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What changed in SOMNIGROUP INTERNATIONAL INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SOMNIGROUP INTERNATIONAL INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+305 added−297 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-28)

Top changes in SOMNIGROUP INTERNATIONAL INC.'s 2025 10-K

305 paragraphs added · 297 removed · 224 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+22 added−25 removed32 unchanged
Biggest changeThe following are some of the actions that we take to realize our commitment to equal opportunity employment: • Promote the consideration of a diverse slate of qualified candidates during the hiring process • Employ a uniform, global process for determining compensation based on experience and skill sets to remove potential biases • Conduct outreach with organizations in each of our local communities to increase the flow of minority, female, veteran and disabled applicants for employment • Analyze gender and minority pay equity regularly and adjust as warranted • Participate in external, community-based activities sponsored by local organizations, including those that assist women, minorities and veterans People Development and Training Our goal is to design and offer development opportunities that improve Company performance and meet employees' individual learning and development needs and strengthen our culture by reinforcing Company values.
Biggest changeThe following are some of the actions that we take to realize our commitment to equal opportunity employment: • Promotion of a qualified slate of candidates during the hiring process based on merit and regardless of background, with the goal of having a workforce that brings broad experiences and ideas to strengthen our Company • Employ a uniform, global process for determining compensation based on experience and skillsets to remove potential biases • Conduct a review of compensation practice periodically • Participate in external, community-based activities sponsored by local organizations to support the resilience of the communities where we operate and where our employees live 11 Table of Contents People Development and Training Our goal is to design and offer development opportunities that improve Company performance and meet employees' individual learning and development needs and strengthen our culture by reinforcing Company values.
Additional details on our approach to sustainability can be found in our Corporate Social Values located on the Somnigroup Investor website at http://investor.somnigroup.com under the "Sustainability" tab. Our website and its contents are not incorporated by reference into this Report. In 2024, we shifted our annual sustainability reporting period to be aligned with our fiscal year.
Additional details on our approach to sustainability can be found in our annual Corporate Social Values reports located on the Somnigroup website at http://somnigroup.com under the "Sustainability" tab. Our website and its contents are not incorporated by reference into this Report. In 2024, we shifted our annual sustainability reporting period to be aligned with our fiscal year.
Eighteen other states have introduced similar privacy laws. These U.S. state privacy laws grant consumers new rights over their personal information, such as access to and deletion of their personal information, placing strict data collection requirements on businesses, including ours.
Numerous other states have introduced similar privacy laws. These U.S. state privacy laws grant consumers new rights over their personal information, such as access to and deletion of their personal information, placing strict data collection requirements on businesses, including ours.
In addition, there are country-specific data privacy laws in Europe that impose additional requirements on data controllers and several of these laws are more stringent than the GDPR. 9 Table of Contents In recent years, U.S. states have adopted legislation offering similar protections for resident citizens, such as the California Privacy Rights Act (which amends the California Consumer Privacy Act ("CCPA")).
In addition, there are country-specific data privacy laws in Europe that impose additional requirements on data controllers and several of these laws are more stringent than the GDPR. In recent years, U.S. states have adopted legislation offering similar protections for resident citizens, such as the California Privacy Rights Act (which amends the California Consumer Privacy Act ("CCPA")).
The PIPL is widely considered one of the strictest personal data protection laws in the world, with significant restrictions placed on the transfer of personal information outside of China or use without separate citizen consent. Recently the EU harmonized its existing laws governing AI with the introduction of the consolidated EU AI Act ("AI Act").
The PIPL is widely considered one of the strictest personal data protection laws in the world, with significant restrictions placed on the transfer of personal information outside of China or use without separate citizen consent. 9 Table of Contents Recently the EU harmonized its existing laws governing AI with the introduction of the consolidated EU AI Act ("AI Act").
For example, the European Union's new General Product Safety Regulation, which came into force on December 13, 2024, required us to make changes to the way in which our products are labelled and to add product safety and manufacturer information to all of our online product listings.
For example, the European Union's General Product Safety Regulation, which came into force on December 13, 2024, required us to make changes to the way in which our products are labeled and to add product safety and manufacturer information to all of our online product listings.
Additionally, we have a product testing facility that conducts hundreds of consumer tests annually. We believe our consumer-research driven approach to innovation results in best-in-class products that benefit the consumer. Industry and Competition We compete in the global bedding industry. The bedding industry is comprised of mattresses and foundations, pillows and accessories.
Additionally, we have a product testing facility that conducts hundreds of consumer tests annually. We believe our consumer-research driven approach to innovation results in best-in-class products that benefit the consumer. 7 Table of Contents Industry and Competition We compete in the global bedding industry, comprised of mattresses and foundations, pillows and accessories.
Our Products and Brands We have a comprehensive offering of products that appeal to a broad range of consumers, some of which are covered by one or more patents and/or patent applications. We also routinely introduce new mattress models, launch new products and update our existing mattress products in each of our segments.
Our Products and Brands We have a comprehensive offering of products that appeal to a broad range of consumers, some of which are covered by one or more patents and/or patent applications. We also routinely introduce new bedding products and update our existing bedding products in each of our segments.
Manufacturers and retailers in the global bedding industry are seeking to increase their channels of distribution and are looking for new ways to reach the consumer, including the expansion in the number of U.S. and international companies pursuing online direct-to-consumer models for mattresses.
Manufacturers and retailers in the global bedding industry are seeking to increase their channels of distribution and are looking for new ways to reach the consumer, resulting in an increase in the number of U.S. and international companies pursuing online direct-to-consumer models for mattresses.
New regulations can require us to change the way in which our products are labelled and marketed.
New regulations can require us to change the way in which our products are labeled and marketed.
Additionally, the pillow market is comprised of traditional foam and feather pillows, as well as pillows made of visco-elastic, latex, foam, gel, rubber and down. The primary distribution channels for bedding products are retail furniture and bedding stores, big-box retailers and online. We encounter competition from a number of bedding manufacturers.
Additionally, the pillow market is comprised of traditional foam and feather pillows, as well as pillows made of visco-elastic, latex, foam, gel, rubber and down. The primary distribution channels for bedding products are retail furniture and bedding stores, big-box retailers and e-commerce channels. We encounter competition from other bedding manufacturers and retailers.
The retail brands named above are described below: • Mattress Firm ® - Mattress Firm is the leading multi-branded mattress specialty retailer in the U.S., helping to make better sleep a reality by matching consumers to their perfect mattress through its highly trained team of Sleep Experts® across its 2,200 stores and robust online operations.
The retail brands named above are described below: 5 Table of Contents • Mattress Firm ® - Mattress Firm is the largest multi-branded mattress specialty retailer in the U.S., helping to make better sleep a reality by matching consumers to their perfect mattress through its highly trained team of Sleep Experts® across its over 2,100 stores and robust online operations.
Mattress Firm is a leading retailer of brands including Tempur-Pedic®, Sealy®, Stearns & Foster®, Sleepy's®, Beautyrest®, Serta®, Simmons®, Purple® and other leading mattress brands. • Dreams ® - Dreams is the leading specialty bedding retailer in the United Kingdom ("U.K."). As a multi-branded retailer, Dreams sells a variety of products across a range of price points.
Mattress Firm is a leading retailer of brands such as Tempur-Pedic®, Sealy®, Stearns & Foster®, Purple®, Sleepy's®, Beautyrest®, Nectar®, Serta®, Simmons®, Tuft & Needle® and tulo®. • Dreams ® - Dreams is the leading specialty bedding retailer in the United Kingdom ("U.K."). As a multi-branded retailer, Dreams sells a variety of products across a range of price points.
Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturpedic® and Stearns & Foster® are our primary trademarks registered with the U.S. Patent and Trademark Office and various foreign trademark offices, as are many other of our registered trademarks and pending applications. Each U.S. trademark registration is renewable indefinitely as long as the trademark remains in use.
Patent and Trademark Office and various foreign trademark offices, as are many other of our registered trademarks and pending applications. Each U.S. trademark registration is renewable indefinitely as long as the trademark remains in use.
We offer employees access to a learning management system where they can take courses on a variety of individual and leadership development topics. All our professional employees have access to this system, and there are thousands of individual modules offered through our partnership with Skillsoft.
We offer employees access to a learning management system where they can take courses on a variety of individual and leadership development topics. All our professional employees have access to this system which offers thousands of individual learning modules.
We believe over time that sufficient alternate sources of supply for the same or similar components will be available outside of China from our current or alternate suppliers.
These products are dependent on components supply chains originating in China. We believe over time that sufficient alternate sources of supply for the same or similar components will be available outside of China from our current or alternate suppliers.
We are subject to similar requirements in Canada, the EU and other jurisdictions, with further waste management and prevention, and other environmental protection regulations coming into effect both this year and over the next few years. We believe that we are in compliance with all applicable international, federal, state and local environmental statutes and regulations.
We are subject to similar requirements in Canada, the EU and other jurisdictions, with further waste management and prevention, and other environmental protection regulations coming into effect both this year and over the next few years.
The regulations generally impose requirements as to the proper labeling of bedding merchandise, restrictions regarding the identification of merchandise as "new" or otherwise, controls as to chemical and other substances, hygiene and other aspects of product safety, handling, marketing and sale and penalties for violations.
These regulations vary among the states, countries and localities in which we do business. The regulations generally impose requirements as to the proper labeling of bedding merchandise, restrictions regarding the identification of merchandise as "new" or otherwise, controls as to chemical and other substances, hygiene and other aspects of product safety, handling, marketing and sale and penalties for violations.
We seek to achieve zero waste-to-landfill status across our global operations which not only can help reduce costs related to waste management but also reinforces our efforts to improve resource efficiency throughout our production and distribution processes. Human Capital Management As a global organization, our workforce is important to us.
We seek to achieve zero waste-to-landfill status across our global operations which not only helps reduce costs related to waste management but also reinforces our efforts to improve resource efficiency throughout our production and distribution processes. Human Capital Management As a global organization, our workforce is important to us. As of December 31, 2025, we had over 19,000 full-time employees.
These retail boutiques are strategically located in high traffic, premium retail centers with customer demographics that closely align to the Tempur-Pedic® customer profile. • SOVA - SOVA is a highly respected and well-established premium bedding chain in Sweden. Our stores are connected to the urban areas of Stockholm, Gothenburg and Malmö.
These retail boutiques are strategically located in high traffic, premium retail centers that attract customers whose interests and purchasing behaviors align with our brand. • SOVA - SOVA is a highly respected and well-established premium bedding chain in Sweden. Our stores are connected to the urban areas of Stockholm, Gothenburg and Malmö.
Our powerful distribution and retail model operates through an omni-channel strategy. Somnigroup's combined global footprint includes approximately 2,800 retail stores, 30 e-commerce platforms, 71 manufacturing facilities and four state-of-the-art research and development facilities worldwide. Our combined operations are supported by more than 20,000 employees with a collective focus on providing breakthrough sleep solutions to consumers.
As of December 31, 2025, Somnigroup's combined global footprint included over 2,800 retail stores, approximately 30 e-commerce platforms, over 70 manufacturing facilities and four state-of-the-art research and development facilities worldwide. Our combined operations are supported by more than 20,000 employees with a collective focus on providing breakthrough sleep solutions to consumers.
In response to the changing regulatory global landscape, we have implemented a global compliance system, appointed dedicated resources and have put measures in place to facilitate adherence to the continuing compliance requirements of applicable worldwide data privacy laws. Sustainability and Corporate Social Values We recognize that as a corporate citizen we have a responsibility to protect our communities and environment.
In response to the changing regulatory global landscape, we have implemented a global compliance system, appointed dedicated resources and have put measures in place to facilitate adherence to the continuing compliance requirements of applicable worldwide data privacy laws.
The name Somnigroup reflects our position as a global holding company and provider of sleep solutions with a portfolio of bedding businesses. Somnigroup's purpose is to drive long-term shareholder returns through sustainable competitive advantages and disciplined capital allocation as we oversee our investments in the $120 billion global sleep industry.
Somnigroup's purpose is to drive long-term shareholder returns through sustainable competitive advantages and disciplined capital allocation as we oversee our investments in the $120 billion global sleep industry.
Future changes to these regulations and standards may require modifications to our products to comply with such changes. For example, the U.K. is considering new regulations which would include measures to reduce the use of chemical fire retardants.
Many foreign jurisdictions also regulate fire retardancy standards. Future changes to these regulations and standards may require modifications to our products to comply with such changes. For example, the U.K. is in the process of a major reform of furniture fire safety regulations which would include measures to reduce the use of chemical fire retardants.
Somnigroup has a strong competitive presence in the bedding marketplace with a leadership position that comes from product and service quality, culture, strategy and people, backed with financial strength and a disciplined approach to returning value to shareholders.
Somnigroup has a strong competitive presence in the bedding marketplace with a leadership position that comes from product and service quality, culture, strategy and people, backed with financial strength and a disciplined approach to returning value to shareholders. On February 5, 2025, we completed the previously announced acquisition of Mattress Firm, the nation's largest mattress specialty retailer.
We believe a key driver of long-term success is the strength of our workforce and we are committed to investing in our workforce.
Our joint ventures also employ over 1,500 full-time employees. We believe a key driver of long-term success is the strength of our workforce and we are committed to investing in our workforce.
Under the license arrangements, licensees have the right to use certain trademarks and current proprietary and/or patented technology in designated jurisdictions. We also provide our licensees with product specifications, research and development, statistical services and marketing programs. For the year ended December 31, 2024, our licensing activities as a whole generated royalties of approximately $31.5 million.
Under the license arrangements, licensees have the right to use certain trademarks and current proprietary and/or patented technology in designated jurisdictions. We also provide our licensees with product specifications, research and development, statistical services and marketing programs.
Our International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). Following the acquisition of Mattress Firm and beginning in the first quarter of 2025, we will operate in three segments: Tempur Sealy North America, Tempur Sealy International and Mattress Firm.
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).
ITEM 1. BUSINESS General Somnigroup is the world's largest bedding company, dedicated to enriching people's lives through the power of a good night's sleep. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in over 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.
With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in over 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.
We also purchase a significant portion of our Sealy foundation parts from third-party sources. Additionally, we source our adjustable bed bases and foundations from third-party manufacturers. These are purchased under supply agreements from a limited number of key suppliers. These products are dependent on components supply chains originating in China.
We also purchase a significant portion of our Sealy foundation parts from third-party sources. Our Mattress Firm segment sources finished goods from various bedding manufacturers, including our Tempur Sealy North America segment. Additionally, we source our adjustable bed bases and foundations from third-party manufacturers. These are purchased under supply agreements from a limited number of key suppliers.
The domestic market is highly concentrated, while the international market is highly fragmented and served by a large number of manufacturers, primarily operating on a regional and local basis. Participants in the global bedding industry offer a broad range of mattress, bed base and pillow products and compete primarily on price, quality, brand name recognition, product availability and product performance.
Participants in the global bedding industry offer a broad range of mattress, bed base and pillow products and compete primarily on price, quality, brand name recognition, product availability and product performance.
We anticipate publishing the report covering the 2024 fiscal year period in late 2025. The impact of any acquisitions will generally be integrated into our Sustainability and Corporate Responsibility disclosures and initiatives approximately 24 months after closing.
Note on Sustainability Discussion and Mattress Firm The impact of any acquisitions will generally be integrated into our Sustainability and Corporate Responsibility disclosures and initiatives approximately 24 months after closing. We plan to formally incorporate Mattress Firm into our next sustainability report to be published in 2026 covering our activities in fiscal year 2025.
The U.K. government has recently introduced a new draft framework law on product regulation which may have a similar impact. The U.S. Consumer Product Safety Commission ("CPSC") has adopted rules relating to fire retardancy standards for the mattress industry. Many foreign jurisdictions also regulate fire retardancy standards.
In July 2025, the U.K. government published a new framework law on product regulation, the Product Regulation and Metrology Act 2025, which provides for further detailed regulations to be enacted which may have a similar impact. The U.S. Consumer Product Safety Commission ("CPSC") has adopted rules relating to fire retardancy standards for the mattress industry.
This approach helps to ensure compliance with relevant regulation, better position our products to meet evolving consumer expectations and drive cost savings through efficiency gains.
This approach helps to ensure compliance with relevant regulations, better positions our products to meet evolving consumer expectations and drives cost savings through efficiency gains. Resource Conservation. We are investing in resource efficiency throughout our production and distribution processes.
Intellectual Property Patents, Trademarks and Licensing We hold over one thousand U.S. and foreign patents and patent applications regarding certain elements of the design and function of many of our mattress and pillow products. 8 Table of Contents As of December 31, 2024, we held thousands of trademark registrations worldwide, which we believe have significant value and are important to the marketing of our products to retailers and consumers.
In addition, retailers both in the U.S. and internationally are increasingly seeking to offer their own private label products. Intellectual Property Patents, Trademarks and Licensing As of December 31, 2025, we hold over one thousand U.S. and foreign patents and patent applications regarding certain elements of the design and function of many of our mattress and pillow products.
Sleepy's competes in a space where customers look for quality and value and is positioned to provide high-quality mattresses, made from a wide range of materials, for the right price. • Non-Branded - Our non-branded product offerings include private label and OEM products, including mattresses, pillows and other bedding products and components at a wide range of price points.
Sleepy's is well-positioned to compete in a space where consumers prioritize quality and value. • Non-Branded - We offer non-branded products through our OEM business, including mattresses, pillows and other bedding products and components at a wide range of price points.
We will incorporate information on the Mattress Firm business as required beginning in the first quarter of 2025. In connection with the closing of the Mattress Firm acquisition, we amended our Certificate of Incorporation to change our name to "Somnigroup International Inc." effective February 18, 2025.
In connection with the closing of the Mattress Firm Acquisition, we amended our Certificate of Incorporation to change our name to "Somnigroup International Inc." effective February 18, 2025. The name Somnigroup reflects our position as a global holding company and provider of sleep solutions with a portfolio of bedding businesses.
When doing so, we seek to balance our assessment of the industry environment, our business outlook and the potential for further strategic expansion, while also prudently managing our business. 4 Table of Contents In 2024, we operated in two segments: North America and International.
From time to time, we also look at acquisition opportunities that could complement and strengthen our core business. When doing so, we seek to balance our assessment of the industry environment, our business outlook and the potential for further strategic expansion, while also prudently managing our business.
We are committed to fostering a culture that is inclusive and representative of the communities where we operate. As an Equal Employment Opportunity Employer, we are committed to providing opportunities to all employees and applicants and prohibiting discrimination and harassment.
Equal Opportunity Employment We have a diverse global workforce that includes a range of skill sets, perspectives, backgrounds and qualifications. As an Equal Employment Opportunity Employer, we are committed to providing opportunities to all employees and applicants and prohibiting discrimination and harassment.
Sales in a particular quarter can also be impacted by competitive industry dynamics and global macroeconomic conditions. Additionally, the U.S. bedding industry generally experiences increases in sales around holidays and promotional periods. Operations Manufacturing and Distribution In 2023, we opened our newest and largest state-of-the-art manufacturing facility in Crawfordsville, Indiana.
Sales in a particular quarter can also be impacted by competitive industry dynamics and global macroeconomic conditions. Additionally, the U.S. bedding industry generally experiences increases in sales around holidays and promotional periods. Operations Mattress Firm Manufacturers ship merchandise directly to our national network of 62 distribution centers that serve our over 2,100 retail stores and e-commerce operations.
Our expanded direct channel distribution complements our wholesale business, and we believe this balanced approach enhances the overall global sales potential and profitability of Somnigroup.
Direct channel sales represented 63.5% of net sales in 2025, compared to 24.9% in 2024, primarily driven by the acquisition of Mattress Firm. Our wholesale distribution complements our broad direct channel distribution, and we believe this balanced approach enhances the overall global sales potential and profitability of Somnigroup.
We are focused on ensuring compliance with health and safety best practices, requiring employee health and safety training for 100% of our applicable employees, raising workplace awareness through safety initiatives and identifying risk elimination opportunities. 11 Table of Contents Equal Opportunity Employment We have a diverse global workforce that includes a range of skill sets, perspectives, backgrounds, ethnicity, genders and qualifications.
We also strive to continue to be proactive in our operational health and safety initiatives. We are focused on ensuring compliance with health and safety best practices, requiring employee health and safety training for 100% of our applicable employees, raising workplace awareness through safety initiatives and identifying risk elimination opportunities.
Throughout the year, we invested in a series of strategic marketing initiatives, which included new product introductions, advertising and in-store marketing investments. Seasonality We believe that sales of products to furniture and bedding stores are typically subject to modest seasonality inherent in the bedding industry, with sales expected to be generally lower in the second and fourth quarters.
This activity includes investments in co-operative advertising, new product launches and the deployment of in-store point-of-sale material and training programs designed to enhance the visibility of, and advocacy, for our brands. 6 Table of Contents Seasonality We believe that sales of products to furniture and bedding stores are typically subject to modest seasonality inherent in the bedding industry, with sales expected to be generally lower in the second and fourth quarters.
We currently acquire chemicals and proprietary additives for Tempur-Pedic® products as well as other components such as textiles from a number of suppliers with manufacturing locations around the world. These supplier relationships may be modified in order to maintain quality, cost and delivery expectations. All critical components are purchased under supply agreements.
Suppliers We obtain the raw materials used to produce our pressure-relieving Tempur® material and components used in the manufacture of Tempur-Pedic® products from third-party sources. We currently acquire chemicals and proprietary additives for Tempur-Pedic® products as well as other components such as textiles from a number of suppliers with manufacturing locations around the world.
Our principal executive office is located at 1000 Tempur Way, Lexington, Kentucky 40511 and our telephone number is (800) 878-8889. Somnigroup International Inc. was incorporated under the laws of the State of Delaware in September 2002.
Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results. Our principal executive office is located at 100 Crescent Ct. Suite 700, Dallas, Texas 75201 and our telephone number is (800) 878-8889. Somnigroup International Inc. was incorporated under the laws of the State of Delaware in September 2002.
Sustainability Governance The Nominating and Corporate Governance ("NCG") Committee, on behalf of the Company's Board of Directors (the "Board"), is responsible for reviewing the Company's practices and positions relating to ESG issues that may affect the Company's business and key stakeholders and for overseeing ESG matters.
The NCG Committee reviews our practices and positions relating to sustainability, technology (including artificial intelligence) and social issues that may affect the Company's business and key stakeholders and exercises oversight on such matters.
The assortment primarily focuses on premium to ultra-premium brands and well trained sales staff targeting to sell quality beds with a very high average selling price. In 2025, we are launching an all-new collection of Sealy Posturepedic® products in North America.
The assortment primarily focuses on premium to ultra-premium brands and well-trained sales staff targeting to sell quality beds with a strong average selling price. Omni-Channel Distribution Our primary selling channels are Direct and Wholesale. These channels align to the operating margin characteristics of our business and our marketplace.
The Sealy Posturepedic® brand, introduced in 1950, was engineered to provide all-over support and body alignment to allow full relaxation and deliver a comfortable night's sleep. Sealy was voted America's most-trusted mattress brand by American shoppers in the 2021 American Brand Trust Study. Sealy was also the #1 best-selling mattress brand according to Furniture Today's 2021 Top 20 U.S.
The Sealy Posturepedic® brand, introduced in 1950, was engineered to provide all-over support and body alignment to allow full relaxation and deliver a comfortable night's sleep. • Sleepy's ® - The Sleepy's brand is our private label brand offering at our Mattress Firm stores and online at www.mattressfirm.com.
Our products are currently manufactured and distributed through our global network of facilities. For a list of our principal manufacturing and distribution facilities, please refer to ITEM 2, "Properties". 7 Table of Contents Suppliers We obtain the raw materials used to produce our pressure-relieving Tempur® material and components used in the manufacture of Tempur-Pedic® products from third-party sources.
Our merchandise is received, inspected and processed at our distribution centers and then delivered to customers’ homes or to stores through third-party delivery services. Tempur Sealy Our products are currently manufactured and distributed through our global network of facilities. For a list of our principal manufacturing and distribution facilities, please refer to ITEM 2, "Properties".
Governmental Regulation Our operations are subject to international, federal, state and local consumer protection and other regulations, primarily relating to the mattress and pillow industry. These regulations vary among the states, countries and localities in which we do business.
For the year ended December 31, 2025, our licensing activities generated royalty and franchise revenue of $39.5 million. 8 Table of Contents Governmental Regulation Our operations are subject to international, federal, state and local consumer protection and other regulations, primarily relating to the mattress and pillow industry.
Our proprietary Tempur material precisely adapts to the shape, weight and temperature of the consumer and creates fewer pressure points, reduces motion transfer and provides personalized comfort and support. Tempur-Pedic was awarded #1 in Customer Satisfaction for both the in-store and online mattress segments in the J.D. Power 2024 Mattress Satisfaction Report.
Our proprietary Tempur material precisely adapts to the shape, weight and temperature of the consumer and creates fewer pressure points, reduces motion transfer and provides personalized comfort and support. • Stearns & Foster ® - The Stearns & Foster brand offers our consumers high quality mattresses built by certified craftsmen who have been specially trained.
This group is advised by a third party that brings external sustainability insights to help inform our strategic objectives and is overseen by the Chief Financial Officer. 10 Table of Contents Environment Somnigroup's approach to managing our environmental impact is focused on three pillars: resource conservation, product and packaging and waste management.
Because of the acquisition, we also plan to revisit, and update if needed, our key sustainability-related targets, including our goal to achieve carbon neutrality by 2040 discussed below. 10 Table of Contents Environment Somnigroup's approach to managing our environmental impact is focused on three pillars: resource conservation, product and packaging and waste management.
In order to achieve our goal of enriching the lives and improving the health of people worldwide through the power of a good night's sleep, one of our strategic initiatives is to leverage and strengthen our comprehensive portfolio of iconic brands and products.
In order to deliver on our mission to be every consumer's choice for better sleep by advancing innovation and expertise in the bedding industry, one of our strategic initiatives is to leverage and strengthen our comprehensive portfolio of iconic brands and products.
The addition of non-branded offerings expands our capabilities to service third-party retailers to capture manufacturing profits from bedding brands outside our own. 5 Table of Contents Our portfolio of retail brands includes Mattress Firm®, Dreams®, Tempur-Pedic® retail stores, SOVA and a variety of other retail brands internationally, which operate in various countries.
The addition of non-branded offerings expands our capabilities to service third-party retailers to capture manufacturing profits from bedding brands outside our own. In 2026, we plan to launch an all-new collection of Stearns & Foster products in North America.
These channels align to the operating margin characteristics of our business and our marketplace. We drive growth in our Wholesale business by growing our share with existing customers, gaining new business, expanding into new channels of distribution and driving slot velocity.
Growth opportunities for our Wholesale business include driving slot velocity, increasing our slot placements with existing customers and expanding distribution through new retail partners and alternative distribution channels.
Corporate operating expenses are not included in either of the segments and are presented separately as a reconciling item to consolidated results. The North America and International segments are strategic business units that are managed separately based on geography. Our North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico.
Following the completion of the Mattress Firm Acquisition in the first quarter of 2025, we have operated 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 4 Table of Contents U.S.
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We seek to deliver long-term value for our shareholders through prudent capital allocation, including managing investments in our businesses. We are guided by our core value of Doing the Right Thing and committed to our global responsibility to protect the environment and the communities in which we operate.
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ITEM 1. BUSINESS General Somnigroup is the world's largest bedding company, dedicated to enriching people's lives through the power of a good night's sleep and transforming how the world sleeps.
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On February 5, 2025, we completed the previously announced acquisition of Mattress Firm, the nation's largest mattress specialty retailer. The total purchase price was approximately $5.1 billion. The transaction was funded by approximately $2.8 billion of cash consideration (subject to adjustments, including the repayment of Mattress Firm's debt and other customary items) and 34.2 million shares of common stock.
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The total purchase price was approximately $5.1 billion, net of cash acquired of $0.3 billion.
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The cash payment was funded using a combination of cash on hand and proceeds from existing borrowings. Mattress Firm was founded in 1986 and operates over 2,200 brick and mortar retail locations and a growing e-commerce platform.
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The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.
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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. Due to the close proximity of the Mattress Firm acquisition to the filing of this Report, our assessment of the newly acquired business remains ongoing as of the date of this Report.
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To comply with commitments made in securing approval for our acquisition of Mattress Firm, we set our merchandising plan to provide 43% of horizontal premium ($1,500+) floor slots, on average across all our open Mattress Firm stores, for the placement of third-party premium mattresses as assessed at calendar year end.
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From time to time, we also look at acquisition opportunities that could complement and strengthen our core business.
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To monitor the Company's fulfillment of the merchandising plan, the Company has designed and instituted certain protocols in conjunction with an independent consulting firm. Based on these protocols, management determined that the Company was in compliance with the floor slot commitment as assessed on December 31, 2025. Our powerful distribution and retail model operates through an omni-channel strategy.
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This is the fourth consecutive year winning the online mattress category and the sixth consecutive year winning at least one J.D. Power award. • Stearns & Foster ® - The Stearns & Foster brand offers our consumers high quality mattresses built by certified craftsmen who have been specially trained.
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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. Our portfolio of retail brands includes Mattress Firm®, Dreams®, Tempur-Pedic® retail stores, SOVA retail stores in Sweden and a variety of other retail brands internationally, which operate in various countries.
Removed
Bedding Producers methodology, which includes Stearns & Foster®. • Sleepy's ™ - The Sleepy's brand is our private label brand offering at our Mattress Firm stores and online at www.mattressfirm.com.
Added
Our Direct channel includes over 2,800 company-owned retail stores and our e-commerce platforms and call centers worldwide. Growth opportunities for our Direct channel include improving conversion, average order value and traffic, and through opening new brick and mortar stores and e-commerce channels. Our Wholesale channel includes sales of product to third-party retailers, hospitality businesses and healthcare customers.
Removed
This reinvention of the Sealy Posturepedic® brand is strategically aimed at reigniting growth in the mid-to-entry level market, which has experienced outsize pressures relative to other price points in recent years. The new collection incorporates innovative technologies, including our proprietary PrecisionFit™ coils that deliver superior support and exceptional comfort. Omni-Channel Distribution Our primary selling channels are Wholesale and Direct.
Added
Marketing Our overall marketing strategy is to drive consumer demand for our brands by distinguishing them in the marketplace. To accomplish this, we target each brand to a particular and complementary audience, and tailor our product design/development, distribution and advertising accordingly.
Removed
In 2024, we continued to drive this initiative, as we expanded with new third-party retail partners and expanded our company-owned store footprint around the world. We are continuing to expand our Direct channel to strengthen our distribution footprint and provide alternatives to allow the customer to shop on their preferred terms — whether online or in-store.
Added
To maximize awareness and purchase intent for our brands, we invest at industry-leading levels in national television, radio, search-engine marketing, social media and other media channels. We also complement our own direct-to-consumer marketing activities and investments with marketing activity conducted in cooperation with our retail partners.
Removed
Our Direct channel includes company-owned stores, online and call centers and represented 24.9% of net sales in 2024. Following the acquisition of Mattress Firm, we expect over 60% of our global sales will be direct-to-consumer and no customer will represent more than 5% of global sales.
Added
These supplier relationships may be modified in order to maintain quality, cost and delivery expectations. All critical components are purchased under supply agreements.
Removed
For consumers that prefer to purchase directly from the manufacturer and are seeking a more personalized and educational sales experience, we have over 2,800 retail stores worldwide, including our retail stores owned through our international joint venture operations, after giving effect to the anticipated divestitures in the second quarter of 2025 described below.
Added
The domestic market for manufacturers is concentrated and the domestic market for retailers is fragmented. The international market for both manufacturers and retailers is highly fragmented, with a large number of competitors primarily operating on a regional and local basis.
Removed
We operate Tempur-Pedic® retail stores worldwide that provide a low-pressure environment to explore the comprehensive line up of our Tempur-Pedic® products. Each showroom features knowledgeable Brand Ambassadors who educate potential customers on Tempur-Pedic® products in a relaxed, comfortable environment.
Added
As of December 31, 2025, we held thousands of trademark registrations worldwide, which we believe have significant value and are important to the marketing of our products to retailers and consumers. Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturpedic®, Stearns & Foster®, Sleepy's® and Mattress Firm® are our primary trademarks registered with the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePotential difficulties that may be encountered in the merger process include, among other factors: • the inability to successfully merge the business of Mattress Firm, operationally and culturally, in a manner that permits us to achieve the financial results anticipated; • the inability to deliver on our strategy as a combined company, including the expansion of consumer touchpoints and acceleration of our U.S. omni-channel strategy; • complexities associated with managing a larger, more complex business, including the potential diversion of management's attention; • not realizing anticipated operating synergies; • the inability to retain key employees and otherwise combine personnel from the two companies; • potential unknown liabilities and unforeseen expenses; • merging relationships with customers, suppliers, distributors and business partners; • performance shortfalls at one or both of the companies as a result of the diversion of management's attention caused by merging Mattress Firm's operations; and • the disruption of, or the loss of momentum in, each company's ongoing business or inconsistencies in standards, controls, procedures and policies.
Biggest changePotential difficulties that may be encountered in the acquisition and merger process include, among other factors: • the inability to obtain financing for potential acquisitions; • delays in closing or the inability to close an acquisition for any reason, including third-party consents or approvals; • the inability to successfully merge the acquired business, operationally and culturally, in a manner that permits us to achieve the financial results anticipated; • the inability to deliver on our strategy as a combined company; • complexities associated with managing a larger, more complex business, including the potential diversion of management's attention; • not realizing anticipated operating synergies; • the inability to retain key employees and otherwise combine personnel from the acquired companies; • potential unknown liabilities and unforeseen expenses; • merging relationships with customers, suppliers, distributors and business partners; • performance shortfalls at one or any of the companies as a result of the diversion of management's attention caused by merging the acquired business' operations; and • the disruption of, or the loss of momentum in, each company's ongoing business or inconsistencies in standards, controls, procedures and policies.
We are subject to laws and regulations both in the U.S. and internationally, relating to pollution, environmental protection and occupational health and safety, such as the Federal Water Pollution Control Act, and Registration, Evaluation, Authorization and Restriction of Chemicals ("REACH"), amongst others. As a manufacturer of bedding and related products, we are subject to regulations governing the environment.
We are subject to laws and regulations both in the U.S. and internationally, relating to pollution, recycling, environmental protection and occupational health and safety, such as the Federal Water Pollution Control Act, and Registration, Evaluation, Authorization and Restriction of Chemicals ("REACH"), amongst others. As a manufacturer of bedding and related products, we are subject to regulations governing the environment.
The performance of our business depends upon a number of factors, including the following: • our ability to continuously improve our products to offer new and enhanced consumer benefits and better quality; • the ability of our current and future product launches to increase net sales; • the effectiveness of our advertising campaigns and other marketing programs to build product and brand awareness, driving traffic to our distribution channels and increasing sales; • our ability to successfully launch new products; • our ability to compete in the mattress and pillow industry; • our ability to continue to expand into new distribution channels and optimize our existing channels; • our ability to continue to successfully execute our strategic initiatives; • our ability to manage growth and limit cannibalization associated with new or expanded supply agreements; • our ability to reduce costs, including the level of consumer acceptance of our products at optimal price points; • our ability to successfully mitigate the impact of headwinds facing our business, including increased commodity prices and the influx of low-end, imported beds that compete with certain of our products; • our ability to pursue, successfully integrate and capture the synergies from potential acquisition opportunities, such as the Mattress Firm acquisition; • general economic factors that impact consumer confidence, disposable income or the availability of consumer financing; and • our ability to successfully open new stores and profitably operate existing stores.
The performance of our business depends upon a number of factors, including the following: • our ability to continuously improve our products to offer new and enhanced consumer benefits and better quality; • the ability of our current and future product launches to increase net sales; • the effectiveness of our advertising campaigns and other marketing programs to build product and brand awareness, driving traffic to our distribution channels and increasing sales; • our ability to successfully launch new products; • our ability to compete in the mattress and pillow industry; • our ability to continue to expand into new distribution channels and optimize our existing channels; • our ability to continue to successfully execute our strategic initiatives; • our ability to manage growth and limit cannibalization associated with new or expanded supply agreements; • our ability to reduce costs, including the level of consumer acceptance of our products at optimal price points; • our ability to successfully mitigate the impact of headwinds facing our business, including increased commodity prices and the influx of low-end, imported beds that compete with certain of our products; • our ability to pursue, successfully integrate and capture the synergies from potential acquisition opportunities; • general economic factors that impact consumer confidence, disposable income or the availability of consumer financing; and • our ability to successfully open new stores and profitably operate existing stores.
Our degree of leverage could have important consequences, such as: • increasing our vulnerability to adverse economic, industry or competitive developments; • requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and other business opportunities; • making it more difficult for us to satisfy the obligations related to our indebtedness; • restricting us from making strategic acquisitions or investments or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, such as the Mattress Firm acquisition, and general corporate or other purposes; • limiting our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; • exposing us to variability in interest rates, as a substantial portion of our indebtedness is and will be at variable rates; and • limiting our ability to return capital to our stockholders, including through share repurchases and dividends.
Our degree of leverage could have important consequences, such as: • increasing our vulnerability to adverse economic, industry or competitive developments; • requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and other business opportunities; • making it more difficult for us to satisfy the obligations related to our indebtedness; • restricting us from making strategic acquisitions or investments or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; • limiting our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; • exposing us to variability in interest rates, as a substantial portion of our indebtedness is and will be at variable rates; and • limiting our ability to return capital to our stockholders, including through share repurchases and dividends.
Our Board of Directors authorized a share repurchase program in 2016 pursuant to which we are authorized to repurchase shares of our common stock. The share repurchase program may be suspended or terminated at any time. From 2016 through December 31, 2024, we had repurchased an aggregate of 55.3 million shares for approximately $2,388.9 million under our share repurchase program.
Our Board of Directors authorized a share repurchase program in 2016 pursuant to which we are authorized to repurchase shares of our common stock. The share repurchase program may be suspended or terminated at any time. From 2016 through December 31, 2025, we had repurchased an aggregate of 55.3 million shares for approximately $2,388.9 million under our share repurchase program.
Given the significance of the cost of these materials to our products, volatility in the prices of the underlying commodities has and will significantly affect profitability. The global economy continues to experience high rates of inflation, and inflationary pressure and price uncertainty may continue in 2025.
Given the significance of the cost of these materials to our products, volatility in the prices of the underlying commodities has and will significantly affect profitability. The global economy continues to experience high rates of inflation, and inflationary pressure and price uncertainty may continue in 2026.
We, and our products, are subject to extensive regulation in the U.S. by various federal, state and local regulatory authorities, including the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission ("CPSC") and the U.S. Food and Drug Administration, and by similar international regulatory regimes.
We, and our products, are subject to extensive regulation in the U.S. by various federal, state and local regulatory authorities, including the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission ("CPSC") and the U.S. Food and Drug Administration, and by similar international regulatory regimes, including the EU's General Product Safety Regulation.
Approximately 16% of our employees are represented by various labor unions with separate collective bargaining agreements or government labor union contracts for certain international locations. Our North American collective bargaining agreements, which are typically three years in length, expire at various times during any given three-year period.
Approximately 14.7% of our employees are represented by various labor unions with separate collective bargaining agreements or government labor union contracts for certain international locations. Our North American collective bargaining agreements, which are typically three years in length, expire at various times during any given three-year period.
We participate in several plans which are in the Red Zone for 2024. A plan is in the Red Zone (Critical) if it has a current funded percentage of less than 65.0%.
We participate in several plans which are in the Red Zone for 2025. A plan is in the Red Zone (Critical) if it has a current funded percentage of less than 65.0%.
Our international operations are subject to the customary risks of operating in an international environment, including complying with U.S. laws affecting operations outside of the U.S., such as the Foreign Corrupt Practices Act; complying with foreign laws and regulations, including disparate anti-corruption laws and regulations; and the potential imposition of trade or foreign exchange restrictions, tariffs and other tax increases, inflation, unstable political situations, labor issues and geopolitical conflicts (including the Russia-Ukraine conflict, the Israel-Hamas conflict and wider Middle East developments).
Our international operations are subject to the customary risks of operating in an international environment, including complying with U.S. laws affecting operations outside of the U.S., such as the Foreign Corrupt Practices Act; complying with foreign laws and regulations, including disparate anti-corruption laws and regulations; and the potential imposition of trade or foreign exchange restrictions, tariffs and other tax increases, inflation, unstable political situations, labor issues and geopolitical conflicts (including the war in Ukraine and conflicts in the Middle East).
In 2024, foreign currency exchange rate changes positively impacted our net income by approximately 0.1% and positively impacted adjusted EBITDA, which is a non-GAAP financial measure, by approximately 0.1%. Changes in foreign currency exchange rates could have an adverse impact on our financial condition, results of operations and cash flows.
In 2025, foreign currency exchange rate changes negatively impacted our net income by approximately 1.1% and negatively impacted adjusted EBITDA, which is a non-GAAP financial measure, by approximately 0.4%. Changes in foreign currency exchange rates could have an adverse impact on our financial condition, results of operations and cash flows.
Geopolitical developments, such as trade wars, the Russia-Ukraine conflict, the Israel-Hamas conflict and wider Middle East developments (including disruptions to the Red Sea passage or such conflicts spreading further in the relevant regions), have adversely impacted and could continue to adversely impact, among other things, our raw material, energy and transportation costs, certain of our suppliers, distributors, customers and local markets, global and local macroeconomic conditions, and cause further supply chain disruptions (including by delaying the delivery times of raw materials needed for our business or our products to customers).
Geopolitical developments, such as trade wars, the war in Ukraine conflicts in the Middle East (including disruptions to the Red Sea passage), have adversely impacted and could continue to adversely impact, among other things, our raw material, energy and transportation costs, certain of our suppliers, distributors, customers and local markets, global and local macroeconomic conditions and cause further supply chain disruptions (including by delaying the delivery times of raw materials needed for our business or our products to customers).
Regulatory, Legal and Financial Risks We may be adversely affected by fluctuations in exchange rates, which could affect our results of operations, the costs of our products and our ability to sell our products in foreign markets. Approximately 29.2% of our net sales were generated outside of the U.S. in 2024.
Regulatory, Legal and Financial Risks We may be adversely affected by fluctuations in exchange rates, which could affect our results of operations, the costs of our products and our ability to sell our products in foreign markets. Approximately 20.6% of our net sales were generated outside of the U.S. in 2025.
We depend on the continued services of our executive management team, whose average tenure with the Company is 17 years. Our executive team's leadership experience provides us with a competitive advantage, as the team sets clear initiatives for the organization and enhances high-performing teams by empowering them to act quickly, especially during challenging periods.
We depend on the continued services of our executive management team. Our executive team's leadership experience provides us with a competitive advantage, as the team sets clear initiatives for the organization and enhances high-performing teams by empowering them to act quickly, especially during challenging periods.
We generated approximately 29.2% of our net sales outside of the U.S. in the year ended December 31, 2024. We operate through multiple wholly owned subsidiaries and we also participate in international license and joint venture arrangements with independent third parties.
We generated approximately 20.6% of our net sales outside of the U.S. in the year ended December 31, 2025. We operate through multiple wholly owned subsidiaries and we also participate in international license and joint venture arrangements with independent third parties.
We recently announced an increase in our quarterly dividend to $0.15 per share, effective for the first quarter of 2025.
We recently announced an increase in our quarterly dividend to $0.17 per share, effective for the first quarter of 2026.
Deterioration in labor relations could disrupt our business operations and increase our costs, which could decrease our liquidity and profitability. As of December 31, 2024, we had approximately 12,000 full-time employees. Our joint ventures also employ approximately 1,550 full-time employees.
Deterioration in labor relations could disrupt our business operations and increase our costs, which could decrease our liquidity and profitability. As of December 31, 2025, we had over 19,000 full-time employees. Our joint ventures also employ over 1,500 full-time employees.
This cybersecurity event, as well as any other breach of our network or databases, or those of our third-party providers, have resulted and may in the future result in the risks discussed herein.
Cybersecurity events and breaches of our network or databases, or those of our third-party providers, have resulted and may in the future result in the risks discussed herein.
Our ability to realize these anticipated benefits depends on the successful merger of our business with Mattress Firm, which will be complex and time-consuming. This merger will involve numerous operational, strategic, financial, accounting, legal, tax and other risks, including potential liabilities associated with Mattress Firm's business.
Our ability to realize these anticipated benefits depends on the successful integration of Mattress Firm with our businesses, which has been complex and time-consuming. This integration has involved numerous operational, strategic, financial, accounting, legal, tax and other risks, including liabilities assumed with the Mattress Firm Acquisition.
In addition, we may not have the financial resources necessary to enforce or defend our trademarks. Furthermore, our patents may not provide meaningful protection and patents may never issue from pending applications.
In addition, if we incur significant costs defending our brands and other trademarks, our liquidity and profitability could be adversely affected, and we may not have the financial resources necessary to enforce or defend our brands and other trademarks. Furthermore, our patents may not provide meaningful protection and patents may never issue from pending applications.
Any loss of trademark protection could result in a decrease in sales or cause us to spend additional amounts on marketing, either of which could decrease our liquidity and profitability. In addition, if we incur significant costs defending our trademarks, that could also decrease our liquidity and profitability.
Any loss of trademark protection could result in a decrease in sales or cause us to spend additional amounts on marketing, either of which could decrease our liquidity and profitability. We have made and continue to make significant investments to promote our retail and product brands.
Certain other trademarks are the subject of protection under common law. However, those rights could be circumvented, or violate the proprietary rights of others, or we could be prevented from using them if challenged.
Our rights to our trademarks could be circumvented, or violate the proprietary rights of others, or we could be prevented from using them if challenged.
In 2025, we are launching 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.
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 that deliver superior support and exceptional comfort.
Further, introduction costs and manufacturing inefficiencies may be greater than anticipated, while the rollout of the product could be delayed, each of which could impact profitability. We rely significantly on IT and we have experienced, and in the future could experience, cyber-based attacks which have and in the future could harm our ability to effectively operate our business.
We rely significantly on IT and we have experienced, and in the future could experience, cyber-based attacks which have and in the future could harm our ability to effectively operate our business.
The new collection incorporates innovative technologies, including our proprietary PrecisionFit™ coils that deliver superior support and exceptional comfort. There are a number of risks that are inherent in our new product line introductions, including that the anticipated level of market acceptance may not be realized, which could negatively impact our sales.
There are a number of risks that are inherent in our new product line introductions, including that the anticipated level of market acceptance may not be realized, which could negatively impact our sales. Further, introduction costs and manufacturing inefficiencies may be greater than anticipated, while the rollout of the product could be delayed, each of which could impact profitability.
Risks related to operating our business The performance of our business depends on our ability to implement strategic initiatives and actions taken to increase sales growth may not be effective.
Failure to comply with this commitment could result in legal or administrative proceedings, such as regulatory action or private litigation, and could harm our business, reputation and financial condition. Risks related to operating our business The performance of our business depends on our ability to implement strategic initiatives and actions taken to increase sales growth may not be effective.
Shares may be repurchased from time to time, in the open market or through private transactions, subject to market conditions, in compliance with applicable state and federal securities laws.
For the year ended and as of December 31, 2025, we did not repurchase shares under our share repurchase program and had approximately $774.5 million remaining under the share repurchase authorization. Shares may be repurchased from time to time, in the open market or through private transactions, subject to market conditions, in compliance with applicable state and federal securities laws.
The acquisition of Mattress Firm may not be as successful as anticipated, and we may not achieve the intended benefits or do so within the intended timeframe. The success of our acquisition of Mattress Firm will depend, in large part, on our ability to realize the anticipated benefits from combining our business with Mattress Firm.
The success of such acquisitions will depend upon a number of factors, some of which may not be within our control. For example, the success of our acquisition of Mattress Firm depends, in large part, on our ability to realize the anticipated benefits from combining our businesses.
Removed
In 2024, we completed the launch of a new portfolio of Tempur-Pedic® Adapt mattresses in our North America segment. This collection was designed to complement the Tempur-Pedic® Breeze collection and Tempur-Ergo® Smart Bases launched in 2023 and finishes the complete reset of our core Tempur® lineup.
Added
The Company may not realize the benefits it expects from the Mattress Firm Acquisition or acquisitions or other strategic transactions it may pursue in the future. From time to time, the Company considers and may make acquisitions, such as our acquisition of Mattress Firm.
Removed
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.
Added
We could also issue a significant number of shares of our common stock in the future in connection with acquisitions. Any of these issuances could dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect on the market price for the shares of our common stock.
Removed
As previously disclosed, we identified a cybersecurity event on July 23, 2023 affecting certain of our data and IT systems, which resulted in the temporary interruption of our operations when we proactively shut down certain of our systems.
Added
In addition, in connection with the acquisition of Mattress Firm, we have committed to maintain a merchandising plan that provides 43% of horizontal premium ($1,500+) floor slots for the placement of third-party premium mattresses.
Removed
A successful claim brought against us in excess of available insurance coverage could impair our liquidity and profitability, and any claim or product recall that results in significant adverse publicity against us could adversely affect our reputation or result in consumers purchasing fewer of our products, which would also impair our liquidity and profitability.
Added
For example, in 2026, we plan to launch an all-new collection of Stearns & Foster products in North America, and in 2025, we launched an all-new collection of Sealy Posturepedic® products in North America.
Removed
For the year ended and as of December 31, 2024, we did not repurchase shares under our share repurchase program and had approximately $774.5 million remaining under the share repurchase authorization. While the Mattress Firm acquisition was pending, we temporarily suspended our share repurchase program, and currently expect to allocate unused cash flows toward repayment of debt.
Added
This all-new collection of Stearns & Foster products 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.
Added
Certain other trademarks are the subject of protection under common law. However, there can be no assurance that the steps we take to protect our trademarks in the U.S. and foreign jurisdictions will be adequate to prevent third parties from copying or using our trademarks, including our retail and product brands, without authorization.
Added
For example, in 2025, we launched a new "Sleep Easy" advertising campaign to promote our Mattress Firm retail brand. If our brands are copied or used without authorization, we may be unable to realize the benefits of such investments, and the value of our brands, their reputation, our competitive advantages and our goodwill could be harmed.
Added
UNRESOLVED STAFF COMMENTS None. 12 Table of Contents

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe address cybersecurity risks and threats through a strategic program based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework. Our dedicated cybersecurity team oversees and implements our cybersecurity 12 Table of Contents management program, compliance with applicable legal and third-party data privacy requirements and our incident response and crisis management plans.
Biggest changeWe address cybersecurity risks and threats through a strategic program based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework. Our dedicated cybersecurity team oversees and implements our cybersecurity management program, compliance with applicable legal and third-party data privacy requirements and our incident responses. Our team has a crisis management plan for security, communications and disaster recovery events.
We also implemented additional security measures following the previously disclosed cybersecurity incident of July 2023, such as stronger privileged access policies and enhanced and expanded multi-factor authentication to help prevent unauthorized access to our systems.
We have also implemented additional security measures following the previously disclosed cybersecurity incident of July 2023, such as stronger privileged access policies and enhanced and expanded multi-factor authentication to help prevent unauthorized access to our systems.
The Audit Committee receives a cybersecurity update at each of its quarterly meetings from our Senior Vice President, Chief Information Officer ("CIO") or management. These updates address a range of topics, including updates on technology trends, policies and practices, and specific and ongoing efforts to prevent, detect and respond to internal and external critical threats. Management's Role.
The Audit Committee receives a cybersecurity update at each of its quarterly meetings from our Executive Vice President, Chief Information Officer ("CIO") or management. These updates address a range of topics, including updates on technology trends, policies and practices, and specific and ongoing efforts to prevent, detect and respond to internal and external critical threats. Management's Role.
Our CIO and IT management team meet regularly to develop and oversee strategies to protect our data, systems and technology across the organization. These strategies include reviewing security performance metrics, identifying security risks and assessing the status of approved security enhancements.
Our CIO and IT management team meet regularly to develop and oversee strategies to protect our data, systems and technology across the 13 Table of Contents organization. These strategies include reviewing security performance metrics, identifying security risks and assessing the status of approved security enhancements.
We have an enterprise risk management group that manages this process, which includes our executive leadership team. Their activities include assessing the risks, prioritizing the risks, measuring the risks, implementing mitigation plans and auditing the results. Cybersecurity Risk Management.
We have an enterprise risk management group that manages this process, which includes our executive leadership team. Their activities include assessing the risks, prioritizing the risks, measuring the risks, responding to an escalating risk or crisis by implementing mitigation plans and auditing the results. Cybersecurity Risk Management.
Our CIO and IT management team also receive regular training and education on cybersecurity-related topics. 13 Table of Contents
Our CIO and IT management team also receive regular training and education on cybersecurity-related topics.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease the land that our manufacturing facility in Albuquerque, New Mexico is located, as part of the related industrial revenue bond financing. We have an option to repurchase the land for one dollar upon termination of the lease.
Biggest changeWe lease the land that our Tempur manufacturing facility in Albuquerque, New Mexico is located, as part of the related industrial revenue bond financing. We have an option to repurchase the land for one dollar upon termination of the lease. We do not have material properties related to our Mattress Firm segment, and nearly all Mattress Firm-operated properties are leased.
Name Location Type of Facility North America Sealy Mattress Manufacturing Company, LLC United States Manufacturing Tempur Production USA, LLC United States Manufacturing Sherwood Bedding United States Manufacturing Comfort Revolution, LLC United States Manufacturing Sealy Canada, Ltd. Canada Manufacturing Tempur Sealy Mattress Mexico, S. de R.L. de C.V.
Name Location Type of Facility Tempur Sealy North America Sealy Mattress Manufacturing Company, LLC United States Manufacturing Tempur Production USA, LLC United States Manufacturing Sherwood Bedding United States Manufacturing Comfort Revolution, LLC United States Manufacturing Sealy Canada, Ltd. Canada Manufacturing Tempur Sealy Mattress Mexico, S. de R.L. de C.V.
Mexico Manufacturing International Dan-Foam ApS Denmark Manufacturing Dreams Limited United Kingdom Manufacturing In addition to the properties listed above, we have other facilities in the U.S. and other countries, the majority under leases with one to ten year terms.
Mexico Manufacturing Tempur Sealy International Dan-Foam ApS Denmark Manufacturing Dreams Limited United Kingdom Manufacturing In addition to the properties listed above, we have other facilities in the U.S. and other countries, the majority under leases with one to ten year terms.
ITEM 2. PROPERTIES The following table sets forth certain information regarding our principal facilities by segment, which have been aggregated by principal manufacturing entity, at December 31, 2024.
ITEM 2. PROPERTIES The following table sets forth certain information regarding our principal facilities by segment, which have been aggregated by principal manufacturing entity, at December 31, 2025.
We believe that our existing properties are suitable for the conduct of our business, are adequate for our present needs and will be adequate to meet our future needs.
Our largest Mattress Firm distribution centers are located in New York, Illinois and New Jersey. We believe that our existing properties are suitable for the conduct of our business, are adequate for our present needs and will be adequate to meet our future needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Information regarding legal proceedings can be found in Note 12, "Commitments and Contingencies," of the Notes to the Consolidated Financial Statements, included in Part II, ITEM 8 of this Report, "Financial Statements and Supplementary Data," and is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES None. PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS Information regarding legal proceedings can be found in Note 12, "Commitments and Contingencies," of the Notes to the Consolidated Financial Statements, included in Part II, ITEM 8 of this Report, "Financial Statements and Supplementary Data," and is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES None. 14 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+1 added−4 removed3 unchanged
Biggest changeThe following table sets forth purchases of our common stock for the three months ended December 31, 2024: Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum number of shares (or approximate dollar value of shares) that may yet be purchased under the plans or programs (in millions) October 1, 2024 - October 31, 2024 — $— — $774.5 November 1, 2024 - November 30, 2024 — $— — $774.5 December 1, 2024 - December 31, 2024 — $— — $774.5 Total — — Equity Compensation Plan Information Equity compensation plan information required by this Item is incorporated by reference from Part III, ITEM 12 of this Report.
Biggest changeThe following table sets forth purchases of our common stock for the three months ended December 31, 2025: Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum number of shares (or approximate dollar value of shares) that may yet be purchased under the plans or programs (in millions) October 1, 2025 - October 31, 2025 — $— — $774.5 November 1, 2025 - November 30, 2025 — $— — $774.5 December 1, 2025 - December 31, 2025 — $— — $774.5 Total — — Equity Compensation Plan Information Equity compensation plan information required by this Item is incorporated by reference from Part III, ITEM 12 of this Report. 15 Table of Contents Performance Graph The following Performance Graph and related information shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
However, payment of future dividends, and the timing and amount thereof, will be at the discretion of our Board of Directors and will depend on our 14 Table of Contents earnings, operating and financial condition, capital requirements, legal requirements and other factors that our Board of Directors deems relevant.
However, payment of future dividends, and the timing and amount thereof, will be at the discretion of our Board of Directors and will depend on our earnings, operating and financial condition, capital requirements, legal requirements and other factors that our Board of Directors deems relevant.
Prior to that time, there was no public trading market for our common stock. On February 18, 2025, our common stock began trading on the NYSE under the symbol "SGI" in connection with our name change to Somnigroup International Inc. As of February 25, 2025, we had approximately 152 stockholders of record of our common stock.
Prior to that time, there was no public trading market for our common stock. On February 18, 2025, our common stock began trading on the NYSE under the symbol "SGI" in connection with our name change to Somnigroup International Inc. As of February 23, 2026, we had approximately 86 stockholders of record of our common stock.
Issuer Purchases of Equity Securities 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.
Issuer Purchases of Equity Securities 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 year ended December 31, 2025, we did not repurchase shares under the program.
Dividends In February 2025, our Board of Directors declared a cash dividend of $0.15 per share on our common stock. The dividend is payable on March 20, 2025 to shareholders of record on the close of business March 6, 2025.
Dividends In February 2026, our Board of Directors declared a cash dividend of $0.17 per share on our common stock. The dividend is payable on March 19, 2026 to shareholders of record on the close of business March 5, 2026.
(CRI) Levi Strauss & Co. (LEVI) Tapestry, Inc. (TPR) Columbia Sportswear Company (COLM) Mohawk Industries Inc. (MHK) Under Armour, Inc. (UA) Deckers Outdoor Corporation (DECK) Polaris Industries Inc. (PII) Williams-Sonoma, Inc. (WSM) Gildan Activewear Inc. (GIL) PVH Corp. (PVH) Hanesbrands Inc. (HBI) Ralph Lauren Corporation (RL) 2023 Peer Group Brunswick Corporation (BC) Hasbro, Inc. (HAS) Skechers U.S.A., Inc.
(CRI) Levi Strauss & Co. (LEVI) Tapestry, Inc. (TPR) Columbia Sportswear Company (COLM) Mohawk Industries Inc. (MHK) Under Armour, Inc. (UA) Deckers Outdoor Corporation (DECK) Polaris Industries Inc. (PII) Williams-Sonoma, Inc. (WSM) Gildan Activewear Inc. (GIL) PVH Corp. (PVH) Hanesbrands Inc.
The program does not require the repurchase 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.
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.
The peer issuers included in this graph are set forth below in the table. Each year we assess our peer group and evaluate if they meet our market capitalization criteria.
The peer issuers included in this graph are set forth below in the table. Each year we assess our peer group and evaluate if they meet our market capitalization criteria. 2025 Peer Group Brunswick Corporation (BC) Hasbro, Inc. (HAS) RH (RH) Capri Holdings Limited (CPRI) Leggett & Platt, Incorporated (LEG) Skechers U.S.A., Inc. (SKX) Carter's, Inc.
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. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing, regulatory requirements and other market conditions.
We had approximately $774.5 million remaining under the share repurchase program as of December 31, 2025. 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.
(HBI) RH (RH) 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Somnigroup International Inc. $ 100.00 $ 124.05 $ 217.83 $ 161.29 $ 242.05 $ 271.90 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 S&P 400 Consumer Discretionary 100.00 130.99 167.26 132.09 164.16 179.62 2023 Peer Group 100.00 102.87 128.29 93.16 108.24 131.69 2024 Peer Group 100.00 101.24 124.37 90.58 100.69 113.79 16 Table of Contents ITEM 6. [RESERVED]
(HBI) Ralph Lauren Corporation (RL) 16 Table of Contents 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Somnigroup International Inc. $ 100.00 $ 175.60 $ 130.02 $ 195.12 $ 219.18 $ 348.13 S&P 500 100.00 128.71 105.40 133.10 166.40 196.16 S&P 400 Consumer Discretionary 100.00 127.69 100.83 125.32 137.12 129.35 2025 Peer Group 100.00 126.14 90.66 103.73 126.22 132.87 ITEM 6. [RESERVED]
Removed
During the year ended December 31, 2024, we did not repurchase shares under the program while the Mattress Firm acquisition was pending. We had approximately $774.5 million remaining under the share repurchase program as of December 31, 2024.
Added
The timing and actual number of shares repurchased will depend on a variety of factors including price, financing, regulatory requirements and other market conditions. The program does not require the repurchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice.
Removed
Performance Graph The following Performance Graph and related information shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
Removed
In 2024, Mohawk Industries Inc. was added to the peer group, while Sleep Number Corporation was removed since they no longer meet our revenue and business comparability criteria. 15 Table of Contents 2024 Peer Group Brunswick Corporation (BC) Hasbro, Inc. (HAS) RH (RH) Capri Holdings Limited (CPRI) Leggett & Platt, Incorporated (LEG) Skechers U.S.A., Inc. (SKX) Carter's, Inc.
Removed
(SKX) Capri Holdings Limited (CPRI) Leggett & Platt, Incorporated (LEG) Sleep Number Corporation (SNBR) Carter's, Inc. (CRI) Levi Strauss & Co. (LEVI) Tapestry, Inc. (TPR) Columbia Sportswear Company (COLM) Polaris Industries Inc. (PII) Under Armour, Inc. (UA) Deckers Outdoor Corporation (DECK) PVH Corp. (PVH) Williams-Sonoma, Inc. (WSM) Gildan Activewear Inc. (GIL) Ralph Lauren Corporation (RL) Hanesbrands Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+49 added−39 removed40 unchanged
Biggest changeThe following table sets forth the reconciliation of our reported net income to the calculations of EBITDA and adjusted EBITDA for the years ended December 31, 2024 and 2023: Year Ended (in millions) December 31, 2024 December 31, 2023 Net income $ 384.3 $ 368.1 Interest expense, net 125.0 129.9 Transaction related interest expense, net (1) 9.8 — Loss on extinguishment of debt (2) — 3.2 Income tax provision 118.6 103.4 Depreciation and amortization 203.9 184.8 EBITDA $ 841.6 $ 789.4 Adjustments: Transaction costs (3) 47.8 49.0 Customer-related transition charges (4) 26.7 — Supply chain transition costs (5) 9.5 — Operational start-up costs (6) 3.1 10.4 Cybersecurity event (7) (4.9) 14.3 Fair value remeasurement (8) — 11.0 ERP system transition (9) — 3.2 Adjusted EBITDA $ 923.8 $ 877.3 Consolidated indebtedness less netted cash $ 2,134.8 $ 2,518.7 Ratio of consolidated indebtedness less netted cash to adjusted EBITDA 2.31 times 2.87 times (1) In the year ended 2024, we incurred $9.8 million of transaction related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow.
Biggest changeAccordingly, we present adjusted EBITDA to provide information regarding our compliance with requirements under the 2023 Credit Agreement. 31 Table of Contents The following table sets forth the reconciliation of our reported net income to the calculations of EBITDA and adjusted EBITDA for the years ended December 31, 2025 and 2024: Year Ended (in millions) December 31, 2025 December 31, 2024 Net income $ 384.1 $ 384.3 Interest expense, net 261.1 125.0 Transaction-related interest expense, net (1) 6.8 9.8 Income tax provision 95.7 118.6 Depreciation and amortization 291.6 203.9 EBITDA $ 1,039.3 $ 841.6 Adjustments: Acquisition-related costs (2) 114.2 — Transaction costs (3) 56.0 47.8 Business combination charges (4) 53.8 — Loss on disposal of business (5) 13.9 — Supply chain transition costs (6) 12.1 9.5 Disposition-related costs (7) 10.5 — Cloud-based computing arrangements impairment (8) 6.2 — Customer-related transition charges (9) — 26.7 Operational start-up costs (10) — 3.1 Cybersecurity event (11) — (4.9) Adjusted EBITDA $ 1,306.0 $ 923.8 Adjustments for financial covenant purposes: Loss from unrestricted subsidiary (12) 3.1 — Earnings from Mattress Firm prior to acquisition (13) 18.7 — Future cost synergies to be realized from Mattress Firm Acquisition (14) 100.0 — Adjusted EBITDA per credit facility $ 1,427.8 $ 923.8 Consolidated indebtedness less netted cash $ 4,582.4 $ 2,134.8 Ratio of consolidated indebtedness less netted cash to adjusted EBITDA 3.21 times 2.31 times 32 Table of Contents (1) In the year ended 2025, we incurred $6.8 million of transaction-related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow.
Non-GAAP Financial Information We provide information regarding adjusted net income, adjusted EPS, adjusted gross profit, adjusted gross margin, adjusted operating income (expense), adjusted operating margin, EBITDA, adjusted EBITDA, consolidated indebtedness and consolidated indebtedness less netted cash, which are not recognized terms under GAAP and do not purport to be alternatives to net income, earnings per share, gross profit, gross margin, operating income (expense) and operating margin as a measure of operating performance or an alternative to total debt as a measure of liquidity.
Non-GAAP Financial Information We provide information regarding adjusted net income, EBITDA, adjusted EBITDA, adjusted EPS, adjusted gross profit, adjusted gross margin, adjusted operating income (expense), adjusted operating margin, consolidated indebtedness and consolidated indebtedness less netted cash, which are not recognized terms under GAAP and do not purport to be alternatives to net income, earnings per share, gross profit, gross margin, operating income (expense) and operating margin as a measure of operating performance or an alternative to total debt as a measure of liquidity.
We believe that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of various adjustments as described in the footnotes below.
We believe that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of various adjustments as described in the footnotes below.
Goodwill and Indefinite-Lived Intangible Assets. Goodwill and indefinite-lived intangible assets are evaluated for impairment annually as of October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred or when required by accounting standards. We test goodwill for impairment at the reporting unit level.
Goodwill and indefinite-lived intangible assets are evaluated for impairment annually as of October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred or when required by accounting standards. We test goodwill for impairment at the reporting unit level.
While we are well represented at third-party retailers in the U.S. today, there are opportunities to both increase the presence of our brands with existing retail partners and to sell into certain key retailers that do not have our products on their floors today. We also have significant opportunity to expand our third-party retail distribution in our international business.
While we are well represented at third-party retailers in the U.S. today, there are opportunities to both increase the presence of our brands with retail partners and to sell into certain key retailers that do not have our products on their floors today. We also have significant opportunity to expand our third-party retail distribution in our international business.
The 2024 effective tax rate as compared to the U.S. federal statutory tax rate included a net favorable impact of discrete items, primarily related to excess tax benefits from the vesting of certain stock awards under our incentive stock compensation plan and other discrete items.
The 2024 effective tax rate as compared to the U.S. federal statutory tax rate also included a net favorable impact of discrete items, primarily related to excess tax benefits from the vesting of certain stock awards under our incentive stock compensation plan and other discrete items.
In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the years ended December 31, 2024 and 2023, including the following topics: • an overview of our business and strategy; • results of operations, including our net sales and costs in the periods presented as well as changes between periods; • expected sources of liquidity for future operations; and • our use of certain non-GAAP financial measures.
In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the years ended December 31, 2025 and 2024, including the following topics: • an overview of our business and strategy; • results of operations, including our net sales and costs in the periods presented as well as changes between periods; • expected sources of liquidity for future operations; and • our use of certain non-GAAP financial measures.
As of December 31, 2024, our accounts receivable were substantially current. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. The credit environment in which our customers operate has been relatively stable over the past few years.
As of December 31, 2025, our accounts receivable were substantially current. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. The credit environment in which our customers operate has been relatively stable over the past few years.
For the year ended December 31, 2024, we did not repurchase shares under our share repurchase program and had approximately $774.5 million remaining under our share repurchase program. 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.
For the year ended December 31, 2025, we did not repurchase shares under our share repurchase program and had approximately $774.5 million remaining under our share repurchase program. 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.
As of December 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. Our debt agreements contain certain covenants that limit restricted payments, including share repurchases and dividends.
As of December 31, 2025, 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. Our debt agreements contain certain covenants that limit restricted payments, including share repurchases and dividends.
The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates.
The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. Business Combinations.
Discounted cash flow models are reliant on various assumptions, including projected business results, long-term growth factors and weighted-average cost of capital. Management judgement is involved in estimating these variables, and they include inherent uncertainties as they are forecasting future events.
Discounted cash flow models are reliant on various assumptions, including projected business results, long-term growth factors and weighted-average cost of capital. Management judgment is involved in estimating these variables, and they include inherent uncertainties as they are forecasting future events.
The valuation allowance is based, in part, on our estimate of future taxable income, the expected utilization of foreign and state tax loss carryforwards and credits and the expiration dates of such tax loss carryforwards. We did not recognize tax benefits from uncertain tax positions within the provision for income taxes.
The valuation allowance is based, in part, on our estimate of future taxable income, the expected utilization of foreign and domestic tax loss carryforwards and credits and the expiration dates of such tax loss carryforwards. We did not recognize tax benefits from uncertain tax positions within the provision for income taxes.
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. Gross margin improved 100 basis points.
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. Gross margin improved 150 basis points.
Revenue Recognition . Sales of product are recognized when the performance obligations under the terms of the contract with the customer are satisfied, which is generally when control of the product has transferred to the customer. Transferring control of each product sold is considered a separate performance obligation.
Sales of product are recognized when the performance obligations under the terms of the contract with the customer are satisfied, which is generally when control of the product has transferred to the customer. Transferring control of each product sold is considered a separate performance obligation.
The aggregate purchase price consisted of $2.8 billion in cash and approximately 34.2 million shares of our common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.
The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of our common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.
For a discussion and reconciliation of non-GAAP financial measures as discussed above to the corresponding GAAP financial results, refer to the non-GAAP financial information set forth below under the heading "Non-GAAP Financial Information." 19 Table of Contents We may refer to net sales or earnings or other historical financial information on a "constant currency basis," which is a non-GAAP financial measure.
For a discussion and reconciliation of non-GAAP financial measures as discussed above to the corresponding GAAP financial results, refer to the non-GAAP financial information set forth below under the heading "Non-GAAP Financial Information." We may refer to net sales or earnings or other historical financial information on a "constant currency basis," which is a non-GAAP financial measure.
The following table sets forth the reconciliation of our reported net income to adjusted net income and the calculation of adjusted EPS for the years ended December 31, 2024 and 2023.
The following table sets forth the reconciliation of our reported net income to adjusted net income and the calculation of adjusted EPS for the years ended December 31, 2025 and 2024.
A valuation allowance is recorded against certain deferred tax assets to reduce the consolidated deferred tax asset to an amount that will, more likely than not, be realized in future periods. At December 31, 2024, the valuation allowance of $48.1 million was primarily related to certain tax attributes both domestically and in various foreign jurisdictions.
A valuation allowance is recorded against certain deferred tax assets to reduce the consolidated deferred tax asset to an amount that will, more likely than not, be realized in future periods. At December 31, 2025, the valuation allowance of $48.7 million was primarily related to certain tax attributes both domestically and in various foreign jurisdictions.
We recorded $10.4 million of operational start-up costs related to the capacity expansion of our manufacturing and distribution facilities in the U.S. in the year ended 2023. (7) In the year ended 2024, we received proceeds of $4.9 million for an insurance claim related to the previously disclosed cybersecurity event identified on July 23, 2023.
(10) In the year ended 2024, we recorded $3.1 million of operational start-up costs for the capacity expansion of our manufacturing and distribution facilities in the U.S. (11) In the year ended 2024, we received proceeds of $4.9 million for an insurance claim related to the previously disclosed cybersecurity event identified on July 23, 2023.
For results of operations comparisons relating to years ending December 31, 2023 and 2022, refer to our annual report on Form 10-K, Part II, ITEM 7: Management's Discussion and Analysis of Financial Condition and Results of Operations filed with the Securities and Exchange Commission on February 16, 2024.
For results of operations comparisons relating to years ending December 31, 2024 and 2023, refer to our annual report on Form 10-K, Part II, ITEM 7: Management's Discussion and Analysis of Financial Condition and Results of Operations filed with the Securities and Exchange Commission on February 28, 2025.
Historically, less than 1.0% of net sales ultimately prove to be uncollectible. Total bad debt expense was $22.5 million in 2024, $8.2 million in 2023 and $6.7 million in 2022.
Historically, less than 1.0% of net sales ultimately prove to be uncollectible. Total bad debt expense was $5.6 million in 2025, $22.5 million in 2024 and $8.2 million in 2023.
The proceeds 24 Table of Contents of this financing were collectively used to fund a portion of the cash consideration for the acquisition, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the acquisition.
The proceeds of this financing were collectively used to fund a portion of the cash consideration for the acquisition, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the acquisition.
The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2024, our estimated gross unrecognized tax benefits were $2.1 million which, if recognized, would favorably impact our future earnings.
The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. At December 31, 2025, our estimated gross unrecognized tax benefits were $30.7 million which, if recognized, would favorably impact our future earnings.
EBITDA, Adjusted EBITDA and Consolidated Indebtedness Less Netted Cash The following reconciliations are provided below: • Net income to EBITDA and adjusted EBITDA • Ratio of consolidated indebtedness less netted cash to adjusted EBITDA • Total debt, net to consolidated indebtedness less netted cash We believe that presenting these non-GAAP measures provides investors with useful information with respect to our operating performance, cash flow generation and comparisons from period to period, as well as general information about our progress in reducing our leverage. 30 Table of Contents The 2023 Credit Agreement provides the definition of adjusted EBITDA.
EBITDA, Adjusted EBITDA and Consolidated Indebtedness Less Netted Cash The following reconciliations are provided below: • Net income to EBITDA and adjusted EBITDA • Ratio of consolidated indebtedness less netted cash to adjusted EBITDA • Total debt, net to consolidated indebtedness less netted cash We believe that presenting these non-GAAP measures provides investors with useful information with respect to our operating performance, cash flow generation and comparisons from period to period, as well as general information about our progress in reducing our leverage.
The industry is no longer engaged in 17 Table of Contents uneconomical retail store expansion, startups have shifted from uneconomical strategies to becoming profitable and legacy retailers and manufacturers have become skilled in producing profitable online sales. Over the last decade, consumers have made the connection between a good night's sleep and overall health and wellness.
In our opinion, the industry is no longer engaged in uneconomical retail store expansion, startups have shifted from uneconomical strategies to becoming profitable and legacy retailers and manufacturers have become skilled in producing profitable online sales. Over the last decade, consumers have made the connection between a good night's sleep and overall health and wellness.
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 geographic mix; foreign exchange fluctuations; volume incentives offered to certain retail accounts; participation in our retail cooperative advertising programs; and costs associated with new product introductions.
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.
The following discussion identifies those accounting policies that we believe are critical in the preparation of our financial statements, the judgments and uncertainties affecting the application of those policies and the possibility that materially different amounts will be reported under different conditions or using different assumptions.
Our management believes these policies are reasonable and appropriate. The following discussion identifies those accounting policies that we believe are critical in the preparation of our financial statements, the judgments and uncertainties affecting the application of those policies and the possibility that materially different amounts will be reported under different conditions or using different assumptions.
Total cash interest payments related to our borrowings are expected to be between approximately $265 million to $275 million in 2025. Our debt service obligations could, under certain circumstances, have material consequences to our stockholders. Similarly, our cash requirements are subject to change as business conditions warrant and opportunities arise.
Total cash interest payments related to our borrowings are expected to be approximately $225 million in 2026. Our debt service obligations could, under certain circumstances, have material consequences to our stockholders. Similarly, our cash requirements are subject to change as business conditions warrant and opportunities arise.
As of December 31, 2024, our ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure defined in the 2023 Credit Agreement, was 2.31 times.
As of December 31, 2025, our ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure defined in the 2023 Credit Agreement, was 3.21 times.
(3) We recorded $47.8 million and $49.0 million of transaction costs, primarily related to legal and professional fees associated with the acquisition of Mattress Firm in the year ended 2024 and 2023, respectively.
In the year ended 2024, we recorded $47.8 million of transaction costs, primarily related to legal and professional fees associated with the acquisition of Mattress Firm.
The allowance for credit losses included in accounts receivable, net in the accompanying Consolidated Balance Sheets, was $80.4 million and $66.9 million as of December 31, 2024 and 2023, respectively. We regularly review the adequacy of our allowance for credit losses.
The allowance for credit losses included in accounts receivable, net in the accompanying Consolidated Balance Sheets, was $39.2 million and $80.4 million as of December 31, 2025 and 2024, respectively. We regularly review the adequacy of our allowance for credit losses.
As consumers make this connection, they are willing to invest more in their bedding purchases, which positions us well for long-term growth. In 2025, we expect the current macroeconomic environment to stabilize throughout the year. The global bedding industry was challenged in 2024 due to certain macroeconomic pressures on the consumer.
As consumers make this connection, they are willing to invest more in their bedding purchases, which positions us well for long-term growth. The global bedding industry was challenged in 2025 due to certain macroeconomic pressures on the consumer.
The proceeds of this financing were collectively used to fund a portion of the cash consideration, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the merger.
The proceeds of this financing were collectively used to fund a portion of the cash consideration, the repayment of Mattress Firm's debt and the payment of certain fees and expenses related to the merger. Mattress Firm operates as a separate business segment.
(in millions) December 31, 2024 December 31, 2023 Total debt, net $ 3,809.9 $ 2,571.9 Plus: Deferred financing costs (1) 34.6 21.7 Consolidated indebtedness 3,844.5 2,593.6 Less: Netted cash (2) 1,709.7 74.9 Consolidated indebtedness less netted cash $ 2,134.8 $ 2,518.7 (1) We present deferred financing costs as a direct reduction from the carrying amount of the related debt in the Consolidated Balance Sheets.
(in millions) December 31, 2025 December 31, 2024 Total debt, net $ 4,685.7 $ 3,809.9 Plus: Deferred financing costs (1) 31.6 34.6 Consolidated indebtedness $ 4,717.3 $ 3,844.5 Less: Netted cash (2) 134.9 1,709.7 Consolidated indebtedness less netted cash $ 4,582.4 $ 2,134.8 (1) We present deferred financing costs as a direct reduction from the carrying amount of the related debt in the Consolidated Balance Sheets.
FULL YEAR 2024 (in millions, except percentages) Consolidated Margin North America Margin International Margin Corporate Net sales $ 4,930.9 $ 3,788.9 $ 1,142.0 $ — Gross profit $ 2,180.1 44.2 % $ 1,530.8 40.4 % $ 649.3 56.9 % $ — Adjustments: Customer-related transition charges (1) 21.9 21.9 — — Supply chain transition costs (2) 9.3 9.3 — — Operational start-up costs (3) 3.1 3.1 — — Transaction costs (4) 2.4 2.4 — — Total adjustments 36.7 36.7 — — Adjusted gross profit $ 2,216.8 45.0 % $ 1,567.5 41.4 % $ 649.3 56.9 % $ — Operating income (expense) $ 634.2 12.9 % $ 612.1 16.2 % $ 194.9 17.1 % $ (172.8) Adjustments: Transaction costs (4) 47.8 2.5 — 45.3 Customer-related transition charges (1) 26.7 26.7 — — Supply chain transition costs (2) 9.5 9.5 — — Operational start-up costs (3) 3.1 3.1 — — Total adjustments 87.1 41.8 — 45.3 Adjusted operating income (expense) $ 721.3 14.6 % $ 653.9 17.3 % $ 194.9 17.1 % $ (127.5) (1) In the year ended 2024, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer.
FULL YEAR 2024 (in millions, except percentages) Consolidated Margin Tempur Sealy North America Margin Tempur Sealy International Margin Corporate Net sales $ 4,930.9 $ 3,788.9 $ 1,142.0 $ — Gross profit $ 2,027.9 41.1 % $ 1,466.7 38.7 % $ 561.2 49.1 % $ — Adjustments: Customer-related transition charges (1) 21.9 21.9 — — Supply chain transition costs (2) 9.3 9.3 — — Operational start-up costs (3) 3.1 3.1 — — Transaction costs (4) 2.4 2.4 — — Total adjustments 36.7 36.7 — — Adjusted gross profit $ 2,064.6 41.9 % $ 1,503.4 39.7 % $ 561.2 49.1 % $ — Operating income (expense) $ 634.2 12.9 % $ 612.1 16.2 % $ 194.9 17.1 % $ (172.8) Adjustments: Transaction costs (4) 47.8 2.5 — 45.3 Customer-related transition charges (1) 26.7 26.7 — — Supply chain transition costs (2) 9.5 9.5 — — Operational start-up costs (3) 3.1 3.1 — — Total adjustments 87.1 41.8 — 45.3 Adjusted operating income (expense) $ 721.3 14.6 % $ 653.9 17.3 % $ 194.9 17.1 % $ (127.5) (1) In the year ended 2024, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer, with $21.9 million recorded in cost of sales and $4.8 million in operating expenses.
(3) In the fourth quarter of 2024, we incurred $9.8 million of transaction related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow. The proceeds of the Term B Loan were released upon the closing of the acquisition of Mattress Firm on February 5, 2025.
(7) In the year ended 2025, we incurred $6.8 million of transaction-related interest expense, net of interest income, related to the Term B Loan drawn and held in escrow. The proceeds of the Term B Loan were released upon the closing of the acquisition of Mattress Firm on February 5, 2025.
The accrued sales returns in the accompanying Consolidated Balance Sheet, which include a current balance in accrued expenses and other current liabilities and a non-current balance in other non-current liabilities, was $44.2 million and $43.7 million as of December 31, 2024 and 2023, respectively.
The accrued sales returns in the accompanying Consolidated Balance Sheets, which include a current balance in accrued expenses and other current liabilities and a non-current balance in other non-current liabilities, was $106.9 million and $44.2 million as of December 31, 2025 and 2024, respectively.
Net sales in the Direct channel increased 4.6% on a constant currency basis.
Net sales in the Direct channel increased 8.8% on a constant currency basis. Net sales in the Wholesale channel increased 7.6% on a constant currency basis.
Business Overview General We are the world's largest bedding company, dedicated to enriching people's lives through the power of a good night's 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.
Business Overview General We are the world's largest 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 over 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.
The 2023 effective tax rate, as compared to the U.S. federal statutory tax rate, also included a net favorable impact of discrete items, primarily related to excess tax benefits from the vesting of certain stock awards under our incentive stock compensation plan and a benefit related to the settlement of the Danish Tax Matter.
The 2025 effective tax rate as compared to the U.S. federal statutory tax rate included a net favorable impact of discrete items, primarily related to excess tax benefits from the vesting of certain stock awards under our incentive stock compensation plan and other discrete items, including the impact of the Mattress Firm Acquisition.
The improvement in operating margin was primarily driven by the improvement in gross margin of 160 basis points, partially offset by Asia joint venture performance of 50 basis points and operating expense deleverage. • Corporate operating expenses decreased $34.0 million, which positively impacted our consolidated operating margin.
The improvement in operating margin was primarily driven by the improvement in gross margin of 30 basis points and operating expense leverage of 10 basis points, partially offset by Asia joint venture performance. • Corporate operating expenses increased $37.6 million, which negatively impacted our consolidated operating margin.
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 solutions.
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 solutions. 17 Table of Contents As of December 31, 2025, Somnigroup operated 2,852 company-owned stores, including 2,174 Mattress Firm stores, Tempur Sealy owned stores, Dreams stores and joint venture stores.
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.
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.
(5) We recorded $3.1 million of operational start-up costs in cost of sales for the capacity expansion of our manufacturing and distribution facilities in the U.S., which include personnel and facility related costs in the year ended 2024.
(2) In the year ended 2024, we recorded $9.5 million of supply chain transition costs primarily in cost of sales associated with the consolidation of certain manufacturing facilities. (3) In the year ended 2024, we recorded $3.1 million of operational start-up costs in cost of sales for the capacity expansion of our manufacturing and distribution facilities in the U.S.
The adjustments we make to derive the non-GAAP financial measures include adjustments to exclude items that may cause short-term fluctuations in the nearest GAAP financial measure, but which we do not consider to be the fundamental attributes or primary drivers of our business. 26 Table of Contents We believe that exclusion of these items assists in providing a more complete understanding of our underlying results from continuing operations and trends, and we use these measures along with the corresponding GAAP financial measures to manage our business, to evaluate our consolidated and business segment performance compared to prior periods and the marketplace, to establish operational goals and to provide continuity to investors for comparability purposes.
We believe that exclusion of these items assists in providing a more complete understanding of our underlying results from continuing operations and trends, and we use these measures along with the corresponding GAAP financial measures to manage our business, to evaluate our consolidated and business segment performance compared to prior periods and the marketplace, to establish operational goals and to provide continuity to investors for comparability purposes.
GROSS PROFIT Year Ended December 31, 2024 2023 Margin Change (in millions, except percentages) Gross Profit Gross Margin Gross Profit Gross Margin 2024 vs 2023 North America $ 1,530.8 40.4 % $ 1,537.5 39.9 % 0.5 % International 649.3 56.9 % 591.2 55.3 % 1.6 % Consolidated gross margin $ 2,180.1 44.2 % $ 2,128.7 43.2 % 1.0 % 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.
GROSS PROFIT Year Ended December 31, 2025 2024 Margin Change (in millions, except percentages) Gross Profit Gross Margin Gross Profit Gross Margin 2025 vs 2024 Mattress Firm $ 1,171.7 33.4 % $ — — % 33.4 % Tempur Sealy North America 1,383.8 51.2 % 1,466.7 38.7 % 12.5 % Tempur Sealy International 627.7 49.4 % 561.2 49.1 % 0.3 % Consolidated gross margin $ 3,183.2 42.6 % $ 2,027.9 41.1 % 1.5 % 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.
Adjusted gross margin, which is a non-GAAP financial measure, was 45.0% as compared to 43.7% in 2023. • Operating income increased 4.4% to $634.2 million as compared to $607.2 million in 2023.
Adjusted gross margin, which is a non-GAAP financial measure, was 44.4% as compared to 41.9% in 2024. • Operating income increased 19.0% to $754.9 million as compared to $634.2 million in 2024. Adjusted operating income, which is a non-GAAP financial measure, increased 41.2% to $1,018.7 million as compared to $721.3 million in 2024.
INCOME TAX PROVISION Year Ended December 31, Percent change (in millions, except percentages) 2024 2023 2024 vs 2023 Income tax provision $ 118.6 $ 103.4 14.7 % Effective tax rate 23.5 % 21.8 % 1.7 % 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.
INCOME TAX PROVISION Year Ended December 31, Percent Change (in millions, except percentages) 2025 2024 2025 vs 2024 Income tax provision $ 95.7 $ 118.6 (19.3) % Effective tax rate 19.9 % 23.5 % (15.3) % 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. 23 Table of Contents Our income tax provision decreased $22.9 million due to a decrease in income before income taxes.
Adjusted net income, which is a non-GAAP financial measure, increased 6.9% to $455.1 million as compared to $425.6 million in 2023. • Earnings per diluted share ("EPS") increased 3.8% to $2.16 as compared to $2.08 in 2023. Adjusted EPS, which is a non-GAAP financial measure, increased 6.3% to $2.55 as compared to $2.40 in 2023.
Adjusted net income, which is a non-GAAP financial measure, increased 24.2% to $565.3 million as compared to $455.1 million in 2024. 19 Table of Contents • Earnings per diluted share ("EPS") decreased 14.8% to $1.84 as compared to $2.16 in 2024. Adjusted EPS, which is a non-GAAP financial measure, increased 5.9% to $2.70 as compared to $2.55 in 2024.
In addition to the sale of our branded products through third-party retailers, we also offer non-branded products through our OEM business, including mattresses, pillows and other bedding products and components, at a wide range of price points.
In addition to offering a portfolio of some of the most highly recognized brands in the industry, we also offer non-branded products through our OEM business. These offerings include mattresses, pillows and other bedding products and components, at a wide range of price points.
The following table sets forth the various components of our Consolidated Statements of Income and expresses each component as a percentage of net sales: (in millions, except percentages and Year Ended December 31, per common share amounts) 2024 2023 Net sales $ 4,930.9 100.0 % $ 4,925.4 100.0 % Cost of sales 2,750.8 55.8 2,796.7 56.8 Gross profit 2,180.1 44.2 2,128.7 43.2 Selling and marketing expenses 1,091.6 22.1 1,063.4 21.6 General, administrative and other expenses 473.2 9.6 481.1 9.8 Equity income in earnings of unconsolidated affiliates (18.9) (0.4) (23.0) (0.5) Operating income 634.2 12.9 607.2 12.3 Other expense, net: Interest expense, net 134.8 2.7 129.9 2.6 Loss on extinguishment of debt — — 3.2 0.1 Other income, net (4.9) (0.1) — — Total other expense, net 129.9 2.6 133.1 2.7 Income before income taxes 504.3 10.2 474.1 9.6 Income tax provision (118.6) (2.4) (103.4) (2.1) Net income before non-controlling interest 385.7 7.8 370.7 7.5 Less: Net income attributable to non-controlling interest 1.4 — 2.6 0.1 Net income attributable to Somnigroup International Inc. $ 384.3 7.8 % $ 368.1 7.5 % Earnings per common share: Basic $ 2.21 $ 2.14 Diluted $ 2.16 $ 2.08 Weighted average common shares outstanding: Basic 173.6 172.2 Diluted 178.2 177.3 20 Table of Contents NET SALES Year Ended December 31, Consolidated North America International (in millions) 2024 2023 2024 2023 2024 2023 Net sales by channel Wholesale $ 3,701.6 $ 3,746.1 $ 3,275.2 $ 3,348.2 $ 426.4 $ 397.9 Direct 1,229.3 1,179.3 513.7 507.3 715.6 672.0 Total net sales $ 4,930.9 $ 4,925.4 $ 3,788.9 $ 3,855.5 $ 1,142.0 $ 1,069.9 Net sales increased 0.1% (including on a constant currency basis).
The following table sets forth the various components of our Consolidated Statements of Income and expresses each component as a percentage of net sales: (in millions, except percentages and Year Ended December 31, per common share amounts) 2025 2024 Net sales $ 7,476.5 100.0 % $ 4,930.9 100.0 % Cost of sales 4,293.3 57.4 2,903.0 58.9 Gross profit 3,183.2 42.6 2,027.9 41.1 Selling and marketing expenses 1,739.0 23.3 939.4 19.1 General, administrative and other expenses 695.0 9.3 473.2 9.6 Loss on disposal of business 13.9 0.2 — — Equity income in earnings of unconsolidated affiliates (19.6) (0.3) (18.9) (0.4) Operating income 754.9 10.1 634.2 12.9 Other expense, net: Interest expense, net 267.9 3.6 134.8 2.7 Other expense (income), net 6.0 0.1 (4.9) (0.1) Total other expense, net 273.9 3.7 129.9 2.6 Income before income taxes 481.0 6.4 504.3 10.2 Income tax provision (95.7) (1.3) (118.6) (2.4) Net income before non-controlling interest 385.3 5.2 385.7 7.8 Less: Net income attributable to non-controlling interest 1.2 — 1.4 — Net income attributable to Somnigroup International Inc. $ 384.1 5.2 % $ 384.3 7.8 % Earnings per common share: Basic $ 1.86 $ 2.21 Diluted $ 1.84 $ 2.16 Weighted average common shares outstanding: Basic 206.0 173.6 Diluted 209.2 178.2 20 Table of Contents NET SALES Year Ended December 31, Consolidated Mattress Firm Tempur Sealy North America Tempur Sealy International (in millions) 2025 2024 2025 2024 2025 2024 2025 2024 Net sales by channel Direct $ 4,745.9 $ 1,229.3 $ 3,505.4 $ — $ 437.6 $ 513.7 $ 802.9 $ 715.6 Wholesale 2,730.6 3,701.6 — — 2,263.6 3,275.2 467.0 426.4 Total net sales $ 7,476.5 $ 4,930.9 $ 3,505.4 $ — $ 2,701.2 $ 3,788.9 $ 1,269.9 $ 1,142.0 Net sales increased 51.6%, and on a constant currency basis increased 51.1%.
Key Highlights Year Ended December 31, (in millions, except percentages and per common share amounts) 2024 2023 % Change Net sales $ 4,930.9 $ 4,925.4 0.1 % Net income $ 384.3 $ 368.1 4.4 % Adjusted net income (1) $ 455.1 $ 425.6 6.9 % EPS $ 2.16 $ 2.08 3.8 % Adjusted EPS (1) $ 2.55 $ 2.40 6.3 % (1) Non-GAAP financial measure.
Key Highlights Year Ended December 31, (in millions, except percentages and per common share amounts) 2025 2024 % Change % Change Constant Currency (1) Net sales $ 7,476.5 $ 4,930.9 51.6 % 51.1 % Net income $ 384.1 $ 384.3 (0.1) % (1.1) % Adjusted net income (1) $ 565.3 $ 455.1 24.2 % 23.3 % EPS $ 1.84 $ 2.16 (14.8) % (15.7) % Adjusted EPS (1) $ 2.70 $ 2.55 5.9 % 5.1 % 27 Table of Contents (1) Non-GAAP financial measure.
The increase in operating expenses was primarily driven by incremental bad debt expense related to retailer bankruptcies and investments in growth initiatives, partially offset by decreases in advertising. • International operating expenses increased $30.0 million, or 6.8%, and was flat as a percentage of net sales.
The decrease in operating expenses was primarily driven by decreases in bad debt expense related to retailer bankruptcies and other selling and marketing, partially offset by investments in advertising. • Tempur Sealy International operating expenses increased $40.9 million, or 10.6%, and decreased 10 basis points as a percentage of net sales.
In 2024, we did not make any changes to our reporting units or the accounting methodology we use to assess impairment loss on goodwill and indefinite-lived intangible assets, which included an assessment of the impairment of goodwill for our reporting units and indefinite-lived intangible assets using a quantitative approach.
In 2025, other than the addition of the Mattress Firm reporting unit, we did not make any changes to our reporting units or the accounting methodology we use to assess impairment loss on goodwill and indefinite-lived intangible assets.
Unless otherwise noted, all of the financial information in this Report is consolidated financial information for the Company, excluding Mattress Firm unless otherwise noted. 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.
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" and Part I, ITEM 1A of this Report.
For purposes of determining total debt for financial covenant purposes, we have added these costs back to total debt, net as calculated per the Consolidated Balance Sheets. (2) Netted cash includes cash and cash equivalents and restricted cash for domestic and foreign subsidiaries designated as "Restricted Subsidiaries" in the 2023 Credit Agreement.
For purposes of determining total debt for financial covenant purposes, we have added these costs back to total debt, net as calculated per the Consolidated Balance Sheets.
Our Direct channel includes company-owned stores, online and call centers. General Business and Economic Conditions We believe the bedding industry is structured for sustained growth, driven by product innovation, sleep technology advancements, consumer confidence, housing formations and population growth.
The Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare. General Business and Economic Conditions We believe the bedding industry is structured for sustained growth, driven by product innovation, sleep technology advancements, consumer confidence, housing formations and population growth.
Our reporting units are our North America segment, our International segment (excluding Dreams) and Dreams. We test individual indefinite-lived intangible assets at the brand level. These assessments may be performed quantitatively or qualitatively.
Our reporting units are Mattress Firm, Tempur Sealy North America, Tempur Sealy International (excluding Dreams) and Dreams. Mattress Firm was added as a separate reporting unit upon acquisition of the business on February 5, 2025. We test individual indefinite-lived intangible assets at the brand level. These assessments may be performed quantitatively or qualitatively.
(4) In the year ended 2024, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer. (5) We recorded $9.5 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities in the fourth quarter and year ended 2024.
(9) In the year ended 2024, we recorded $26.7 million of transition charges as a result of a customer's acquisition which foreclosed on our OEM distribution to this customer. (10) In the year ended 2024, we recorded $3.1 million of operational start-up costs related to the capacity expansion of our manufacturing and distribution facilities in the U.S.
Both consolidated indebtedness and adjusted EBITDA as used in discussion of the 2023 Credit Agreement are terms that are not recognized under GAAP and do not purport to be alternatives to net income as a measure of operating performance or total debt.
Both consolidated indebtedness and adjusted EBITDA as used in discussion of the 2023 Credit Agreement are terms that are not recognized under GAAP and do not purport to be alternatives to net income as a measure of operating performance or total debt. 25 Table of Contents Share Repurchase Program 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.
We currently expect our 2025 capital expenditures to be approximately $250 million, including $50 million of investments to refresh Mattress Firm stores. Indebtedness Our total debt increased to $3,844.5 million as of December 31, 2024 from $2,593.6 million as of December 31, 2023. Total availability under our revolving senior secured credit facility was $1,189.2 million as of December 31, 2024.
We currently expect our 2026 capital expenditures to be approximately $250 million, including $75 million of one-time investments to refresh Mattress Firm stores. Indebtedness Our total debt increased to $4,717.3 million as of December 31, 2025 from $3,844.5 million as of December 31, 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. 25 Table of Contents Our capital allocation strategy follows a balanced approach focused on supporting the business and returning shareholder value through strategic acquisition opportunities that enhance our global competitiveness, as well as quarterly dividends and opportunistic share repurchases.
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, share repurchases and dividend payments.
As of December 31, 2024, we had $3,844.5 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $2,134.8 million. Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 2.31 times for the year ended December 31, 2024.
Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 3.21 times for the year ended December 31, 2025. We currently expect our target leverage ratio to return to 2.0 to 3.0 times in the first half of 2026.
(4) Uncertain tax positions are excluded from this table given the timing of payments cannot be reasonably estimated.
(3) The payments due for finance lease obligations excludes $16.8 million in future payments for interest. (4) Uncertain tax positions are excluded from this table given the timing of payments cannot be reasonably estimated.
Year Ended December 31, (in millions, except per common share amounts) 2024 2023 Net income $ 384.3 $ 368.1 Transaction costs (1) 47.8 49.0 Customer-related transition charges (2) 26.7 — Transaction related interest expense, net (3) 9.8 — Supply chain transition costs (4) 9.5 — Operational start-up costs (5) 3.1 10.4 Cybersecurity event (6) (4.9) 14.3 Fair value remeasurement (7) — 11.0 Loss on extinguishment of debt (8) — 3.2 ERP system transition (9) — 3.2 Danish tax matter (10) — (10.2) Adjusted income tax provision (11) (21.2) (23.4) Adjusted net income $ 455.1 $ 425.6 Adjusted earnings per share, diluted $ 2.55 $ 2.40 Diluted shares outstanding 178.2 177.3 27 Table of Contents (1) We recorded $47.8 million of transaction costs, primarily related to legal and professional fees associated with the acquisition of Mattress Firm in the year ended 2024.
Year Ended December 31, (in millions, except per common share amounts) 2025 2024 Net income $ 384.1 $ 384.3 Acquisition-related costs (1) 114.2 — Transaction costs (2) 56.0 47.8 Business combination charges (3) 53.8 — Loss on disposal of business (4) 13.9 — Supply chain transition costs (5) 12.1 9.5 Disposition-related costs (6) 10.5 — Transaction-related interest expense, net (7) 6.8 9.8 Cloud-based computing arrangements impairment (8) 6.2 — Customer-related transition charges (9) — 26.7 Operational start-up costs (10) — 3.1 Cybersecurity event (11) — (4.9) Adjusted income tax provision (12) (92.3) (21.2) Adjusted net income $ 565.3 $ 455.1 Adjusted earnings per share, diluted $ 2.70 $ 2.55 Diluted shares outstanding 209.2 178.2 28 Table of Contents (1) In the year ended 2025, we recognized $114.2 million of acquisition-related costs following the Mattress Firm Acquisition, primarily related to one-time business combination accounting and purchase price allocation adjustments, professional fees and restructuring costs.
Year Ended December 31, (in millions) 2024 2023 Net cash provided by (used in) continuing operations: Operating activities $ 666.5 $ 570.3 Investing activities (96.7) (187.8) Financing activities 1,077.4 (384.3) Cash provided by operating activities increased $96.2 million in 2024 as compared to 2023.
Year Ended December 31, (in millions) 2025 2024 Net cash provided by (used in) continuing operations: Operating activities $ 800.1 $ 666.5 Investing activities (3,024.3) (96.7) Financing activities 616.9 1,077.4 Cash provided by operating activities increased $133.6 million in 2025 as compared to 2024, primarily driven by the Mattress Firm Acquisition and strong operational performance.
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 year ended December 31, 2024.
(7) In the year ended 2025, we recorded $6.2 million of impairment charges related to certain cloud-based computing arrangements. 30 Table of Contents 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 year ended December 31, 2024.
In 2024, we operated in two segments: North America and International. These segments are strategic business units that are managed separately based on geography. Our North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico.
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.
If sales of our value priced products increase relative to sales of our premium products, our gross margins will be negatively impacted in both our North America and International segments.
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 products, our gross margins will be negatively impacted across all segments.
Principal uses of funds consist of payments of principal and interest on our debt facilities, share repurchases, capital expenditures and working capital needs.
Principal uses of funds consist of payments of principal and interest on our debt facilities, share repurchases, capital expenditures and working capital needs. Cash and Working Capital Cash and cash equivalents were $134.9 million and $117.4 million, as of December 31, 2025 and 2024, respectively.
Additionally, we repurchased shares of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans for $43.8 million in 2024 as compared to $36.0 million in 2023. Capital Expenditures Capital expenditures were $97.3 million and $185.4 million for the year ended December 31, 2024 and 2023, respectively.
We repurchased shares of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans for $132.4 million in 2025 as compared to $43.8 million in 2024. Additionally, we paid dividends to shareholders of $127.4 million in 2025 as compared to $92.7 million in 2024.
For the year ended December 31, 2024, our adjustments to net income when calculating adjusted EBITDA did not exceed the allowable amount under the 2023 Credit Agreement. The ratio of consolidated indebtedness less netted cash to adjusted EBITDA was 2.31 times for the trailing twelve months ended December 31, 2024.
Under the 2023 Credit Agreement, the definition of adjusted EBITDA contains certain restrictions that limit adjustments to net income when calculating adjusted EBITDA. For the year ended December 31, 2025, our adjustments to net income when calculating adjusted EBITDA did not exceed the allowable amount under the 2023 Credit Agreement.
The primary drivers of changes in operating expenses by segment are discussed below: • North America operating expenses increased $24.3 million, or 2.7%, and increased 100 basis points as a percentage of net sales.
The primary drivers of changes in operating expenses by segment are discussed below: • Mattress Firm operating expenses were $976.8 million for the stub period. • Tempur Sealy North America operating expenses decreased $33.9 million, or 4.0%, and increased 780 basis points as a percentage of net sales.
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. The following table sets forth the reconciliation of our reported total debt to the calculation of consolidated indebtedness less netted cash as of December 31, 2024 and 2023.
The following table sets forth the reconciliation of our reported total debt to the calculation of consolidated indebtedness less netted cash as of December 31, 2025 and 2024. "Consolidated Indebtedness" and "Netted Cash" are terms used in the 2023 Credit Agreement for purposes of certain financial covenants.
Dollar or other major foreign currencies is not material to our overall liquidity or financial position. 23 Table of Contents Cash Provided by (Used in) Continuing Operations The table below presents net cash provided by (used in) operating, investing and financing activities from continuing operations for the years ended December 31, 2024 and 2023.
Cash Provided by (Used in) Continuing Operations The table below presents net cash provided by (used in) operating, investing and financing activities from continuing operations for the years ended December 31, 2025 and 2024.
OPERATING INCOME Year Ended December 31, 2024 2023 Margin Change (in millions, except percentages) Operating Income Operating Margin Operating Income Operating Margin 2024 vs 2023 North America $ 612.1 16.2 % $ 643.1 16.7 % (0.5) % International 194.9 17.1 % 170.9 16.0 % 1.1 % 807.0 814.0 Corporate expenses (172.8) (206.8) Total operating income $ 634.2 12.9 % $ 607.2 12.3 % 0.6 % 22 Table of Contents Operating income increased $27.0 million and operating margin improved 60 basis points.
Research and development expenses for the year ended December 31, 2025 were $32.9 million as compared to $30.8 million for the year ended December 31, 2024, an increase of $2.1 million, or 6.8%. 22 Table of Contents OPERATING INCOME Year Ended December 31, 2025 2024 Margin Change (in millions, except percentages) Operating Income Operating Margin Operating Income Operating Margin 2025 vs 2024 Mattress Firm $ 190.8 5.4 % $ — — % 5.4 % Tempur Sealy North America 553.3 20.5 % 612.1 16.2 % 4.3 % Tempur Sealy International 221.2 17.4 % 194.9 17.1 % 0.3 % 965.3 807.0 Corporate expenses (210.4) (172.8) Total operating income $ 754.9 10.1 % $ 634.2 12.9 % (2.8) % Operating income increased $120.7 million and operating margin declined 280 basis points.
See "Special Note Regarding Forward-Looking Statements" and Part I, ITEM 1A of this Report. Our actual results may differ materially from those contained in any forward-looking statements.
Our actual results may differ materially from those contained in any forward-looking statements.
Acquisition of Mattress Firm On February 5, 2025, we completed the acquisition of Mattress Firm for an aggregate purchase price of approximately $5.1 billion, net of cash acquired of $0.3 billion.
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. Acquisition of Mattress Firm On February 5, 2025, we completed the acquisition of Mattress Firm for an aggregate purchase price of approximately $5.1 billion, net of cash acquired of $0.3 billion.
The amount of cash and cash equivalents held by subsidiaries outside of the U.S. and not readily convertible into the U.S.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2024, the value of our variable-rate debt was $2,155.8 million. Based on our balance sheet position as of December 31, 2024, the annualized effect of a 10% percentage point increase in floating interest rates on our variable-rate debt obligations would cause an estimated reduction on income before income taxes of $21.6 million.
Biggest changeAs of December 31, 2025, the value of our variable-rate debt was $3,006.7 million. A sensitivity analysis using a one hundred basis point increase in interest rates on our variable-rate debt as of December 31, 2025, and holding other variables consistent, would cause an estimated reduction in income before income taxes of $30.1 million.
Such losses would be largely offset by gains from the revaluation or settlement of the underlying assets and liabilities that are being protected by the foreign exchange forward contracts. 32 Table of Contents
Such losses would be largely offset by gains from the revaluation or settlement of the underlying assets and liabilities that are being protected by the foreign exchange forward contracts.
A sensitivity analysis indicates the potential loss in fair value on foreign exchange forward contracts outstanding at December 31, 2024, resulting from a hypothetical 10.0% adverse change in all foreign currency exchange rates against the U.S. dollar, is approximately $2.9 million.
A sensitivity analysis indicates the potential loss in fair value on foreign exchange forward contracts outstanding at December 31, 2025, resulting from a hypothetical 10.0% adverse change in all foreign currency exchange rates against the U.S. dollar, is approximately $4.0 million.
Foreign Currency Exchange Risk We hedge a portion of our currency exchange exposure relating to foreign currency transactions with foreign exchange forward contracts.
We continue to evaluate the interest rate environment and look for opportunities to improve our debt structure and minimize our interest rate risk and expense. Foreign Currency Exchange Risk We hedge a portion of our currency exchange exposure relating to foreign currency transactions with foreign exchange forward contracts.
Added
During the year ended 2025, we converted $150.0 million of our 4.00% fixed-rate USD-denominated 2029 Senior Notes, including the semi-annual interest payments thereunder, to fixed-rate DKK denominated debt at rate of 1.9809%. We have designated these cross currency swap agreements as net investment hedges.

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