SOMNIGROUP INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited)

(1)Summary of Significant Accounting Policies

(a) Basis of Presentation and Description of Business. Somnigroup International Inc., a Delaware corporation, together with its subsidiaries, is a U.S. based, multinational company. The term "Somnigroup International" refers to Somnigroup International Inc. only, and the term "Company" refers to Somnigroup International Inc. and its consolidated subsidiaries.

On February 5, 2025, the Company completed the previously announced acquisition of Mattress Firm, the largest mattress specialty retailer in the U.S. Mattress Firm was founded in 1986 and operates over 2,200 brick and mortar retail locations and a growing e-commerce platform. Mattress Firm's highly trained retail sales associates provide personalized service to help consumers choose the ideal bedding products across their robust assortment of market-leading brands.

The Company designs, manufactures, distributes and retails bedding products, which include mattresses, foundations and adjustable bases, and other products, which include pillows and other accessories. The Company also derives income from royalties by licensing Sealy® and Stearns & Foster® brands, technology and trademarks to other manufacturers, as well as licensing the Mattress Firm® trademark to retail franchisees. The Company sells its products throughtwo sales channels: Direct and Wholesale.

The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market and distribute Sealy® and Stearns & Foster® branded products. The Company's ownership interests in each of these joint ventures is 50.0%. The equity method of accounting is used for these joint ventures, over which the Company has significant influence but does not have control, and consolidation is not otherwise required. The Company's equity in the net income and losses of these investments is reported in equity income in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Income (Loss).

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States ("GAAP") for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended December 31, 2025, included in the 2025 Annual Report filed with the Securities and Exchange Commission on February 27, 2026.

The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.

(b) Inventories. Inventories are stated at the lower of cost or net realizable value, determined by either the first-in, first-out method or the weighted average cost method, depending on reportable segment, and consist of the following:

(c) Fair Value. Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of those instruments. Borrowings under the 2023 Credit Agreement (as defined in Note 5, "Debt") and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair value of the following material financial instruments were based on Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments. The fair values of these material financial instruments are as follows:

(d)Definitive Agreement with Leggett & Platt, Incorporated

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 (the "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.

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.

(2)Net Sales

The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the three months ended March 31, 2026 and 2025:

Substantially all revenue is associated with bedding product sales.

(3)Acquisitions and Divestitures

Acquisition of Mattress Firm Group Inc.

On February 5, 2025, the Company completed its Mattress Firm Acquisition for an aggregate purchase price of approximately $5.1 billion, net of cash acquired of $0.3 billion. The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of the Company's common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of the Company's common stock on the New York Stock Exchange (the "NYSE") on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.

The Mattress Firm Acquisition enhances the Company's global omni-channel strategy and enables a seamless consumer experience, among other things. Mattress Firm operates as a separate business segment within the Company. The Company accounted for this transaction as a business combination in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Mattress Firm's financial results for the three months ended March 31, 2026 and the period of February 5, 2025 through March 31, 2025 (the "stub period") are included in the Company's Condensed Consolidated Financial Statements for the three months ended March 31, 2026 and March 31, 2025, respectively.

On May 1, 2025, the Company completed the previously announced divestiture of 73 Mattress Firm retail locations and the Company's Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations andseven distribution centers to MW SO Holdings Company, LLC ("Mattress Warehouse").

Purchase Price Consideration

The final purchase price of Mattress Firm as of February 5, 2025 consists of the following items:

Final Purchase Price Allocation

The final allocation of the purchase price is based on the fair values of the assets acquired and liabilities assumed as of February 5, 2025.

The components of the final purchase price allocation are as follows:

The indefinite-lived intangible asset represents the Mattress Firm trade name. The Company applied the income approach through a relief from royalty method to fair value the trade name asset using Level 3 inputs. The indefinite-lived intangible asset is not deductible for income tax purposes.

Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the future economic benefits expected from the expansion of consumer touchpoints, the assembled workforce acquired and operating efficiencies. Due to carryover tax basis, approximately $164.6 million of the goodwill is deductible for income tax purposes and approximately $3,329.3 million is non-deductible for income tax purposes. Combined total goodwill of $3,493.9 million is included within the Mattress Firm segment.

Transaction Costs

The Company incurred an immaterial amount of transaction costs related to the Mattress Firm Acquisition during the three months ended March 31, 2026 and $50.2 million in the three months ended March 31, 2025. Transaction costs primarily included legal and professional fees associated with the Mattress Firm Acquisition.

Consolidated Results of Operations

The business acquired in the Mattress Firm Acquisition contributed revenue of $885.9 million and $593.7 million for the three months ended March 31, 2026 and March 31, 2025, respectively and contributed net income of $32.4 million and $0.8 million for the three months ended March 31, 2026 and March 31, 2025, respectively.

Unaudited Pro Forma Financial Information

The following represents the unaudited consolidated pro forma financial information for the period as if Mattress Firm had been included in the consolidated results of the Company since January 1, 2024. Pro forma results do not include the effect of any future synergies anticipated to be achieved from the acquisition, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.

The pro forma amounts have been calculated after applying the Company's accounting policies and by including the results of Mattress Firm, and adjusting the combined results to give effect to the following, as if the acquisition had been consummated on January 1, 2024, together with the consequential tax effects thereon:

(4)Goodwill

The following summarizes changes to the Company's goodwill, by segment:

(5)Debt

Debt for the Company consists of the following:

As of March 31, 2026, the Company was in compliance with all applicable debt covenants.

2023 Credit Agreement

On October 10, 2023, the Company entered into the 2023 Credit Agreement with a syndicate of banks. The 2023 Credit Agreement provides for a $1,190.00 million revolving credit facility, a $500.0 million term loan facility, a $625.0 million Delayed Draw Term A Loan, a $1,600.0 million Term B Loan (which was initially placed in escrow, net of an original issue discount, and released upon the consummation of the Mattress Firm Acquisition) and an incremental facility in an aggregate amount up to the greater of $850.0 million and additional amounts subject to the conditions set forth in the 2023 Credit Agreement, plus the amount of certain prepayments, plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test. The 2023 Credit Agreement also contains a $60.0 million sub-facility for the issuance of letters of credit.

The Company had outstanding borrowings of $426.5 million under the revolving credit facility as of March 31, 2026. Total availability under the revolving facility was $762.7 million, after a $0.8 million reduction for outstanding letters of credit, as of March 31, 2026.

Securitized Debt

The Company and certain of its subsidiaries are party to a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization"). While subject to a $150.0 million overall limit, the availability of revolving loans varies over the course of the year based on the seasonality of the Company's accounts receivable. As of March 31, 2026, the Company had fully drawn down the Accounts Receivable Securitization with borrowings of $89.5 million. Borrowings under this facility are classified as long-term debt within the Condensed Consolidated Balance Sheets at March 31, 2026, based on the Company's ability and intent to refinance on a long-term basis.

(6) Stockholders' Equity

(a)Treasury Stock. As of March 31, 2026, the Company had approximately $774.5 million remaining under its share repurchase authorization. The Company did not repurchase shares under the program during the three months ended March 31, 2026 or 2025.

The Company acquired 0.3 million and 0.7 million shares upon the vesting of certain restricted stock units ("RSUs") and performance restricted stock units ("PRSUs"), which were withheld to satisfy tax withholding obligations during each of the three months ended March 31, 2026 and 2025, respectively. The shares withheld were valued at the closing price of the stock on the New York Stock Exchange on the vesting date or first business day prior to vesting, resulting in $26.2 million and $37.5 million in treasury stock acquired for the three months ended March 31, 2026 and 2025, respectively.

(b)Accumulated Other Comprehensive Loss ("AOCL"). AOCL consisted of the following:

(7) Other Items

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

(8) Stock-Based Compensation

The Company's stock-based compensation expense for the three months ended March 31, 2026 and 2025 included PRSUs, RSUs and non-qualified stock options. A summary of the Company's stock-based compensation expense is presented in the following table:

The Company grants PRSUs to executive officers and certain members of management. Actual payout under the PRSUs is dependent upon the achievement of certain financial goals. During the first quarter of 2026, the Company granted PRSUs as a component of the long-term incentive plan ("2026 PRSUs"). The Company has recorded stock-based compensation expense related to the 2026 PRSUs during the three months ended March 31, 2026, as it was probable that the Company would achieve the specified performance targets for the performance period.

(9) Commitments and Contingencies

The Company is involved in various legal and administrative proceedings incidental to the operations of its business. Except as disclosed, the Company believes that the outcome of all such pending proceedings in the aggregate will not have a material adverse effect on its business, financial condition, liquidity or operating results. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable potential losses. Accordingly, the Company has not established material reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings in which it is involved, it could, in the future, enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows.

(10) Income Taxes

The Company's effective tax rates for the three months ended March 31, 2026 and 2025 were 24.3% and 33.5%, respectively. The Company's effective tax rates for the three months ended March 31, 2026 and 2025 differed from the U.S. federal statutory rate of 21.0% principally due to subpart F income (i.e., global intangible low-taxed income, or "GILTI," earned by the Company's foreign subsidiaries), foreign income tax rate differentials, state and local taxes, changes in the Company's uncertain tax positions, the excess tax benefit related to stock-based compensation and certain other permanent items.

(11) Earnings Per Common Share

The following table sets forth the components of the numerator and denominator for the computation of basic and diluted earnings per share for net income attributable to Somnigroup International Inc.:

The Company excludes shares issuable upon exercise of certain outstanding stock options from the diluted earnings per common share computation because their exercise price was greater than the average market price of Somnigroup International Inc.'s common stock or they were otherwise anti-dilutive.

As a result, the Company excluded 0.8 million shares for the three months ended March 31, 2026, and animmaterial amount of shares for the three months ended March 31, 2025. Holders of non-vested stock-based compensation awards do not have voting rights but do participate in dividend equivalents distributed upon the award vesting.

(12) Business Segment Information

The Company operates inthree segments: Mattress Firm, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. The Mattress Firm segment consists of retail stores and distribution centers located in the U.S. The 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). The 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 Company evaluates segment performance based on net sales, gross profit and operating income.

The Company's Tempur Sealy North America and Tempur Sealy International segment assets include investments in subsidiaries that are appropriately eliminated in the Company's accompanying Condensed Consolidated Financial Statements. The remaining inter-segment balance sheet eliminations are comprised of intercompany accounts receivable and payable. Inter-segment sales are made primarily at prices that approximate market-based selling prices.

The following table summarizes total assets by segment:

The following table summarizes property, plant and equipment, net, by segment:

The following table summarizes operating lease right-of-use assets by segment:

The following table summarizes segment information for the three months ended March 31, 2026:

(1)Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes segment information for the three months ended March 31, 2025:

(1)Depreciation and amortization includes stock-based compensation amortization expense.

The following table summarizes property, plant and equipment, net by geographic region:

The following table summarizes operating lease right-of-use assets by geographic region: