SOMNIGROUP INTERNATIONAL INC.
For the period ended Mar 31, 2026. Filed May 8, 2026.
View on SEC.govAbout this filing
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.
Mar 31, 2026 · Filed May 8, 2026
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 2025-09-30; filed 2025-11-07.
0001206264-25-000194
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001206264-26-000067
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 155 previous paragraphs and 120 current paragraphs.
58 unchanged; 51 reworded; 11 added; 36 removed; 10 previous and 0 current paragraphs rearranged.
Tables are not compared: 27 previous and 20 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 (11)
Current report
Definitive Agreement with Leggett & Platt, Incorporated
Current report
On April 13, 2026, Somnigroup International and Leggett & Platt, Incorporated ("Leggett & Platt") entered into a definitive agreement (the "Merger Agreement") for a proposed business acquisition in which Somnigroup International, through a wholly-owned subsidiary, will acquire Leggett & Platt in an all-stock transaction valued at approximately $2.5 billion based on the closing price of Somnigroup International's common stock as of April 10, 2026 and inclusive of Leggett & Platt's existing indebtedness.
Current report
The transaction is currently anticipated to close by year-end 2026, subject to the satisfaction of customary closing conditions, including approval by Leggett & Platt’s shareholders and receipt of applicable regulatory approvals. The transaction does not require Somnigroup International shareholder approval. Following the close of the transaction, Leggett & Platt is expected to operate as a separate business unit within Somnigroup and to maintain its offices in Carthage, Missouri.
Current report
In 2026, we plan to launch an all new collection of Stearns & Foster products in North America. This new line is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings and providing a refreshed aesthetic.
Current report
•Gross margin was 43.1% as compared to 36.2% in the first quarter of 2025. Adjusted gross margin(1) was 43.6% as compared to 42.2% in the first quarter of 2025.
Current report
•Net income increased 414.8% to $104.2 million as compared to net loss of $(33.1) million in the first quarter of 2025. Adjusted net income(1) increased 28.4% to $124.5 million as compared to $97.0 million in the first quarter of 2025.
Current report
•Mattress Firmnet sales increased $292.2 million, or 49.2%, primarily driven by the inclusion of net sales for a full quarter as compared to the first quarter of 2025, which included Mattress Firm for the stub period. All Mattress Firm sales are reported through the direct channel.
Current report
•Mattress Firm operating expenses increased $55.1 million, or 29.9%, and decreased 410 basis points as a percentage of net sales. The increase was primarily driven by the inclusion of operating expenses for a full quarter as compared to the first quarter of 2025, which included operating expenses for the stub period.
Current report
OPERATING INCOME (LOSS)
Current report
•Mattress Firm operating income increased $26.6 million and operating margin improved 270 basis points. The improvement in operating margin was primarily driven by operating expense leverage of 410 basis points, offset by the decline in gross margin of 140 basis points.
Current report
Cash provided by operating activities increased $140.1 million in the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by strong operational performance across all segments.
Removed paragraphs (36)
Previous report
In connection with the consummation of the merger, we borrowed $625.0 million on the Delayed Draw Term A Loan and $679.5 million of revolving commitments under our senior credit facility. In addition, approximately $1,592.0 million of proceeds in respect of the Term B Loan were released from escrow. The proceeds of this financing were collectively used to fund a portion of the cash consideration, for the repayment of Mattress Firm's debt and for the payment of certain fees and expenses related to the merger.
Previous report
In 2025, we launched an all-new collection of Sealy Posturepedic products in North America. This reinvention of the Sealy Posturepedic® brand is strategically aimed at reigniting growth in the mid-to-entry level market, which has experienced outsized pressures relative to other price points in recent years. The new collection incorporates innovative technologies, including our proprietary PrecisionFit™ coils which were expertly designed to provide superior support.
Previous report
•Gross margin was 44.9% as compared to 42.4% in the third quarter of 2024. Adjusted gross margin, which is a non-GAAP financial measure, was 45.6% as compared to 43.2% in the third quarter of 2024.
Previous report
•Net income increased 36.5% to $177.4 million as compared to $130.0 million in the third quarter of 2024. Adjusted net income, which is a non-GAAP financial measure, increased 37.5% to $201.4 million as compared to $146.5 million in the third quarter of 2024.
Previous report
•Tempur Sealy North America net sales decreased $279.2 million, or 27.5%. Net sales in the Wholesale channel decreased $252.0 million, primarily driven by a 35.7% decline from the elimination of intercompany sales to Mattress Firm of $313.7 million, offset by a 7.0% increase in net sales of $61.7 million, primarily driven by growth at third-party retailers. Net sales in the Direct channel decreased $27.2 million, or 19.9%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.
Previous report
•Mattress Firmnet sales were $1,070.8 million for the three months ended September 30, 2025.
Previous report
•Tempur Sealy North America gross margin improved 1,800 basis points. The improvement in gross margin was primarily driven by the elimination of sales to Mattress Firm of 1,740 basis points, operational efficiencies of 50 basis points and fixed cost absorption. These improvements were partially offset by unfavorable mix of 80 basis points.
Previous report
•Tempur Sealy International gross margin declined 40 basis points. The decline in gross margin was primarily driven by unfavorable mix of 60 basis points, partially offset by operational efficiencies.
Previous report
•Mattress Firm operating expenses were $286.9 million for the three months ended September 30, 2025.
Previous report
OPERATING INCOME
Previous report
•Mattress Firm operating income was $81.2 million and operating margin was 7.6% for the three months ended September 30, 2025.
Previous report
NINE MONTHS ENDED SEPTEMBER 30, 2024
Previous report
NET SALES
Previous report
•Tempur Sealy International net sales increased $85.9 million, or 10.4%, primarily driven by the success of new product launches and expanded distribution. On a constant currency basis, International net sales increased $67.9 million, or 8.2%. Net sales in the Wholesale channel increased 8.1% on a constant currency basis. Net sales in the Direct channel increased 8.2% on a constant currency basis.
Previous report
•Mattress Firmnet sales were $2,613.3 million for the stub period.
Previous report
GROSS PROFIT
Previous report
OPERATING EXPENSES
Previous report
Operating expenses increased $802.4 million, or 76.6%, and increased 490 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
Previous report
•Tempur Sealy International operating expenses increased $24.4 million, or 8.6%, and decreased 60 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
Previous report
•Mattress Firm operating expenses were $741.4 million for the stub period.
Previous report
•Corporate operating expenses increased $46.3 million, or 35.7%. The increase in operating expenses was primarily driven by increased costs related to the Mattress Firm Acquisition.
Previous report
Research and development expenses were $24.7 million for the nine months ended September 30, 2025 as compared to $22.8 million for the nine months ended September 30, 2024, an increase of $1.9 million, or 8.3%.
Previous report
OPERATING INCOME
Previous report
Operating income increased $1.2 million and operating margin declined 450 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
Previous report
•Tempur Sealy North America operating income decreased $123.3 million and operating margin improved 90 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 950 basis points, offset by operating expense deleverage of 810 basis points. Additionally, we incurred a $9.8 million loss on disposal of business associated with the divestiture of Sleep Outfitters.
Previous report
•Tempur Sealy International operating income increased $19.6 million and operating margin improved 70 basis points. The improvement in operating margin was primarily driven by operating expense leverage of 60 basis points and the improvement in gross margin of 20 basis points, partially offset by Asia joint venture performance.
Previous report
•Mattress Firm operating income was $151.2 million and operating margin was 5.8% for the stub period. Additionally, we incurred a $4.1 million loss on disposal of business associated with the divestiture of 73 retail stores.
Previous report
•Corporate operating expenses increased $46.3 million, which negatively impacted our consolidated operating margin.
Previous report
INTEREST EXPENSE, NET
Previous report
Interest expense, net, increased $105.2 million, or 106.8%. The increase in interest expense, net, was primarily driven by increased average levels of outstanding variable rate debt.
Previous report
INCOME TAX PROVISION
Previous report
Cash provided by operating activities increased $163.3 million in the nine months ended September 30, 2025 as compared to the same period in 2024. The increase in cash provided by operating activities was driven by a $150.5 million increase in cash provided by changes in operating assets and liabilities and a $58.1 million increase in non-cash depreciation expense, primarily associated with the Mattress Firm Acquisition, offset by a $68.7 million decrease in net income.
Previous report
Share repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as management deems appropriate. These repurchases may be funded by operating cash flows and/or borrowings under our debt arrangements. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing and regulatory requirements and other market conditions. The program is subject to certain limitations under our debt agreements. The program does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. Repurchases may be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when we might otherwise be precluded from doing so under federal securities laws.
Previous report
During the nine months ended September 30, 2025, there were no material changes to our critical accounting policies and estimates as described in our 2024 Annual Report, except as set forth below.
Previous report
Business Combinations. We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires estimates and the use of valuation techniques when fair value is not readily available and requires a significant amount of management judgment. For the valuation of intangible assets acquired in the Mattress Firm Acquisition, we applied the income approach through a relief from royalty method. Although we believe these estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair values of the intangible assets acquired.
Previous report
The excess of the purchase price over fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill due to the use of preliminary information in our initial estimates. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
Reworded paragraphs (51)
Previous wording
In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three and nine months ended September 30, 2025, 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 months ended March 31, 2026, including the following topics:
Previous wording
We are the world's largest bedding company, dedicated to improving people's lives through better sleep. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in more than 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.
Current wording
We are the world's leading bedding company, dedicated to transforming how the world sleeps. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in more than 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.
Previous wording
We operate in three segments: Tempur Sealy North America, Tempur Sealy International and Mattress Firm. These segments are strategic business units that are managed separately. Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). The Mattress Firm segment consists of retail stores and distribution centers located in the U.S. Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results. We evaluate segment performance based on net sales, gross profit and operating income. For additional information refer to Note 12, "Business Segment Information," included in Part I, ITEM 1 of this Report.
Current wording
We operate in three segments: Mattress Firm, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. Our Mattress Firm segment consists of retail stores and distribution centers located in the U.S. Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results. We evaluate segment performance based on net sales, gross profit and operating income. For additional information refer to Note 12, "Business Segment Information," included in Part I, ITEM 1 of this Report.
Previous wording
Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy®, Stearns & Foster® and Sleepy's® and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored sleep solutions. Our products allow for complementary merchandising strategies and are sold through third-party retailers, our company-owned and joint venture operated retail stores worldwide and our e-commerce channel.
Current wording
Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy® and Stearns & Foster® and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored sleep solutions.
Previous wording
Our distribution model operates through an omni-channel strategy. We distribute through two channels in the Tempur Sealy North America and Tempur Sealy International operating business segments: Wholesale and Direct. We distribute through one channel in the Mattress Firm operating business segment: Direct. Our Wholesale channel consists of third-party retailers, including third-party distribution, hospitality and healthcare. Our Direct channel includes company-owned stores, online and call centers.
Current wording
As of March 31, 2026, we operated 2,839 company-owned stores, including 2,161 Mattress Firm stores, Tempur Sealy owned stores, Dreams stores and joint venture stores. Our distribution model operates through an omni-channel strategy. The Mattress Firm segment sells products through one channel: Direct. The Tempur Sealy North America and Tempur Sealy International operating business segments sell products through two channels: Direct and Wholesale. Our Direct channel includes product sales through company-owned stores, online and call centers. Our Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare.
Previous wording
The global bedding industry was challenged in 2024 due to certain macroeconomic pressures on the consumer, which have continued during 2025. Ongoing geopolitical conflicts, including trade disputes and the imposition of tariffs, along with the U.S. government shutdown, may also introduce further uncertainty for the consumer. We have taken actions to mitigate the impact of proposed tariffs, and we implemented pricing actions to mitigate the remaining impact. The majority of our products sold are also manufactured in the U.S. Accordingly, we believe proposed tariffs will not have a material impact on our results of operations in 2025. However, the duration and extent of tariffs remain uncertain, and we are continuing to evaluate the potential future impacts of the imposition of tariffs. We expect to outperform the bedding industry as a result of our investments in new product launches and continued investments in innovation, quality, advertising and customer service.
Current wording
The global bedding industry was challenged in 2025 due to certain macroeconomic pressures on the consumer, which continued during the first quarter of 2026. Ongoing geopolitical conflicts, including trade disputes and the imposition of tariffs, along with the U.S. government shutdowns, may also introduce further uncertainty for the consumer. We have taken actions to mitigate the impact of proposed tariffs, and we implemented pricing actions to mitigate the remaining impact. The majority of our products sold in the U.S. are also manufactured in the U.S. Accordingly, we believe proposed tariffs will not have a material impact on our results of operations in 2026. However, the duration and extent of tariffs remain uncertain, and we are continuing to evaluate the potential future impacts of the imposition of tariffs. We expect to outperform the bedding industry as a result of our investments in new product launches and continued investments in innovation, quality, advertising and customer service.
Previous wording
Mattress Firm operates as a separate business segment. Mattress Firm's financial results for the periods from July 1, 2025 through September 30, 2025 and February 5, 2025 through September 30, 2025 (the "stub period") are included in the Company's Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2025, respectively.
Current wording
Mattress Firm operates as a separate business segment. Mattress Firm's financial results for the period February 5, 2025 through March 31, 2025 (the "stub period") are included in our Condensed Consolidated Financial Statements for the three months ended March 31, 2025.
Previous wording
On May 1, 2025, we completed the previously announced divestiture of 73 Mattress Firm retail locations and our Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers, to MW SO Holdings Company, LLC ("Mattress Warehouse"). In the nine months ended September 30, 2025, the Company recorded a $13.9 million loss on disposal of business associated with the divestiture, net of proceeds of $9.0 million. We do not expect the divestiture to have a material impact on our results of operations for the twelve months ended December 31, 2025.
Current wording
On May 1, 2025, we completed the previously announced divestiture of 73 Mattress Firm retail locations and our Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers, to MW SO Holdings Company, LLC ("Mattress Warehouse").
Previous wording
•Total net sales increased 63.3% to $2,122.6 million as compared to $1,300.0 million in the third quarter of 2024, primarily driven by the inclusion of $1,070.8 million of Mattress Firm sales for the quarter, offset by the elimination of $313.7 million of sales from the Tempur Sealy North America segment to the Mattress Firm segment.
Current wording
•Total net sales increased 12.3% to $1,801.5 million as compared to $1,604.7 million in the first quarter of 2025, primarily driven by the inclusion of Mattress Firm sales for a full quarter as compared to the first quarter of 2025, which included Mattress Firm for the stub period.
Previous wording
•Operating income increased 55.9% to $314.7 million as compared to $201.8 million in the third quarter of 2024. Adjusted operating income, which is a non-GAAP financial measure, increased 53.6% to $343.7 million as compared to $223.7 million in the third quarter of 2024. Both were primarily driven by the inclusion of Mattress Firm.
Current wording
•Operating income increased 1,317.4% to $187.1 million as compared to $13.2 million in the first quarter of 2025. Adjusted operating income(1) increased 17.4% to $214.6 million as compared to $182.8 million in the first quarter of 2025. Both were primarily driven by the inclusion of Mattress Firm and realized sales and cost synergies.
Previous wording
•Earnings per diluted share ("EPS") increased 13.7% to $0.83 as compared to $0.73 in the third quarter of 2024. Adjusted EPS, which is a non-GAAP financial measure, increased 15.9% to $0.95 as compared to $0.82 in the third quarter of 2024.
Current wording
•Earnings per diluted share ("EPS") increased 388.2% to $0.49 as compared to loss per diluted share of $(0.17) in the first quarter of 2025. Adjusted EPS(1) increased 20.4% to $0.59 as compared to $0.49 in the first quarter of 2025.
Previous wording
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 wording
The following table sets forth the various components of our Condensed Consolidated Statements of Income (Loss) and expresses each component as a percentage of net sales:
Previous wording
Net sales increased 63.3%, and on a constant currency basis increased 62.5%. The change in net sales was driven by the following:
Current wording
Net sales increased 12.3%, and on a constant currency basis increased 10.4%. The change in net sales was driven by the following:
Previous wording
•Tempur Sealy North America net sales decreased $814.1 million, or 28.1%. Net sales in the Wholesale channel decreased $765.2 million, or 30.5%, primarily driven by a 28.2% decline from the elimination of intercompany sales to Mattress Firm of $707.3 million, and a 2.3% decrease in net sales of $57.9 million, primarily driven by foreclosed distribution. Net sales in the Direct channel decreased $48.9 million, or 12.7%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.
Current wording
•Tempur Sealy North America net sales decreased $142.7 million, or 20.2%, net sales in the Wholesale channel decreased $111.0 million, primarily driven by the accounting elimination of sales to Mattress Firm for a full quarter in 2026 as compared to the first quarter of 2025, which eliminated sales to Mattress Firm for the stub period. Net sales in the Direct channel decreased $31.7 million, or 26.0%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters in the second quarter of 2025.
Previous wording
•Tempur Sealy International net sales increased $31.0 million, or 10.9%, primarily driven by expanded distribution. On a constant currency basis, International net sales increased 7.2%. Net sales in the Wholesale channel increased 6.1% on a constant currency basis. Net sales in the Direct channel increased 7.8% on a constant currency basis.
Current wording
•Tempur Sealy International net sales increased $47.3 million, or 15.5%, primarily driven by strong performance in key markets. On a constant currency basis, International net sales increased 7.2%. Net sales in the Direct channel increased 7.5% on a constant currency basis. Net sales in the Wholesale channel increased 6.7% on a constant currency basis.
Previous wording
Our gross margin is primarily impacted by the relative amount of net sales contributed by our premium or value products. Our value products have a significantly lower gross margin than our premium products. If sales of our value priced products increase relative to sales of our premium priced products, our gross margins will be negatively impacted across all segments.
Current wording
Our gross margin is primarily impacted by the relative amount of net sales contributed by our premium or value products. Our premium products have higher gross margins than our value products. An increase in sales of our premium priced products can positively impact gross margins, while an increase in sales of our value priced products can negatively impact gross margins across all segments. Our margins are also impacted by the relative amount of net sales contributed by each channel. Sales in our Direct channel have higher gross margins than sales in our Wholesale channel.
Previous wording
Our gross margin is also impacted by fixed cost leverage based on manufacturing unit volumes; the cost of raw materials; operational efficiencies due to the utilization in our manufacturing facilities; product, brand, channel and country mix; foreign exchange fluctuations; volume incentives offered to certain retail accounts; participation in our retail cooperative advertising programs; vendor incentives earned on supply agreements, retail store fixed cost leverage based on unit volumes and costs associated with new product introductions. Future changes in raw material prices could have a significant impact on our gross margin. Our margins are also impacted by the growth in our Wholesale channel as sales in our Wholesale channel are at wholesale prices, whereas sales in our Direct channel are at retail prices.
Current wording
Our gross margin is also impacted by fixed cost leverage based on manufacturing unit volumes; the cost of raw materials; operational efficiencies due to the utilization in our manufacturing facilities; product, brand, channel and country mix; foreign exchange fluctuations; volume incentives offered to certain retail accounts; participation in our retail cooperative advertising programs; vendor incentives earned on supply agreements, retail store fixed cost leverage based on unit volumes and costs associated with new product introductions. Future changes in raw material prices could have a significant impact on our gross margin.
Previous wording
Gross margin improved 250 basis points. The primary drivers of changes in gross margin by segment are discussed below:
Current wording
Gross margin improved 690 basis points. The primary drivers of changes in gross margin by segment are discussed below:
Previous wording
•Mattress Firm gross margin was 34.4% for the three months ended September 30, 2025.
Current wording
•Mattress Firm gross margin declined 140 basis points. The decline in gross margin was primarily driven by investments in promotional expenses of 110 basis points, product mix of 100 basis points and fixed cost deleverage of 90 basis points. Additionally, in 2025, we incurred $17.4 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.
Previous wording
•Tempur Sealy North America gross margin improved 950 basis points. The improvement in gross margin was primarily driven by elimination of intercompany sales to Mattress Firm of 1,240 basis points and operational efficiencies of 80 basis points. These improvements were partially offset by expense deleverage of 80 basis points. Additionally, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition.
Current wording
•Tempur Sealy North America gross margin improved 2,390 basis points. The improvement in gross margin was primarily driven by the achievement of synergies of 620 basis points, the elimination of sales to Mattress Firm of 450 basis points, lower product launch costs and operational efficiencies. Additionally, in 2025, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.
Previous wording
•Tempur Sealy International gross margin improved 20 basis points. The improvement in gross margin was primarily driven by operational efficiencies.
Current wording
•Tempur Sealy International gross margin improved 140 basis points. The improvement in gross margin was primarily driven by favorable mix of 70 basis points and operational efficiencies.
Previous wording
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 wording
Selling and marketing expenses include sales and marketing compensation, advertising and media production associated with the promotion of our brands, and other marketing materials such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials. We also include in selling and marketing expense certain new product development costs, including market research and new product testing.
Previous wording
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, distribution and retail store operations, expenses for administrative functions and research and development costs.
Current wording
General, administrative and other expenses include salaries and related expenses, information technology, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing, distribution and retail store operations, expenses for administrative functions and research and development costs.
Previous wording
Operating expenses increased $289.0 million, or 82.1%, and increased 310 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 $23.3 million, or 4.1%, and decreased 260 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
Previous wording
•Tempur Sealy North America operating expenses decreased $2.1 million, or 1.0%, and increased 780 basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by decreases in general, administrative and other expenses and other selling and marketing, partially offset by investments in advertising.
Current wording
•Tempur Sealy North America operating expenses decreased $5.0 million, or 2.5%, and increased 630 basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by decreases in general, administrative and other expenses and other selling and marketing, partially offset by investments in advertising.
Previous wording
•Tempur Sealy International operating expenses increased $9.5 million, or 10.4%, and decreased 10 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
Current wording
•Tempur Sealy International operating expenses increased $14.8 million, or 14.4%, and decreased 30 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 decreased $5.3 million, or 12.3%. The decrease in operating expenses was primarily driven by decreased costs related to the Mattress Firm Acquisition.
Current wording
•Corporate operating expenses decreased $41.6 million, or 48.9%. The decrease in operating expenses was primarily driven by decreased transaction costs related to the Mattress Firm Acquisition.
Previous wording
Research and development expenses for the three months ended September 30, 2025 were $8.8 million, compared to $7.0 million for the three months ended September 30, 2024, an increase of $1.8 million, or 25.7%.
Current wording
Research and development expenses for the three months ended March 31, 2026 were $8.5 million, compared to $8.1 million for the three months ended March 31, 2025, an increase of $0.4 million, or 4.9%.
Previous wording
Operating income increased $112.9 million and operating margin declined 70 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
Current wording
Operating income increased $173.9 million and operating margin improved 960 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
Previous wording
•Tempur Sealy North America operating income increased $21.1 million and operating margin improved 1,010 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 1,800 basis points, partially offset by operating expense deleverage of 780 basis points.
Current wording
•Tempur Sealy North America operating income increased $91.4 million and operating margin improved 1,770 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 2,390 basis points, partially offset by operating expense deleverage of 630 basis points.
Previous wording
•Tempur Sealy International operating income increased $5.3 million and operating margin declined 10 basis points. The decline in operating margin was driven by decline in gross margin of 40 basis points, offset by operating expense leverage.
Current wording
•Tempur Sealy International operating income increased $13.8 million and operating margin improved 160 basis points. The improvement in operating margin was driven by improvement in gross margin of 140 basis points and operating expense leverage.
Previous wording
•Corporate operating expenses decreased $5.3 million, which positively impacted our consolidated operating margin.
Current wording
•Corporate operating loss decreased $42.1 million, which positively impacted our consolidated operating margin.
Previous wording
Interest expense, net, increased $39.1 million, or 126.9%. The increase in interest expense, net, was primarily driven by increased average levels of outstanding variable rate debt.
Current wording
Interest expense, net, decreased $1.3 million, or 2.1%. The decrease in interest expense, net, was primarily driven by lower interest rates on outstanding variable rate debt.
Previous wording
Our income tax provision includes income taxes associated with taxes currently payable and deferred taxes and includes the impact of net operating losses for certain of our foreign operations.
Current wording
Our income tax provision includes income taxes associated with taxes currently payable and deferred taxes and includes the impact of net operating losses for certain of our domestic and foreign operations.
Previous wording
Our income tax provision increased $15.4 million due to an increase in income before income taxes. Our effective tax rate for the three months ended September 30, 2025 as compared to the prior year increased by 10 basis points. The effective tax rates as compared to the U.S. federal statutory rate for the three months ended September 30, 2025 and 2024 included a net favorable impact of other discrete items.
Current wording
Our income tax provision increased $49.9 million due to an increase in income before income taxes. Our effective tax rate for the first quarter of 2026 as compared to the prior year declined by 920 basis points. The effective tax rates as compared to the U.S. federal statutory rate for the first quarter of 2026 and 2025 included the favorable impact of the deductibility of stock compensation in the U.S. and a net unfavorable impact of other discrete items.
Previous wording
Cash and cash equivalents were $100.2 million and $117.4 million as of September 30, 2025 and December 31, 2024, respectively. We had a working capital deficit of $432.2 million as of September 30, 2025, as compared to working capital of $105.1 million as of December 31, 2024. The reduction in our working capital to a deficit position in 2025 was primarily driven by a $269.0 million increase in our short-term operating lease obligations as a result of the Mattress Firm Acquisition, and we expect to operate with a working capital deficit in the future.
Current wording
Cash and cash equivalents were $110.8 million and $134.9 million as of March 31, 2026 and December 31, 2025, respectively. We had a working capital deficit of $360.5 million as of March 31, 2026, as compared to working capital deficit of $271.1 million as of December 31, 2025.
Previous wording
Cash used in investing activities increased $2,872.5 million in the nine months ended September 30, 2025 as compared to the same period in 2024. The increase in cash used in investing activities was primarily driven by the Mattress Firm Acquisition.
Current wording
Cash used in investing activities decreased $2,798.2 million in the three months ended March 31, 2026 as compared to the same period in 2025. The decrease in cash used in investing activities was primarily driven by the Mattress Firm Acquisition in 2025.
Previous wording
Cash provided by financing activities increased $1,041.6 million in the nine months ended September 30, 2025 as compared to the same period in 2024. For the nine months ended September 30, 2025, we had net borrowings of $801.2 million on our credit facilities as compared to net repayments of $307.3 million in the same period in 2024. We paid dividends to shareholders of $95.9 million and $70.1 million, during the nine months ended September 30, 2025 and 2024, respectively. Additionally, we repurchased $132.4 million and $43.8 million of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans during the nine months ended September 30, 2025 and 2024, respectively. Proceeds from exercise of stock options increased $49.1 million as compared to the same period in 2024.
Current wording
Cash used in financing activities decreased $1,346.8 million in the three months ended March 31, 2026 as compared to the same period in 2025. We had net repayments of $134.4 million on our credit facilities in 2026 as compared to net borrowings of $1,217.3 million in 2025, which was driven by the Mattress Firm Acquisition. Share repurchases of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans decreased $11.3 million in 2026 as compared to in 2025. Dividends paid to shareholders increased $3.8 million in 2026 as compared to 2025.
Previous wording
Capital expenditures totaled $108.6 million and $76.4 million for the nine months ended September 30, 2025 and 2024, respectively. We currently expect our 2025 capital expenditures to be approximately $175 million, including $25 million of investments to refresh Mattress Firm stores.
Current wording
Capital expenditures totaled $60.5 million and $24.0 million for the three months ended March 31, 2026 and 2025, respectively. We currently expect our 2026 capital expenditures to be approximately $225 million, including $75 million of one-time investments to refresh Mattress Firm stores.
Previous wording
Our total debt increased to $4,658.4 million as of September 30, 2025 from $3,844.5 million as of December 31, 2024. Total availability under our revolving senior secured credit facility was $885.7 million as of September 30, 2025. Refer to Note 5, "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 $4,577.9 million as of March 31, 2026 from $4,717.3 million as of December 31, 2025. Total availability under our revolving senior secured credit facility was $762.7 million as of March 31, 2026. Refer to Note 5, "Debt" in the "Notes to Condensed Consolidated Financial Statements," under Part I, ITEM 1 for further discussion of our debt.
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Previous report — wording carried elsewhere
NINE MONTHS ENDED SEPTEMBER 30, 2025 COMPARED TO THE
Previous report — wording carried 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:
Previous report — wording carried elsewhere
Net sales increased 50.6%, and on a constant currency basis increased 50.4%. The change in net sales was driven by the following:
Previous report — wording carried 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. Cost of sales also includes retail store occupancy costs such as rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.
Previous report — wording carried elsewhere
Gross margin improved 60 basis points. The primary drivers of changes in gross margin by segment are discussed below:
Previous report — wording carried elsewhere
•Mattress Firm gross margin was 34.3% for the stub period.
Previous report — wording carried 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.
Previous report — wording carried 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.
Previous report — wording carried elsewhere
•Tempur Sealy North America operating expenses decreased $9.7 million, or 1.5%, and increased 810 basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by decreases in general, administrative and other expenses and other selling and marketing, partially offset by investments in advertising.
Previous report — wording carried elsewhere
Our income tax provision decreased $52.6 million driven by a decrease in income before income taxes and certain discrete items, as discussed below. Our effective tax rate for the nine months ended September 30, 2025 as compared to the prior year declined 850 basis points. The effective tax rate as compared to the U.S. federal statutory rate for the nine months ended September 30, 2025 and 2024 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.