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Guarantor/Non-Guarantor Financial Information
12 Months Ended
Dec. 31, 2016
Guarantor/Non-Guarantor Financial Information  
Guarantor/Non-Guarantor Financial Information
Guarantor/Non-Guarantor Financial Information

The $450.0 million and $600.0 million aggregate principal amount of 2023 Senior Notes and 2026 Senior Notes (collectively the "Senior Notes"), respectively, are general unsecured senior obligations of Tempur Sealy International and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by the Combined Guarantor Subsidiaries. The $375.0 million aggregate principal amount of 2020 Senior Notes were general unsecured senior obligations at December 31, 2015 but were redeemed in full in 2016. The foreign subsidiaries (the "Combined Non-Guarantor Subsidiaries") represent the foreign operations of the Company and do not guarantee the Senior Notes. A subsidiary guarantor will be released from its obligations under the applicable indenture governing the Senior Notes when: (a) the subsidiary guarantor is sold or sells all or substantially all of its assets; (b) the subsidiary is declared "unrestricted" under the applicable indenture governing the Senior Notes; (c) the subsidiary’s guarantee of indebtedness under the 2016 Credit Agreement (as it may be amended, refinanced or replaced) is released (other than a discharge through repayment); or (d) the requirements for legal or covenant defeasance or discharge of the applicable indenture have been satisfied. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions, including transactions with the Company’s wholly-owned subsidiary guarantors and non-guarantor subsidiaries. The Company has accounted for its investments in its subsidiaries under the equity method.

The following financial information presents Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015, and the related Consolidated Statements of Income and Comprehensive Income and Cash Flows for the years ended December 31, 2016, 2015 and 2014 for Tempur Sealy International, Combined Guarantor Subsidiaries and Combined Non-Guarantor Subsidiaries.

TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Statements of Income and Comprehensive Income
Year Ended December 31, 2016
(in millions)

 
Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
2,355.9

 
$
835.9

 
$
(64.5
)
 
$
3,127.3

Cost of sales

 
1,409.4

 
473.0

 
(64.5
)
 
1,817.9

Gross profit

 
946.5

 
362.9

 

 
1,309.4

Selling and marketing expenses
2.9

 
458.6

 
187.0

 

 
648.5

General, administrative and other expenses
14.8

 
186.8

 
76.6

 

 
278.2

Equity income in earnings of unconsolidated affiliates

 

 
(13.3
)
 

 
(13.3
)
Royalty income, net of royalty expense

 
(19.5
)
 

 

 
(19.5
)
Operating (loss) income
(17.7
)
 
320.6

 
112.6

 

 
415.5

 
 
 
 
 
 
 
 
 
 
Other expense, net:
 
 
 
 
 
 
 
 
 
Third party interest expense, net
66.0

 
15.4

 
3.8

 

 
85.2

Intercompany interest (income) expense, net
(4.1
)
 
(0.1
)
 
4.2

 

 

Interest expense, net
61.9

 
15.3

 
8.0

 

 
85.2

Loss on extinguishment of debt
34.3

 
12.9

 

 

 
47.2

Other (income) expense, net

 
(1.4
)
 
1.2

 

 
(0.2
)
Total other expense
96.2

 
26.8

 
9.2

 

 
132.2

 
 
 
 
 
 
 
 
 
 
Income from equity investees
271.6

 
76.8

 

 
(348.4
)
 

 
 
 
 
 
 
 
 
 
 
Income before income taxes
157.7

 
370.6

 
103.4

 
(348.4
)
 
283.3

Income tax benefit (provision)
38.8

 
(99.0
)
 
(26.6
)
 

 
(86.8
)
Net income before non-controlling interest
196.5

 
271.6

 
76.8

 
(348.4
)
 
196.5

Less: net loss attributable to non-controlling interests
(5.6
)
 

 
(5.6
)
 
5.6

 
(5.6
)
Net income attributable to Tempur Sealy International, Inc.
$
202.1

 
$
271.6

 
$
82.4

 
$
(354.0
)
 
$
202.1

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
190.8

 
$
271.7

 
$
71.2

 
$
(342.9
)
 
$
190.8

 
TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Statements of Income and Comprehensive Income
Year Ended December 31, 2015
(in millions)

 
Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
2,422.9

 
$
778.9

 
$
(50.6
)
 
$
3,151.2

Cost of sales

 
1,532.6

 
420.3

 
(50.6
)
 
1,902.3

Gross profit

 
890.3

 
358.6

 

 
1,248.9

Selling and marketing expenses
4.1

 
460.1

 
183.8

 

 
648.0

General, administrative and other expenses
20.8

 
232.6

 
68.6

 

 
322.0

Equity income in earnings of unconsolidated affiliates

 

 
(11.9
)
 

 
(11.9
)
Royalty income, net of royalty expense

 
(18.3
)
 

 

 
(18.3
)
Operating (loss) income
(24.9
)
 
215.9

 
118.1

 

 
309.1

 
 
 
 
 
 
 
 
 
 
Other expense, net:
 
 
 
 
 
 
 
 
 
Third party interest expense, net
27.2

 
66.2

 
2.7

 

 
96.1

Intercompany interest expense (income), net
32.9

 
(35.5
)
 
2.6

 

 

Interest expense, net
60.1

 
30.7

 
5.3

 

 
96.1

Other (income) expense, net

 
(8.1
)
 
21.0

 

 
12.9

Total other expense
60.1

 
22.6

 
26.3

 

 
109.0

 
 
 
 
 
 
 
 
 
 
Income from equity investees
132.9

 
64.7

 

 
(197.6
)
 

 
 
 
 
 
 
 
 
 
 
Income before income taxes
47.9

 
258.0

 
91.8

 
(197.6
)
 
200.1

Income tax benefit (provision)
26.8

 
(125.1
)
 
(27.1
)
 

 
(125.4
)
Net income before non-controlling interest
74.7

 
132.9

 
64.7

 
(197.6
)
 
74.7

Less: net income attributable to non-controlling interests
1.2

 
1.2

 

 
(1.2
)
 
1.2

Net income attributable to Tempur Sealy International, Inc.
$
73.5

 
$
131.7

 
$
64.7

 
$
(196.4
)
 
$
73.5

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
19.1

 
$
130.9

 
$
(3.3
)
 
$
(127.6
)
 
$
19.1


TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Statements of Income and Comprehensive Income
Year Ended December 31, 2014
(in millions)
 
Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
2,229.5

 
$
802.9

 
$
(42.6
)
 
$
2,989.8

Cost of sales

 
1,465.3

 
416.7

 
(42.6
)
 
1,839.4

Gross profit

 
764.2

 
386.2

 

 
1,150.4

Selling and marketing expenses
2.4

 
431.2

 
186.3

 

 
619.9

General, administrative and other expenses
13.4

 
200.5

 
66.7

 

 
280.6

Equity income in earnings of unconsolidated affiliates

 

 
(8.3
)
 

 
(8.3
)
Royalty income, net of royalty expense

 
(18.1
)
 

 

 
(18.1
)
Operating (loss) income
(15.8
)
 
150.6

 
141.5

 

 
276.3

 
 
 
 
 
 
 
 
 
 
Other expense, net:
 
 
 
 
 
 
 
 
 
Third party interest expense, net
27.0

 
62.4

 
2.5

 

 
91.9

Intercompany interest expense (income), net
32.7

 
(34.6
)
 
1.9

 

 

Interest expense, net
59.7

 
27.8

 
4.4

 

 
91.9

Loss on disposal, net

 
23.2

 

 

 
23.2

Other (income) expense, net

 
(17.2
)
 
3.5

 

 
(13.7
)
Total other expense
59.7

 
33.8

 
7.9

 

 
101.4

 
 
 
 
 
 
 
 
 
 
Income from equity investees
159.2

 
98.7

 

 
(257.9
)
 

 
 
 
 
 
 
 
 
 
 
Income before income taxes
83.7

 
215.5

 
133.6

 
(257.9
)
 
174.9

Income tax benefit (provision)
26.3

 
(56.3
)
 
(34.9
)
 

 
(64.9
)
Net income before non-controlling interest
110.0

 
159.2

 
98.7

 
(257.9
)
 
110.0

Less: net income attributable to non-controlling interests
1.1

 
1.1

 

 
(1.1
)
 
1.1

Net income attributable to Tempur Sealy International, Inc.
$
108.9

 
$
158.1

 
$
98.7

 
$
(256.8
)
 
$
108.9

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
66.9

 
$
163.3

 
$
60.3

 
$
(223.6
)
 
$
66.9



    

TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Balance Sheets
December 31, 2016
(in millions)
 
Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
7.9

 
$
57.8

 
$

 
$
65.7

Accounts receivable, net

 
197.7

 
147.4

 

 
345.1

Inventories

 
117.1

 
79.7

 

 
196.8

Income tax receivable
234.2

 

 

 
(234.2
)
 

Prepaid expenses and other current assets

 
48.9

 
15.0

 

 
63.9

Total Current Assets
234.2

 
371.6

 
299.9

 
(234.2
)
 
671.5

Property, plant and equipment,  net

 
346.9

 
75.3

 

 
422.2

Goodwill

 
500.2

 
222.3

 

 
722.5

Other intangible assets, net

 
589.8

 
88.9

 

 
678.7

Deferred income taxes
20.6

 

 
22.5

 
(20.6
)
 
22.5

Other non-current assets

 
41.7

 
143.5

 

 
185.2

Net investment in subsidiaries
2,207.4

 
77.7

 

 
(2,285.1
)
 

Due from affiliates
168.4

 
1,874.7

 
14.3

 
(2,057.4
)
 

Total Assets
$
2,630.6

 
$
3,802.6

 
$
866.7

 
$
(4,597.3
)
 
$
2,702.6

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
0.1

 
$
157.0

 
$
62.2

 
$

 
$
219.3

Accrued expenses and other current liabilities
6.8

 
172.6

 
70.7

 

 
250.1

Income taxes payable

 
235.9

 
4.1

 
(234.2
)
 
5.8

Current portion of long-term debt

 
34.4

 
35.9

 

 
70.3

Total Current Liabilities
6.9

 
599.9

 
172.9

 
(234.2
)
 
545.5

Long-term debt, net
1,040.4

 
776.5

 
0.9

 

 
1,817.8

Deferred income taxes

 
174.9

 
20.3

 
(20.6
)
 
174.6

Other non-current liabilities

 
43.3

 
126.0

 

 
169.3

Due to affiliates
1,587.9

 
0.6

 
468.9

 
(2,057.4
)
 

Total Liabilities
2,635.2

 
1,595.2

 
789.0

 
(2,312.2
)
 
2,707.2

 
 
 
 
 
 
 
 
 
 
Redeemable non-controlling interest
7.6

 

 
7.6

 
(7.6
)
 
7.6

 
 
 
 
 
 
 
 
 
 
Total stockholders’ (deficit) equity, net of non-controlling interests in subsidiaries
(15.2
)
 
2,207.4

 
67.1

 
(2,274.5
)
 
(15.2
)
Non-controlling interest in subsidiaries
3.0

 

 
3.0

 
(3.0
)
 
3.0

Total Stockholder's (Deficit) Equity
(12.2
)
 
2,207.4

 
70.1

 
(2,277.5
)
 
(12.2
)
Total Liabilities and Stockholders’ (Deficit) Equity
$
2,630.6

 
$
3,802.6

 
$
866.7

 
$
(4,597.3
)
 
$
2,702.6

TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Balance Sheets
December 31, 2015
(in millions)


Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
119.7

 
$
34.2

 
$

 
$
153.9

Accounts receivable, net

 
231.9

 
147.5

 

 
379.4

Inventories

 
145.3

 
53.9

 

 
199.2

Income tax receivable
193.1

 

 

 
(193.1
)
 

Prepaid expenses and other current assets

 
45.6

 
31.0

 

 
76.6

Total Current Assets
193.1

 
542.5

 
266.6

 
(193.1
)
 
809.1

Property, plant and equipment, net

 
300.1

 
61.6

 

 
361.7

Goodwill

 
501.4

 
208.0

 

 
709.4

Other intangible assets, net

 
612.9

 
82.5

 

 
695.4

Deferred tax asset
16.0

 

 
12.2

 
(16.0
)
 
12.2

Other non-current assets

 
23.3

 
44.4

 

 
67.7

Net investment in subsidiaries
1,960.5

 

 

 
(1,960.5
)
 

Due from affiliates
548.1

 
1,655.3

 
4.8

 
(2,208.2
)
 

Total Assets
$
2,717.7

 
$
3,635.5

 
$
680.1

 
$
(4,377.8
)
 
$
2,655.5

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
212.2

 
$
54.1

 
$

 
$
266.3

Accrued expenses and other current liabilities
1.4

 
183.8

 
68.8

 

 
254.0

Income taxes payable

 
196.0

 
8.3

 
(193.1
)
 
11.2

Current portion of long-term debt

 
168.7

 
12.8

 

 
181.5

Total Current Liabilities
1.4

 
760.7

 
144.0

 
(193.1
)
 
713.0

Long-term debt, net
811.9

 
461.4

 

 

 
1,273.3

Deferred income taxes

 
189.8

 
21.6

 
(16.0
)
 
195.4

Other non-current liabilities

 
166.6

 
4.6

 

 
171.2

Due to affiliates
1,601.8

 
96.5

 
604.9

 
(2,303.2
)
 

Total Liabilities
2,415.1

 
1,675.0

 
775.1

 
(2,512.3
)
 
2,352.9

 
 
 
 
 
 
 
 
 
 
Redeemable non-controlling interest
12.4

 
12.4

 

 
(12.4
)
 
12.4

 
 
 
 
 
 
 
 
 
 
Total Stockholders’ (Deficit) Equity
290.2

 
1,948.1

 
(95.0
)
 
(1,853.1
)
 
290.2

Total Liabilities and Stockholders’ (Deficit) Equity
$
2,717.7

 
$
3,635.5

 
$
680.1

 
$
(4,377.8
)
 
$
2,655.5



TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Statements of Cash Flows
Year Ended December 31, 2016
(in millions)

 
Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net cash (used in) provided by operating activities
$
(63.1
)
 
$
110.7

 
$
117.9

 
$

 
$
165.5

 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Contributions (paid to) received from subsidiaries and affiliates

 
(76.7
)
 
76.7

 

 

Purchases of property, plant and equipment

 
(43.0
)
 
(19.4
)
 
 
 
(62.4
)
Net cash (used in) provided by investing activities

 
(119.7
)
 
57.3

 

 
(62.4
)
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Proceeds from borrowings under long-term debt obligations
600.0

 
1,523.6

 
109.7

 

 
2,233.3

Repayments of borrowings under long-term debt obligations
(375.0
)
 
(1,406.2
)
 
(86.5
)
 

 
(1,867.7
)
Net activity in investment in and advances from (to) subsidiaries and affiliates
383.1

 
(212.5
)
 
(170.6
)
 

 

Proceeds from exercise of stock options
15.7

 

 

 

 
15.7

Excess tax benefit from stock-based compensation
7.0

 

 

 

 
7.0

Treasury stock repurchased
(535.0
)
 

 

 

 
(535.0
)
Payment of deferred financing costs
(3.1
)
 
(3.8
)
 

 

 
(6.9
)
Fees paid to lenders
(6.0
)
 
(1.8
)
 

 

 
(7.8
)
Call premium on 2020 Senior Notes
(23.6
)
 

 

 

 
(23.6
)
Other

 
(2.1
)
 
2.0

 

 
(0.1
)
Net cash provided by (used in) financing activities
63.1

 
(102.8
)
 
(145.4
)
 

 
(185.1
)
 
 
 
 
 
 
 
 
 
 
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 
(6.2
)
 

 
(6.2
)
(Decrease) increase in cash and cash equivalents

 
(111.8
)
 
23.6

 

 
(88.2
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 
119.7

 
34.2

 

 
153.9

CASH AND CASH EQUIVALENTS, END OF PERIOD
$

 
$
7.9

 
$
57.8

 
$

 
$
65.7

 
TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Statements of Cash Flows
Year Ended December 31, 2015
(in millions)

 
Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net cash (used in) provided by operating activities
$
(87.0
)
 
$
274.7

 
$
46.5

 
$

 
$
234.2

 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Proceeds from disposition of business

 
7.2

 

 

 
7.2

Purchases of property, plant and equipment

 
(49.9
)
 
(16.0
)
 

 
(65.9
)
Other

 
(0.7
)
 
(0.3
)
 

 
(1.0
)
Net cash used in investing activities

 
(43.4
)
 
(16.3
)
 

 
(59.7
)
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Proceeds from borrowings under long-term debt obligations
450.0

 
402.9

 
10.6

 

 
863.5

Repayments of borrowings under long-term debt obligations

 
(988.3
)
 

 

 
(988.3
)
Net activity in investment in and advances (to) from subsidiaries and affiliates
(401.3
)
 
453.4

 
(52.1
)
 

 

Proceeds from exercise of stock options
20.4

 

 

 

 
20.4

Excess tax benefit from stock-based compensation
21.8

 

 

 

 
21.8

Proceeds from purchase of treasury shares by CEO
5.0

 

 

 

 
5.0

Treasury stock repurchased
(1.3
)
 

 

 

 
(1.3
)
Payment of deferred financing costs
(8.0
)
 

 

 

 
(8.0
)
Other

 
(3.0
)
 
(0.8
)
 

 
(3.8
)
Net cash provided by (used in) financing activities
86.6

 
(135.0
)
 
(42.3
)
 

 
(90.7
)
 
 
 
 
 
 
 
 
 
 
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 
7.6

 

 
7.6

(Decrease) increase in cash and cash equivalents
(0.4
)
 
96.3

 
(4.5
)
 

 
91.4

CASH AND CASH EQUIVALENTS, BEGININNG OF PERIOD
0.4

 
23.4

 
38.7

 

 
62.5

CASH AND CASH EQUIVALENTS, END OF PERIOD
$

 
$
119.7

 
$
34.2

 
$

 
$
153.9

TEMPUR SEALY INTERNATIONAL, INC.
Supplemental Consolidated Statements of Cash Flows
Year Ended December 31, 2014
(in millions)
 
Tempur Sealy International, Inc. (Ultimate Parent)
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net cash (used in) provided by operating activities
$
(62.7
)
 
$
191.5

 
$
96.4

 
$

 
$
225.2

 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Acquisition of business, net of cash acquired

 

 
(8.5
)
 

 
(8.5
)
Proceeds from disposition of business

 
43.5

 

 

 
43.5

Purchases of property, plant and equipment

 
(31.3
)
 
(16.2
)
 

 
(47.5
)
Other

 
3.0

 
(0.9
)
 

 
2.1

Net cash provided by (used in) investing activities

 
15.2

 
(25.6
)
 

 
(10.4
)
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Proceeds from borrowings under long-term debt obligations

 
271.5

 

 

 
271.5

Repayments of borrowings under long-term debt obligations

 
(510.9
)
 

 

 
(510.9
)
Net activity in investment in and advances from (to) subsidiaries and affiliates
59.3

 
32.1

 
(91.4
)
 

 

Proceeds from exercise of stock options
4.3

 

 

 

 
4.3

Excess tax benefit from stock-based compensation
1.7

 

 

 

 
1.7

Treasury stock repurchased
(2.2
)
 

 

 

 
(2.2
)
Payment of deferred financing costs

 
(3.1
)
 

 

 
(3.1
)
Other

 
(1.7
)
 
2.3

 

 
0.6

Net cash provided by (used in) financing activities
63.1

 
(212.1
)
 
(89.1
)
 

 
(238.1
)
 
 
 
 
 
 
 
 
 
 
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

 
4.8

 

 
4.8

Increase (decrease) in cash and cash equivalents
0.4

 
(5.4
)
 
(13.5
)
 

 
(18.5
)
CASH AND CASH EQUIVALENTS, BEGININNG OF PERIOD

 
28.8

 
52.2

 

 
81.0

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
0.4

 
$
23.4

 
$
38.7

 
$

 
$
62.5