under our revolving senior secured credit facility was $1,012.4 million as of March 31, 2024. Refer to Note 4, "Debt" in the "Notes to Condensed Consolidated Financial Statements," under Part I, ITEM 1 for further discussion of our debt.
Current wording
Our total debt decreased to $2,505.8 million as of June 30, 2024 from $2,593.6 million as of December 31, 2023. Total availability under our revolving senior secured credit facility was $1,112.9 million as of June 30, 2024. Refer to Note 4, "Debt" in the "Notes to Condensed Consolidated Financial Statements," under Part I, ITEM 1 for further discussion of our debt.
Previous wording
On February 6, 2024, we entered into an amendment to the 2023 Credit Agreement which provides for a $625.0 million delayed draw term loan and a $40.0 million increase in availability on the existing revolving loan. Once drawn, the instruments will have the same terms and conditions as the Company's existing term loans and revolving loans, respectively, under the 2023 Credit Agreement. This amendment was executed in connection with the Company's financing strategy for the pending acquisition of Mattress Firm expected to close in the second half of 2024.
Current wording
On February 6, 2024, we entered into an amendment to the 2023 Credit Agreement which provides for a $625.0 million delayed draw term loan and a $40.0 million increase in availability on the existing revolving loan. Once drawn, the instruments will have the same terms and conditions as the Company's existing term loans and revolving loans, respectively, under the 2023 Credit Agreement. This amendment was executed in connection with the Company's financing strategy for the pending acquisition of Mattress Firm.
Previous wording
As of March 31, 2024, our ratio of consolidated indebtedness less netted cash to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure, in accordance with our 2023 Credit Agreement was 2.85 times. This ratio is within the terms of the financial covenants for the maximum consolidated total net leverage ratio as set forth in the 2023 Credit Agreement, which limits this ratio to 5.00 times. As of March 31, 2024, we were in compliance with all of the financial covenants in our debt agreements, and we do not anticipate material issues under any debt agreements based on current facts and circumstances.
Current wording
As of June 30, 2024, our ratio of consolidated indebtedness less netted cash to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure, in accordance with our 2023 Credit Agreement was 2.70 times. This ratio is within the terms of the financial covenants for the maximum consolidated total net leverage ratio as set forth in the 2023 Credit Agreement, which limits this ratio to 5.00 times. As of June 30, 2024, we were in compliance with all of the financial covenants in our debt agreements, and we do not anticipate material issues under any debt agreements based on current facts and circumstances.
Previous wording
Our Board of Directors authorized a share repurchase program in 2016 pursuant to which we were authorized to repurchase shares of our common stock, and the Board of Directors has authorized increases to this authorization from time to time. During the three months ended March 31, 2024, we did not repurchase shares under our share repurchase program. As of March 31, 2024, we had $774.5 million remaining under our share repurchase authorization.
Current wording
Our Board of Directors authorized a share repurchase program in 2016 pursuant to which we were authorized to repurchase shares of our common stock, and the Board of Directors has authorized increases to this authorization from time to time. During the six months ended June 30, 2024, we did not repurchase shares under our share repurchase program. As of June 30, 2024, we had $774.5 million remaining under our share repurchase authorization.
Previous wording
As of March 31, 2024, we had $1,104.9 million of liquidity, including $92.5 million of cash on hand and $1,012.4 million available under our 2023 Credit Agreement. In addition, we expect to generate cash flow from operations in the full year 2024. We believe that cash flow from operations, availability under our existing credit facilities and arrangements, current cash balances and the ability to obtain other financing, if necessary, will provide adequate cash funds for our foreseeable working capital needs, necessary capital expenditures, debt service obligations and dividend payments.
Current wording
As of June 30, 2024, we had $1,208.7 million of liquidity, including $95.8 million of cash on hand and $1,112.9 million available under our 2023 Credit Agreement. In addition, we expect to generate cash flow from operations in the full year 2024. We believe that cash flow from operations, availability under our existing credit facilities and arrangements, current cash balances and the ability to obtain other financing, if necessary, will provide adequate cash funds for our foreseeable working capital needs, necessary capital expenditures, debt service obligations and dividend payments.
Previous wording
The Board of Directors declared a dividend of $0.13 per share for the second quarter of 2024. The dividend is payable on May 30, 2024 to shareholders of record as of May 16, 2024.
Current wording
The Board of Directors declared a dividend of $0.13 per share for the third quarter of 2024. The dividend is payable on August 29, 2024 to shareholders of record as of August 15, 2024.
Previous wording
As of March 31, 2024, we had $2,594.4 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $2,501.9 million. Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 2.85 times for the trailing twelve months ended March 31, 2024.
Current wording
As of June 30, 2024, we had $2,505.8 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $2,410.0 million. Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 2.70 times for the trailing twelve months ended June 30, 2024.
Previous wording
The following table sets forth the reconciliation of our reported gross profit and operating income (expense) to the calculation of adjusted gross profit and adjusted operating income (expense) for the three months ended March 31, 2024.
Current wording
The following table sets forth the reconciliation of our reported gross profit and operating income (expense) to the calculation of adjusted operating income (expense) for the three months ended June 30, 2024.
Previous wording
Under the 2023 Credit Agreement, the ratio of adjusted EBITDA to consolidated indebtedness less netted cash was 2.85 times for the trailing twelve months ended March 31, 2024. The 2023 Credit Agreement requires us to maintain a ratio of consolidated indebtedness less netted cash to adjusted EBITDA of less than 5.00 times.
Current wording
Under the 2023 Credit Agreement, the ratio of adjusted EBITDA to consolidated indebtedness less netted cash was 2.70 times for the trailing twelve months ended June 30, 2024. The 2023 Credit Agreement requires us to maintain a ratio of consolidated indebtedness less netted cash to adjusted EBITDA of less than 5.00 times.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
Our income tax provision increased $1.8 million due to an increase in income before income taxes. Our effective tax rate for the three months ended June 30, 2024 as compared to the prior year declined by 150 basis points. The effective tax rates as compared to the U.S. federal statutory rates for the three months ended June 30, 2024 and 2023 included a net favorable impact of other discrete items.
Current report — wording carried from elsewhere
SIX MONTHS ENDED JUNE 30, 2024 COMPARED TO THE
Current report — wording carried from elsewhere
The following table sets forth the various components of our Condensed Consolidated Statements of Income and expresses each component as a percentage of net sales:
Current report — wording carried from elsewhere
Net sales decreased 2.2%, and on a constant currency basis decreased 2.4%. The change in net sales was driven by the following:
Current report — wording carried from elsewhere
Costs associated with net sales are recorded in cost of sales and include the costs of producing, shipping, warehousing, receiving and inspecting goods during the period, as well as depreciation and amortization of long-lived assets used in the manufacturing process.
Current report — wording carried from elsewhere
Gross margin improved 190 basis points. The primary drivers of changes in gross margin by segment are discussed below:
Current report — wording carried from elsewhere
Selling and marketing expenses include advertising and media production associated with the promotion of our brands, other marketing materials such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials and sales force compensation. We also include in selling and marketing expense certain new product development costs, including market research and new product testing.
Current report — wording carried from elsewhere
General, administrative and other expenses include salaries and related expenses, IT, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing process, expenses for administrative functions and research and development costs.
Current report — wording carried from elsewhere
Operating income increased $2.7 million and operating margin improved 40 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below: