Somnigroup Q3 net income falls 7.8% to $164M
Dreams' ERP implementation brought manufacturing delays and extended delivery times, adversely affecting customer conversion and resulting in lost sales.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Somnigroup International Inc. (SGI) reported third-quarter net sales of $2,350.8 million, up 10.8% from $2,122.6 million; $372.6 million came from Leggett & Platt during the period after its August 26, 2026 acquisition. Net income attributable to Somnigroup was $163.5 million, down from $177.4 million, and diluted EPS was $0.74 versus $0.83. Operating income was $297.4 million versus $314.7 million, while gross margin was 42.0% versus 44.9%.
Adjusted operating income, a non-GAAP measure, increased 6.0% to $364.2 million; adjusted net income increased 13.7% to $228.9 million, and adjusted diluted EPS increased 9.5% to $1.04. For the nine months ended September 30, 2026, net cash provided by operating activities was $831.9 million, compared with $700.7 million.
The company completed its acquisition of Leggett & Platt for approximately $730.0 million, net of $560.2 million cash acquired; total consideration of $1.3 billion included approximately 19.9 million common shares. At September 30, 2026, long-term debt, net, was $5,276.2 million, and the company reported compliance with all applicable debt covenants.
3 points · 0 major0 major · 3 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointQuarterly sales rose 10.8%, including $372.6 million from Leggett & Platt.
- Moderate pointNine-month operating cash flow was $831.9 million, versus $700.7 million.
- Moderate pointAdjusted operating income rose 6.0% to $364.2 million.
Negative
- Moderate pointQuarterly operating income fell 5.5% to $297.4 million.
- Moderate pointQuarterly net income attributable fell 7.8% to $163.5 million.
- Minor pointDiluted EPS fell 10.8% to $0.74.
Filing Explained
This Somnigroup quarterly report adds a post-quarter debt update: on
Key Figures
Net sales: $2,350.8 million; up 10.8% from $2,122.6 million
Gross margin: 42.0% versus 44.9%
Net income attributable to Somnigroup: $163.5 million versus $177.4 million
+5 more
8 metrics
Net sales
$2,350.8 million; up 10.8% from $2,122.6 million
Three months ended September 30, 2026, compared with 2025
Gross margin
42.0% versus 44.9%
Three months ended September 30, 2026, compared with 2025
Net income attributable to Somnigroup
$163.5 million versus $177.4 million
Three months ended September 30, 2026, compared with 2025
Diluted EPS
$0.74 per share versus $0.83 per share
Three months ended September 30, 2026, compared with 2025
Adjusted operating income
$364.2 million; up 6.0% from $343.7 million
Three months ended September 30, 2026; non-GAAP measure
Net cash provided by operating activities
$831.9 million versus $700.7 million
Nine months ended September 30, 2026, compared with 2025
Leggett & Platt acquisition purchase price
Approximately $730.0 million, net of $560.2 million cash acquired
Acquisition completed August 26, 2026
Long-term debt, net
$5,276.2 million
As of September 30, 2026
Key Terms
non-GAAP financial measure, constant currency basis, stub period, Accounts Receivable Securitization, +1 more
5 terms
non-GAAP financial measure financial
"Adjusted operating income, which is a non-GAAP financial measure"
A non-GAAP financial measure is a way companies present their financial results that excludes certain expenses or income to show how they believe their core business is performing. It matters because it can give a clearer picture of how the company is really doing, but it can also be used to make results look better than they actually are.
constant currency basis financial
"Net sales increased 10.8%, and on a constant currency basis increased 10.8%"
A "constant currency basis" is a way companies compare financial results by removing the effects of changing exchange rates between different currencies. It helps show how the business is really performing, without the confusion caused by currency value swings, much like adjusting for inflation to see true growth.
stub period financial
"Leggett & Platt stub period"
An abbreviated accounting period that covers the time between a transaction date (such as an acquisition, spin-off, IPO or change in fiscal year) and the next regular reporting date; financial results for a stub period show revenues, expenses and cash flows for that partial interval rather than a full quarter or year. Stub-period figures are used in pro forma or comparative financial statements and often require adjustments (for seasonality, one‑time items, or allocation of annual expenses) because they do not reflect a complete reporting cycle.
Accounts Receivable Securitization financial
"party to a securitization transaction with respect to certain accounts receivable"
A financing method where a company converts money owed by its customers (accounts receivable) into immediate cash by selling or pledging those customer payments to an outside lender or investor. Think of it like selling a bundle of IOUs to get money now instead of waiting, which can boost short-term cash flow and reduce visible borrowing; investors watch it because the terms and quality of the receivables affect a company’s liquidity, risk profile, and true leverage.
purchase price allocation financial
"The final allocation of the purchase price is based on the fair values"
Purchase price allocation is the accounting process that breaks down the total amount paid for an acquired business into specific pieces—like tangible assets, identifiable intangible assets (brands, patents, customer lists) and goodwill—based on their estimated fair values. Investors care because this breakdown affects future earnings, tax costs and reported asset values: higher allocations to amortizable intangibles or goodwill can change profit volatility, depreciation and potential impairment charges, similar to splitting a restaurant bill to see what you actually bought versus what you paid extra for goodwill.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
Why did SGI's international sales fall in Q3 2026?
Tempur Sealy International net sales decreased 12.3%, primarily driven by a 34.7% decrease at Dreams following implementation of a new ERP system amid challenging market conditions. The implementation resulted in temporary operational disruptions, including manufacturing delays and extended delivery times, which adversely affected customer conversion and resulted in lost sales.
What dividend did SGI declare for the third quarter of 2026?
Somnigroup declared a common-stock dividend of $0.17 per share in the quarter ended September 30, 2026.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 2026
or
For the transition period from to .
Commission file number 001-31922
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices)
Registrant’s telephone number, including area code: (800 ) 878-8889
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging Growth Company | |||||||||||
| x | o | o | ||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ý
The number of shares outstanding of the registrant’s common stock as of November 4, 2026 was 230,249,931 shares.
Table of Contents
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this "Report"), including the information incorporated by reference herein, contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which includes information concerning one or more of our plans; objectives; goals; strategies and other information that is not historical information. Many of these statements appear, in particular, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I, ITEM 2 of this Report. When used in this Report, the words "assumes," "estimates," "expects," "guidance," "anticipates," "might," "projects," "predicts," "plans," "proposed," "targets," "intends," "believes," "will," "may," "could," "is likely to" and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations and beliefs and various assumptions. There can be no assurance that we will realize our expectations or that our beliefs will prove correct.
Numerous factors, many of which are beyond the Company's control, could cause actual results to differ materially from any that may be expressed herein as forward-looking statements in this Report. These risk factors include the impact of the macroeconomic environment including its impact on consumer behavior in both the U.S. and internationally on our business segments and expectations regarding growth of the mattress industry; changes in economic conditions, including inflationary trends in the price of raw materials; uncertainties arising from global and geopolitical events (including the wars in Ukraine and the Middle East) and any related effect on pricing, sales and supply of materials, labor costs and other employment-related costs; the imposition of new tariffs and retaliatory tariffs, increases in existing tariffs and other changes in trade policy and regulations; loss of suppliers and disruptions in the supply of raw materials; competition in our industry; the effects of strategic investments on our operations, including our efforts to expand our global market share and actions taken to increase sales growth including the acquisitions of Mattress Firm and Leggett & Platt; expectations regarding post-closing supply agreements, future performance, synergies and integration of acquired companies with our business, including Mattress Firm and Leggett & Platt; the ability to successfully integrate Mattress Firm and Leggett & Platt into the Company's operations and realize all synergies from the transactions; the possibility that the expected benefits of the Mattress Firm and Leggett & Platt acquisitions are not realized when expected or at all; general economic, financial and industry conditions, particularly conditions relating to the financial performance and related credit issues present in the retail sector, as well as consumer confidence and the availability of consumer financing; the ability to develop and successfully launch new products; capital project timelines; the ability to realize all synergies and benefits of acquisitions (including the acquisitions of Mattress Firm and Leggett & Platt); our reliance on information technology ("IT") and the associated risks involving realized or potential security lapses and/or cyber-based attacks; the impact of cybersecurity incidents on our business, results of operations or financial condition, including our assessments of such impact; the Company's ability to restore its critical operational data and IT systems in a reasonable time frame following a cybersecurity incident; changes in interest rates; effects of changes in foreign exchange rates on our reported earnings; expectations regarding our target leverage and our share repurchase program; compliance with regulatory requirements and the possible exposure to liability for failures to comply with these requirements; the outcome of pending tax audits or other tax, regulatory or investigation proceedings and pending litigation; changes in foreign tax rates and changes in tax laws generally, including the ability to utilize tax loss carryforwards and the H.R. 1 tax act ("Tax Act"); and our capital structure and debt level, including our ability to meet financial obligations and continue to comply with the terms and financial ratio covenants of our credit facilities.
Other potential risk factors include the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report"). In addition, there may be other factors that may cause our actual results to differ materially from the forward-looking statements.
All forward-looking statements attributable to us apply only as of the date of this Report and are expressly qualified in their entirety by the cautionary statements included in this Report. Except as may be required by law, we undertake no obligation to publicly update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.
2
Table of Contents
When used in this Report, except as specifically noted otherwise, the term "Somnigroup International" refers to the parent company Somnigroup International Inc. only, and the terms "Somnigroup," "Company," "we," "our," "ours" and "us" refer to Somnigroup International Inc. and its consolidated subsidiaries. When used in this Report, the term "Tempur" may refer to Tempur-branded products and the term "Sealy" may refer to Sealy-branded products or to Sealy Corporation and its historical subsidiaries, in all cases as the context requires. When used in this Report, the term "Mattress Firm" refers to Mattress Firm Group Inc. and its direct and indirect wholly-owned subsidiaries or Mattress Firm Group LLC and its direct and indirect wholly-owned subsidiaries as the context requires, and the term "Mattress Firm Acquisition" refers to the acquisition of Mattress Firm which was finalized on February 5, 2025. When used in this Report, the term "Leggett & Platt" refers to Leggett & Platt, Incorporated and its direct and indirect wholly-owned subsidiaries as the context requires, and the term "Leggett & Platt Acquisition" refers to the acquisition of Leggett & Platt which was finalized on August 26, 2026. In addition, when used in this Report, "2023 Credit Agreement" refers to the Company's senior credit facility entered into in 2023, and amended in February 2024, October 2024, June 2025, July 2026 and October 2026; "Term B Loan" refers to the incremental term B loan facility entered into in 2024; "Delayed Draw Term A Loan" refers to the delayed draw term A loan commitment entered into in 2024; "2029 Senior Notes" refers to the 4.00% senior notes due 2029 issued in 2021; "2031 Senior Notes" refers to the 3.875% senior notes due 2031 issued in 2021; and "Leggett & Platt Senior Notes" collectively refers to the 3.50% senior notes due 2027, the 4.40% senior notes due 2029 and the 3.50% senior notes due 2051 assumed as part of the Leggett & Platt Acquisition.
3
TABLE OF CONTENTS
| Page | ||||||||
Special Note Regarding Forward-Looking Statements | 2 | |||||||
PART I. FINANCIAL INFORMATION | ||||||||
ITEM 1. | Financial Statements | |||||||
Condensed Consolidated Statements of Income | 5 | |||||||
Condensed Consolidated Statements of Comprehensive Income | 6 | |||||||
Condensed Consolidated Balance Sheets | 7 | |||||||
Condensed Consolidated Statements of Stockholders' Equity | 8 | |||||||
Condensed Consolidated Statements of Cash Flows | 10 | |||||||
Notes to Condensed Consolidated Financial Statements | 11 | |||||||
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 | ||||||
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 47 | ||||||
ITEM 4. | Controls and Procedures | 48 | ||||||
PART II. OTHER INFORMATION | ||||||||
ITEM 1. | Legal Proceedings | 48 | ||||||
ITEM 1A. | Risk Factors | 48 | ||||||
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 49 | ||||||
ITEM 3. | Defaults upon Senior Securities | 49 | ||||||
ITEM 4. | Mine Safety Disclosures | 49 | ||||||
ITEM 5. | Other Information | 49 | ||||||
ITEM 6. | Exhibits | 50 | ||||||
Signatures | 51 | |||||||
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in millions, except per common share amounts)
(unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling and marketing expenses | |||||||||||||||||||||||
| General, administrative and other expenses | |||||||||||||||||||||||
| Loss on disposal of business | |||||||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | ( | ( | ( | ( | |||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Loss on extinguishment of debt | |||||||||||||||||||||||
| Other expense (income), net | ( | ||||||||||||||||||||||
| Total other expense, net | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income tax provision | ( | ( | ( | ( | |||||||||||||||||||
| Net income before non-controlling interest | |||||||||||||||||||||||
| Less: Net (loss) income attributable to non-controlling interest | ( | ( | |||||||||||||||||||||
| Net income attributable to Somnigroup International Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
Table of Contents
SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
(unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income before non-controlling interest | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
| Net change in pension benefits, net of tax | |||||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||
| Less: Comprehensive (loss) income attributable to non-controlling interest | ( | ( | |||||||||||||||||||||
| Comprehensive income attributable to Somnigroup International Inc. | $ | $ | $ | $ | |||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
6
Table of Contents
SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
| September 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | (unaudited) | ||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total Current Assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Trade name and other intangible assets, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-current assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Short-term operating lease obligations | |||||||||||
| Current portion of long-term debt | |||||||||||
| Income taxes payable | |||||||||||
| Total Current Liabilities | |||||||||||
| Long-term debt, net | |||||||||||
| Long-term operating lease obligations | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-current liabilities | |||||||||||
| Total Liabilities | |||||||||||
| Redeemable non-controlling interest | |||||||||||
| Total Stockholders' Equity | |||||||||||
| Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
7
Table of Contents
SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($ in millions) (unaudited)
Three Months Ended September 30, 2026
| Somnigroup International Inc. Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Non-controlling Interest | Common Stock | Treasury Stock | Accumulated Other Comprehensive Loss | Non-controlling Interest in Subsidiaries | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | At Par | Shares Issued | At Cost | Additional Paid in Capital | Retained Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2026 | $ | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of non-controlling interest in subsidiary | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to non-controlling interest | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments, net of tax | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared on common stock ($ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued in connection with Leggett & Platt Acquisition | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuances of PRSUs and RSUs | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock repurchased - PRSU/RSU releases | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of September 30, 2026 | $ | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2025
| Somnigroup International Inc. Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Non-controlling Interest | Common Stock | Treasury Stock | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | At Par | Shares Issued | At Cost | Additional Paid in Capital | Retained Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2025 | $ | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to non-controlling interest | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend paid to non-controlling interest in subsidiary | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments, net of tax | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared on common stock ($ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuances of PRSUs and RSUs | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of September 30, 2025 | $ | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
8
Table of Contents
SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
($ in millions) (unaudited)
Nine Months Ended September 30, 2026
| Somnigroup International Inc. Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Non-controlling Interest | Common Stock | Treasury Stock | Accumulated Other Comprehensive (Loss) Income | Non-controlling Interest in Subsidiaries | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | At Par | Shares Issued | At Cost | Additional Paid in Capital | Retained Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2025 | $ | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of non-controlling interest in subsidiary | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to non-controlling interests | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend paid to non-controlling interest in subsidiary | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment to pension liability, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments, net of tax | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared on common stock ($ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued in connection with Leggett & Platt Acquisition | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuances of PRSUs and RSUs | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock repurchased - PRSU/RSU releases | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of September 30, 2026 | $ | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2025
| Somnigroup International Inc. Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Non-controlling Interest | Common Stock | Treasury Stock | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued | At Par | Shares Issued | At Cost | Additional Paid in Capital | Retained Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2024 | $ | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to non-controlling interests | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividend paid to non-controlling interest in subsidiary | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment to pension liability, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency adjustments, net of tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared on common stock ($ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued in connection with Mattress Firm Acquisition | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuances of PRSUs and RSUs | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock repurchased - PRSU/RSU releases | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock repurchased - merger consideration | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned stock-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of September 30, 2025 | $ | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
(unaudited)
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income before non-controlling interest | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of stock-based compensation | |||||||||||
| Amortization of deferred financing costs and discounts | |||||||||||
| Bad debt expense | |||||||||||
| Deferred income taxes | |||||||||||
| Dividends received from unconsolidated affiliates | |||||||||||
| Equity income in earnings of unconsolidated affiliates | ( | ( | |||||||||
| Loss on extinguishment of debt | |||||||||||
| Loss on disposal of business | |||||||||||
| Loss on sale of assets and other | |||||||||||
| Changes in operating assets and liabilities, net of effect of business acquisitions | |||||||||||
| Net cash provided by operating activities | |||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchases of property, plant and equipment | ( | ( | |||||||||
| Acquisitions, net of cash acquired | ( | ||||||||||
| Proceeds from sale of property, plant and equipment | |||||||||||
| Purchases of investments | ( | ( | |||||||||
| Other | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from borrowings under long-term debt obligations | |||||||||||
| Repayments of borrowings under long-term debt obligations | ( | ( | |||||||||
| Proceeds from exercise of stock options | |||||||||||
| Treasury stock repurchased | ( | ( | |||||||||
| Dividends paid | ( | ( | |||||||||
| Repayments of finance lease obligations and other | ( | ( | |||||||||
| Net cash (used in) provided by financing activities | ( | ||||||||||
| NET EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | |||||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Non-cash investing activities: | |||||||||||
| Treasury stock issued in connection with acquisitions | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation and Description of Business. Somnigroup International Inc., a Delaware corporation, together with its subsidiaries, is a U.S. based multinational company. The term "Somnigroup International" refers to Somnigroup International Inc. only, and the term "Company" refers to Somnigroup International Inc. and its consolidated subsidiaries.
On February 5, 2025, the Company completed the previously announced acquisition of Mattress Firm, the largest mattress specialty retailer in the U.S. Mattress Firm was founded in 1986 and operates over 2,100 brick-and-mortar retail locations and a growing e-commerce platform. Mattress Firm's highly trained retail sales associates provide personalized service to help consumers choose the ideal bedding products across their robust assortment of market-leading brands.
On August 26, 2026, the Company completed its previously announced acquisition of Leggett & Platt, a leading manufacturer of engineered components and products for the bedding, furniture, flooring, textile, automotive and industrial markets. Founded in 1883, Leggett & Platt operates approximately 100 manufacturing facilities across 19 countries and is a key supplier of bedding components, including innersprings, specialty foam, adjustable bed mechanisms and machinery. The acquisition strengthens the Company's vertical integration strategy by bringing a critical part of its supply chain in-house, enhancing product innovation, operational efficiency and global manufacturing capabilities across its portfolio.
The Company designs, manufactures, distributes and retails bedding products, which include mattresses, foundations and adjustable bases, and other products, which include pillows and other accessories, enhanced by Leggett & Platt's diversified component engineering expertise. The Company also derives income from royalties by licensing Sealy®, Stearns & Foster® and Tempur® brands, technology and trademarks to other manufacturers, as well as licensing the Mattress Firm® trademark to retail franchisees. The Company sells its products through three sales channels: Direct bedding, Wholesale bedding and furnishings and Specialized products.
The Company has ownership interests in Asia-Pacific joint ventures to develop markets for Sealy® and Stearns & Foster® branded products and ownership in a United Kingdom joint venture to manufacture, market and distribute Sealy® and Stearns & Foster® branded products. The Company's ownership interests in each of these joint ventures is 50.0
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States ("GAAP") for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended December 31, 2025, included in the 2025 Annual Report filed with the Securities and Exchange Commission on February 27, 2026.
The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.
(b) Inventories. Inventories are stated at the lower of cost or net realizable value, determined by either the first-in, first-out method or the weighted average cost method, depending on reportable segment , and consist of the following:
| September 30, | December 31, | ||||||||||
| (in millions) | 2026 | 2025 | |||||||||
| Finished goods | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Raw materials and supplies | |||||||||||
| $ | $ | ||||||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(c) Fair Value. Financial instruments, although not recorded at fair value on a recurring basis, include cash and cash equivalents, accounts receivable, accounts payable and the Company's debt obligations. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of those instruments. Borrowings under the 2023 Credit Agreement (as defined in Note 5, "Debt") and the securitized debt are at variable interest rates and accordingly their carrying amounts approximate fair value. The fair values of the following material financial instruments were based on Level 1 and Level 2 inputs, which include observable inputs estimated using discounted cash flows and market-based expectations for interest rates, credit risk and the contractual terms of debt instruments. The fair values of these material financial instruments are as follows:
| Fair Value | ||||||||||||||
| (in millions) | September 30, 2026 | December 31, 2025 | ||||||||||||
| 2029 Senior Notes | $ | $ | ||||||||||||
| 2031 Senior Notes | $ | $ | ||||||||||||
| 2027 Leggett & Platt Senior Notes | $ | $ | ||||||||||||
| 2029 Leggett & Platt Senior Notes | $ | $ | ||||||||||||
| 2051 Leggett & Platt Senior Notes | $ | $ | ||||||||||||
(d) Accounts Payable Programs. Following the Leggett & Platt Acquisition, the Company utilizes third-party programs that allow suppliers to be paid earlier at a discount. While the Company continues to make payments based on its customary terms, a supplier can elect to take payment from a third party earlier with a discount, and in that case, the Company pays the third party on the original due date of the invoice. Contracts with suppliers are negotiated independently of supplier participation in the programs, and the Company cannot increase payment terms pursuant to the programs. The accounts payable settled through the third-party programs, which remain on the Condensed Consolidated Balance Sheet, were approximately $110.0 million at September 30, 2026.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(2) Net Sales
The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the three months ended September 30, 2026 and 2025:
| Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Consolidated | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Channel | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct bedding | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Wholesale bedding and furnishings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Specialized products | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Consolidated | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Geographical Region | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| All other | 134.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
The following table presents the Company's disaggregated revenue by channel and geographical region, including a reconciliation of disaggregated revenue by segment, for the nine months ended September 30, 2026 and 2025:
| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Consolidated | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Channel | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct bedding | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Wholesale bedding and furnishings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Specialized products | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Consolidated | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Geographical Region | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| All other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(3) Acquisitions and Divestitures
Acquisition of Mattress Firm Group Inc.
On February 5, 2025, the Company completed its Mattress Firm Acquisition for an aggregate purchase price of approximately $5.1 billion, net of cash acquired of $0.3 billion. The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of the Company's common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of the Company's common stock on the New York Stock Exchange (the "NYSE") on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.
The Mattress Firm Acquisition enhances the Company's global omni-channel strategy and enables a seamless consumer experience, among other things. Mattress Firm operates as a separate business segment within the Company. The Company accounted for this transaction as a business combination in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Mattress Firm's financial results for the period July 1, 2025 through September 30, 2025 and February 5, 2025 through September 30, 2025 (the "Mattress Firm stub period") are included in our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2025, respectively.
On May 1, 2025, the Company completed the previously announced divestiture of 73 Mattress Firm retail locations and the Company's Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers to MW SO Holdings Company, LLC ("Mattress Warehouse").
Purchase Price Consideration
The final purchase price of Mattress Firm as of February 5, 2025 consists of the following items:
| (in millions) | ||||||||
| Cash | $ | |||||||
Common stock of the Company (1) | ||||||||
Effective settlement of pre-existing relationships (2) | ||||||||
| Total consideration | $ | |||||||
| Cash acquired | ( | |||||||
| Net consideration transferred | $ | |||||||
| (1) | The stock consideration of | |||||||
| (2) | Represents the effective settlement of Mattress Firm outstanding payables to Somnigroup, net of incentives receivable. No gain or loss was recognized on this settlement. | |||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Final Purchase Price Allocation
The final allocation of the purchase price is based on the fair values of the assets acquired and liabilities assumed as of February 5, 2025.
The components of the final purchase price allocation are as follows:
| (in millions) | Final Allocation | ||||||||||||||||
| Accounts receivable, net | $ | ||||||||||||||||
| Inventories | |||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||
| Assets held for sale | |||||||||||||||||
| Property and equipment | |||||||||||||||||
| Operating lease right-of-use assets | |||||||||||||||||
| Other non-current assets | |||||||||||||||||
| Indefinite-lived trade names | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Fair value of assets acquired | $ | ||||||||||||||||
| Accounts payable | ( | ||||||||||||||||
| Accrued expenses and other current liabilities | ( | ||||||||||||||||
| Income taxes payable | ( | ||||||||||||||||
| Liabilities held for sale | ( | ||||||||||||||||
| Long-term operating lease obligations | ( | ||||||||||||||||
| Deferred tax liability | ( | ||||||||||||||||
| Other non-current liabilities | ( | ||||||||||||||||
| Long-term debt | ( | ||||||||||||||||
| Fair value of liabilities assumed | ( | ||||||||||||||||
| Net consideration transferred | |||||||||||||||||
| Cash acquired | |||||||||||||||||
| Total consideration transferred | $ | ||||||||||||||||
The indefinite-lived intangible asset represents the Mattress Firm trade name. The Company applied the income approach through a relief from royalty method to fair value the trade name asset using Level 3 inputs. The indefinite-lived intangible asset is not deductible for income tax purposes.
Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the future economic benefits expected from the expansion of consumer touchpoints, the assembled workforce acquired and operating efficiencies. Due to carryover tax basis, approximately $164.6 million of the goodwill is deductible for income tax purposes and approximately $3,329.3 million is non-deductible for income tax purposes. Combined total goodwill of $3,493.9 million is included within the Mattress Firm segment.
Transaction Costs
The Company incurred an immaterial amount of transaction costs (primarily legal and professional fees) related to the Mattress Firm Acquisition during the three months ended September 30, 2025. The Company incurred $50.2 million of transaction costs related to the Mattress Firm Acquisition during the nine months ended September 30, 2025, which are included in general, administrative and other expenses in the Condensed Consolidated Statements of Income.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Consolidated Results of Operations
The business acquired in the Mattress Firm Acquisition contributed revenue of $1,070.8 million and $2,613.3 million for the three and nine months ended September 30, 2025, respectively, and contributed net income of $66.7 million and $119.8 million for the three and nine months ended September 30, 2025, respectively.
Acquisition of Leggett & Platt
On August 26, 2026, the Company completed its Leggett & Platt Acquisition, pursuant to which the Company acquired 100 % of Leggett & Platt, for an aggregate purchase price of approximately $730.0 million, net of cash acquired of $560.2 million. The total consideration of $1.3 billion consisted of approximately 19.9 million shares of the Company's common stock valued at $64.09 per share, which represents the closing price per share of the Company's 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.
In connection with the Leggett & Platt Acquisition, the Company assumed certain outstanding Leggett & Platt equity awards, including restricted stock units ("RSUs"), performance restricted stock units ("PRSUs") and stock options (the "Somnigroup Assumed Awards"). These awards were converted to Somnigroup awards based on the merger exchange ratio of 0.1455 and retained the remaining service periods and other applicable terms of the original Leggett & Platt awards.
The Leggett & Platt deferred compensation plans were converted into notional cash investments based on the average closing price of Leggett & Platt common stock for the five trading days immediately prior to the closing date of the merger (the "Leggett & Platt Cash-Settled Plans").
The Leggett & Platt Acquisition continues the Company's vertical integration strategy by bringing a critical part of its supply chain in-house, enhancing product innovation, operational efficiency and global manufacturing capabilities across its portfolio. Leggett & Platt operates as a separate business segment within the Company. The Company accounted for this transaction as a business combination in accordance with ASC 805, Business Combinations. Leggett & Platt's financial results for the period August 26, 2026 through September 30, 2026 (the "Leggett & Platt stub period") are included in the Company's Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2026.
Purchase Price Consideration
The preliminary purchase price of Leggett & Platt as of August 26, 2026 consists of the following items:
| (in millions) | ||||||||
Common stock of the Company (1) | $ | |||||||
Leggett & Platt Cash-Settled Plans attributable to pre-combination service (2) | ||||||||
Somnigroup Assumed Awards attributable to pre-combination service (3) | ||||||||
Effective settlement of pre-existing relationships (4) | ( | |||||||
| Total consideration | $ | |||||||
| Non-controlling interest | ||||||||
| Less: Cash acquired | ( | |||||||
| Net consideration transferred | $ | |||||||
| (1) | The stock consideration of | |||||||
| (2) | Represents the fair value of the Leggett & Platt Cash-Settled Plans related to the pre-combination service period. | |||||||
| (3) | Represents the fair value of the Somnigroup Assumed Awards related to the pre-combination service period of $ | |||||||
| (4) | Represents the effective settlement of Leggett & Platt's outstanding receivables from Somnigroup. No gain or loss was recognized on this settlement. | |||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Preliminary Purchase Price Allocation
The preliminary allocation of the purchase price is based on the fair values of the assets acquired and liabilities assumed as of August 26, 2026.
The components of the preliminary purchase price allocation are as follows:
| (in millions) | August 26, 2026 | ||||||||||||||||
| Accounts receivable, net | $ | ||||||||||||||||
| Inventories | |||||||||||||||||
| Prepaid expenses and other current assets | |||||||||||||||||
| Property, plant and equipment | |||||||||||||||||
| Operating lease right-of-use assets | |||||||||||||||||
| Deferred tax assets | |||||||||||||||||
| Other non-current assets | |||||||||||||||||
| Intangible assets | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Preliminary fair value of assets acquired | $ | ||||||||||||||||
| Accounts payable | $ | ( | |||||||||||||||
| Accrued expenses and other current liabilities | ( | ||||||||||||||||
| Income taxes payable | ( | ||||||||||||||||
| Operating lease obligations | ( | ||||||||||||||||
| Deferred tax liability | ( | ||||||||||||||||
| Other non-current liabilities | ( | ||||||||||||||||
| Long-term debt, net | ( | ||||||||||||||||
| Preliminary fair value of liabilities assumed | ( | ||||||||||||||||
| Net consideration transferred | |||||||||||||||||
| Less: Non-controlling interest | ( | ||||||||||||||||
| Cash acquired | |||||||||||||||||
| Total consideration transferred | $ | ||||||||||||||||
The fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available to management at the time the unaudited Condensed Consolidated Financial Statements were prepared. The Company will finalize the valuation and complete the purchase price allocation as soon as practical, but no later than the measurement period of one year from the Leggett & Platt Acquisition date. The most significant open items include the estimation of certain long-lived and intangible assets and the accounting for leases, as management is awaiting additional information to complete its assessment of these matters. The Company has not completed its analysis of the income tax effects of the Leggett & Platt Acquisition, including its review of the book and tax bases of the assets acquired and liabilities assumed, applicable jurisdictional tax rates, acquired tax attributes, tax assessments, and the tax effects of other preliminary purchase accounting adjustments. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. The finalization of the Company’s purchase accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed, which could be material.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
Trade Name and Intangible Assets
The Company applied the income approach through a relief from royalty method to fair value the Leggett & Platt trade name asset using Level 3 inputs. The trade name asset is indefinite-lived and is not deductible for income tax purposes. The Company also applied the multi-period excess earnings method to fair value customer relationships and the relief from royalty method to fair value technology, using Level 3 inputs for both methods. At the closing date of August 26, 2026, the preliminary fair value of intangible assets acquired and estimated useful lives are as follows:
| Fair Value | Useful Life | |||||||
| Trade name | $ | Indefinite | ||||||
| Customer relationships | ||||||||
| Technology | ||||||||
| Total identifiable intangible assets | $ | |||||||
Goodwill
Goodwill is calculated as the excess of the purchase price over the net assets acquired and primarily represents the future economic benefits expected from the assembled workforce acquired and operating efficiencies. Goodwill will be subject to adjustment for the impact of the measurement period adjustments described above. A portion of the goodwill may be deductible for income tax purposes. The goodwill of $221.6 million is included within the Leggett & Platt business segment.
Transaction Costs
The Company incurred $33.4 million and $45.4 million of transaction costs (primarily legal and professional fees) related to the Leggett & Platt Acquisition during the three and nine months ended September 30, 2026, respectively, which are included in general, administrative and other expenses in the Condensed Consolidated Statements of Income.
Consolidated Results of Operations
The Leggett & Platt Acquisition contributed net sales and net income of $372.6 million and $10.0 million, respectively, for the period August 26, 2026 through September 30, 2026, which are included in the Company's Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2026.
Unaudited Pro Forma Financial Information
The following represents the unaudited consolidated pro forma financial information for the period as if Leggett & Platt had been included in the consolidated results of the Company since January 1, 2025. Pro forma results do not include the effect of any future synergies anticipated to be achieved from the acquisition, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition was consummated on the date indicated or that may result in the future.
| (unaudited) | (unaudited) | ||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Pro forma net sales | $ | $ | $ | $ | |||||||||||||||||||
| Pro forma net income | $ | $ | $ | $ | |||||||||||||||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The pro forma amounts have been calculated after applying the Company's accounting policies and by including the results of Leggett & Platt, and adjusting the combined results to give effect to the following, as if the acquisition had been consummated on January 1, 2025, together with the consequential tax effects thereon:
| (unaudited) | (unaudited) | |||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Pro Forma Adjustments to Net Sales, as Reported: | ||||||||||||||||||||||||||
| Leggett & Platt pre-acquisition net revenue | ||||||||||||||||||||||||||
| Elimination of Leggett & Platt intercompany sales to Somnigroup | ( | ( | ( | ( | ||||||||||||||||||||||
| Total adjustments to net sales | $ | $ | $ | $ | ||||||||||||||||||||||
| Pro Forma Adjustments to Net Income (Loss), as Reported: | ||||||||||||||||||||||||||
Leggett & Platt pre-acquisition (loss) income (1) | ( | |||||||||||||||||||||||||
Transaction costs (2) | ( | |||||||||||||||||||||||||
Leggett & Platt purchase price allocation adjustments (3) | ( | ( | ( | |||||||||||||||||||||||
Tax effect of pro forma adjustments (4) | ( | ( | ||||||||||||||||||||||||
| Total adjustments to net income | $ | $ | $ | $ | ||||||||||||||||||||||
| (1) | For the three and nine months ended September 30, 2026, Leggett & Platt's pre-acquisition (loss) income included transaction costs associated with the acquisition of $ | ||||
| (2) | Represents $ | ||||
| (3) | Represents purchase price allocation adjustments, primarily related to the fair value adjustment of Leggett & Platt's finished goods, long-lived assets, long-term debt and Somnigroup Assumed Awards which were reclassified to the prior year presented in accordance with ASC 805. | ||||
| (4) | Represents the income tax provision for the above pro forma adjustments, which applies an estimated blended statutory income tax rate of | ||||
(4) Goodwill
The following summarizes changes to the Company's goodwill, by segment:
| (in millions) | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Consolidated | ||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Net goodwill resulting from acquisitions | |||||||||||||||||||||||||||||
| Foreign currency translation and other | ( | ( | ( | ( | |||||||||||||||||||||||||
| Balance as of September 30, 2026 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(5) Debt
Debt for the Company and certain of its subsidiaries consists of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||
| (in millions, except percentages) | Amount | Rate | Amount | Rate | Maturity Date | ||||||||||||||||||||||||
| 2023 Credit Agreement: | |||||||||||||||||||||||||||||
| Term A Facility | $ | (1) | $ | (2) | July 27, 2031 | ||||||||||||||||||||||||
| Term B Facility | (3) | (4) | October 24, 2031 | ||||||||||||||||||||||||||
| Revolver | (1) | (2) | July 27, 2031 | ||||||||||||||||||||||||||
| 2031 Senior Notes | October 15, 2031 | ||||||||||||||||||||||||||||
| 2029 Senior Notes | April 15, 2029 | ||||||||||||||||||||||||||||
| Leggett & Platt Senior Notes: | |||||||||||||||||||||||||||||
| 2051 Senior Notes | November 15, 2051 | ||||||||||||||||||||||||||||
| 2029 Senior Notes | March 15, 2029 | ||||||||||||||||||||||||||||
| 2027 Senior Notes | November 15, 2027 | ||||||||||||||||||||||||||||
| Securitized debt | (5) | (5) | October 7, 2027 | ||||||||||||||||||||||||||
Finance lease obligations (6) | Various | ||||||||||||||||||||||||||||
| Other | Various | ||||||||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||||||||
| Less: Deferred financing costs and discounts | |||||||||||||||||||||||||||||
| Total debt, net | |||||||||||||||||||||||||||||
| Less: Current portion | |||||||||||||||||||||||||||||
| Total long-term debt, net | $ | $ | |||||||||||||||||||||||||||
| (1) | Interest at SOFR index plus applicable margin of | ||||
| (2) | Interest at SOFR index plus | ||||
| (3) | Term B interest at SOFR index plus applicable margin of | ||||
| (4) | Term B interest at SOFR index plus applicable margin of | ||||
| (5) | Interest at one month SOFR index plus | ||||
| (6) | New finance lease obligations are a non-cash financing activity. | ||||
As of September 30, 2026, the Company was in compliance with all applicable debt covenants.
2023 Credit Agreement
On October 10, 2023, the Company entered into the 2023 Credit Agreement with a syndicate of banks. The 2023 Credit Agreement provides for a $1,190.0 million revolving credit facility, a $500.0 million term loan facility, a $625.0 million Delayed Draw Term A Loan, a $1,600.0 million Term B Loan (which was initially placed in escrow, net of an original issue discount, and released upon the consummation of the Mattress Firm Acquisition) and an incremental facility in an aggregate amount up to the greater of $850.0 million and additional amounts subject to the conditions set forth in the 2023 Credit Agreement, plus the amount of certain prepayments, plus an additional unlimited amount subject to compliance with a maximum consolidated secured leverage ratio test. The 2023 Credit Agreement also contains a $60.0 million sub-facility for the issuance of letters of credit.
On July 27, 2026, the Company entered into an Amendment No. 5 to the 2023 Credit Agreement ("Amendment No. 5"), which provides for (i) a term loan A of $1,200.0 million (the "Term A Loans"), (ii) an incremental revolving commitment of $510.0 million and (iii) an incremental $90.0 million added to the sub-facility for the issuances of letters of credit. The proceeds of the Term A Loans were used to refinance the amounts outstanding under the term loan facility and the Delayed Draw Term A Loan under the 2023 Credit Agreement. The Company's commitments under the Company's revolving credit facility were $1,700.0 million after giving effect to Amendment No. 5.
Amendment No. 5 was executed in connection with the then-pending Leggett & Platt Acquisition and extended the maturity dates of the Term A Loans and the revolving credit facility to July 27, 2031. Borrowings under the Term A Loans and the revolving credit facility will generally bear interest, at the election of the Company and its subsidiary borrowers, at either (i) a base rate plus an applicable margin of 0.125 % to 0.875 %, (ii) a term SOFR rate plus an applicable margin of 1.125 % to 1.875 % or (iii) a daily simple SOFR rate plus an applicable margin of 1.125 % to 1.875 %. For the Term A Loans and the revolving credit facility the applicable margin is determined by a pricing grid based on the consolidated total net leverage ratio of the Company.
In connection with Amendment No. 5, the Company prepaid $700.0 million of the outstanding Term B Loan with the remaining proceeds from the Term A Loans and revolving credit facility.
As a result of Amendment No. 5 and the Company's prepayment of the outstanding Term B Loan, the Company recognized $13.0 million of loss on extinguishment of debt, which includes the write-off of $9.4 million of unamortized deferred financing costs and $3.6 million of legal and professional fees.
The Company had outstanding borrowings of $516.5 million under the revolving credit facility as of September 30, 2026. Total availability under the revolving facility was $1,182.7 million, after a $0.8 million reduction for outstanding letters of credit, as of September 30, 2026.
On October 1, 2026, the Company prepaid $200.0 million of the outstanding Term B Loan with cash acquired from the Leggett & Platt Acquisition and cash from operations.
Leggett & Platt Senior Notes
In connection with the Leggett & Platt Acquisition, the Leggett & Platt Senior Notes of $1.5 billion remain outstanding as general unsecured senior obligations of Leggett & Platt, Incorporated and do not benefit from any guarantees. The Company recorded a discount of $224.1 million to reflect the total fair value of $1.3 billion on the date of the Leggett & Platt Acquisition. The discount is recorded as a reduction to long-term debt in the Condensed Consolidated Balance Sheet and is being amortized into interest expense over the remaining terms of each note, as described below.
2051 Leggett & Platt Senior Notes
The Company recorded the outstanding $500.0 million aggregate principal amount of 3.50 % senior notes due 2051 (the “2051 Leggett & Platt Senior Notes”) at a discount of $201.5 million to reflect its fair value of $298.5 million on the date of the Leggett & Platt Acquisition. The 2051 Leggett & Platt Senior Notes are general unsecured senior obligations of Leggett & Platt, Incorporated and do not benefit from any guarantees. The 2051 Leggett & Platt Senior Notes mature on November 15, 2051, and interest is payable semi-annually in arrears on each May 15 and November 15.
The 2051 Leggett & Platt Senior Notes were issued pursuant to the Senior Indenture dated May 6, 2005 between Leggett & Platt, Incorporated and U.S. Bank Trust Company, National Association (successor in interest to The Bank of New York Mellon Trust Company, NA, which was successor in interest to JPMorgan Chase Bank, N.A.), as Trustee (the “L&P Senior Indenture”) (as modified by the Officer’s Certificate pursuant to Section 3.1 of the Indenture, dated as of November 16, 2017).
Leggett & Platt, Incorporated has the option to redeem all or a portion of the 2051 Leggett & Platt Senior Notes at any time on or after May 15, 2051. The redemption price is 100 % of the principal amount, plus accrued and unpaid interest, if any. In addition, Leggett & Platt, Incorporated has the option at any time prior to May 15, 2051 to redeem some or all of the 2051 Leggett & Platt Senior Notes at 100 % of the original principal amount plus a "make-whole" premium and accrued and unpaid interest, if any.
The 2051 Leggett & Platt Senior Notes restrict the ability of Leggett & Platt, Incorporated and its subsidiaries, to, among other things: (i) incur, directly or indirectly, secured indebtedness and (ii) enter into sale and leaseback transactions on their principal property. These covenants are subject to a number of exceptions and qualifications.
2029 Leggett & Platt Senior Notes
The Company recorded the outstanding $500.0 million aggregate principal amount of 4.40 % senior notes due 2029 (the “2029 Leggett & Platt Senior Notes”) at a discount of $14.1 million to reflect its fair value of $485.9 million on the date of the Leggett & Platt Acquisition. The 2029 Leggett & Platt Senior Notes are general unsecured senior obligations of Leggett & Platt, Incorporated and do not benefit from any guarantees. The 2029 Leggett & Platt Senior Notes mature on March 15, 2029, and interest is payable semi-annually in arrears on each March 15 and September 15.
The 2029 Leggett & Platt Senior Notes were issued pursuant to L&P Senior Indenture (as modified by the Officer’s Certificate pursuant to Section 3.1 of the Indenture, dated as of March 7, 2019).
Leggett & Platt, Incorporated has the option to redeem all or a portion of the 2029 Leggett & Platt Senior Notes at any time on or after December 15, 2028. The redemption price is 100 % of the principal amount, plus accrued and unpaid interest, if any. In addition, Leggett & Platt, Incorporated has the option at any time prior to December 15, 2028 to redeem some or all of the 2029 Leggett & Platt Senior Notes at 100 % of the original principal amount plus a "make-whole" premium and accrued and unpaid interest, if any.
The 2029 Leggett & Platt Senior Notes restrict the ability of Leggett & Platt, Incorporated and its subsidiaries, to, among other things: (i) incur, directly or indirectly, secured indebtedness and (ii) enter into sale and leaseback transactions on their principal property. These covenants are subject to a number of exceptions and qualifications.
2027 Leggett & Platt Senior Notes
The Company recorded the outstanding $500.0 million aggregate principal amount of 3.50 % senior notes due 2027 (the “2027 Leggett & Platt Senior Notes”) at a discount of $8.5 million to reflect its fair value of $491.5 million on the date of the Leggett & Platt Acquisition. The 2027 Leggett & Platt Senior Notes are general unsecured senior obligations of Leggett & Platt, Incorporated and do not benefit from any guarantees. The 2027 Leggett & Platt Senior Notes mature on November 15, 2027, and interest is payable semi-annually in arrears on each May 15 and November 15.
The 2027 Leggett & Platt Senior Notes were issued pursuant to L&P Senior Indenture (as modified by the Officer’s Certificate pursuant to Section 3.1 of the Indenture, dated as of November 16, 2017).
Leggett & Platt, Incorporated has the option to redeem all or a portion of the 2027 Leggett & Platt Senior Notes at any time on or after August 15, 2027. The redemption price is 100 % of the principal amount, plus accrued and unpaid interest, if any. In addition, Leggett & Platt, Incorporated has the option at any time prior to August 15, 2027 to redeem some or all of the 2027 Leggett & Platt Senior Notes at 100 % of the original principal amount plus a "make-whole" premium and accrued and unpaid interest, if any.
The 2027 Leggett & Platt Senior Notes restrict the ability of Leggett & Platt, Incorporated and its subsidiaries, to, among other things: (i) incur, directly or indirectly, secured indebtedness and (ii) enter into sale and leaseback transactions on their principal property. These covenants are subject to a number of exceptions and qualifications.
Securitized Debt
The Company and certain of its subsidiaries are party to a securitization transaction with respect to certain accounts receivable due to the Company and certain of its subsidiaries (as amended, the "Accounts Receivable Securitization"). While subject to a $150.0 million overall limit, the availability of revolving loans varies over the course of the year based on the seasonality of the Company's accounts receivable. As of September 30, 2026, the Company had fully drawn down the Accounts Receivable Securitization with borrowings of $100.5 million. Borrowings under this facility are classified as long-term debt within the Condensed Consolidated Balance Sheets at September 30, 2026, based on the Company's ability and intent to refinance on a long-term basis.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(6) Stockholders' Equity
(a) Treasury Stock. As of September 30, 2026, the Company had approximately $774.5 million remaining under its share repurchase authorization. The Company did not repurchase shares under the program during the three and nine months ended September 30, 2026 or 2025.
The Company acquired an insignificant amount of shares upon the exercise of stock options, the vesting of certain RSUs and PRSUs, which were withheld to satisfy tax withholding obligations during each of the three months ended September 30, 2026 and 2025, respectively. The shares withheld were valued at the closing price of the stock on the NYSE on the vesting date or first business day prior to vesting, resulting in an immaterial 0.3 2.0 26.3 million and $132.4 million in treasury stock acquired for the nine months ended September 30, 2026 and 2025, respectively.
(b) Accumulated Other Comprehensive Loss ("AOCL"). AOCL consisted of the following:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Foreign Currency Translation | |||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||||||||
Foreign currency translation adjustments (1) | ( | ( | ( | ||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Pensions | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
Net change from period revaluations (2) | |||||||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
| (1) | In 2026 and 2025, there were | ||||
| (2) | In 2026 and 2025, there were | ||||
(7) Other Items
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Wages and benefits | $ | $ | |||||||||
| Unearned revenue | |||||||||||
| Sales returns | |||||||||||
| Advertising | |||||||||||
| Taxes | |||||||||||
| Other | |||||||||||
| $ | $ | ||||||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(8) Stock-Based Compensation
The Company's stock-based compensation expense for the three and nine months ended September 30, 2026 and 2025 included PRSUs, RSUs and non-qualified stock options. A summary of the Company's stock-based compensation expense is presented in the following table:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| PRSU expense | $ | $ | $ | $ | |||||||||||||||||||
| RSU expense | |||||||||||||||||||||||
| Option expense | |||||||||||||||||||||||
| Total stock-based compensation expense related to stock-settled awards | $ | $ | $ | $ | |||||||||||||||||||
| RSU expense related to cash-settled awards | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
The Company grants PRSUs to executive officers and certain members of management. Actual payout under the PRSUs is dependent upon the achievement of certain financial goals. During the first quarter of 2026, the Company granted PRSUs as a component of the long-term incentive plan ("2026 PRSUs"). The Company has recorded stock-based compensation expense related to the 2026 PRSUs during the three and nine months ended September 30, 2026, as it was probable that the Company would achieve the specified performance targets for the performance period.
In connection with the Leggett & Platt Acquisition, the Somnigroup Assumed Awards were converted into Company awards based on the merger exchange ratio of 0.1455 and retained the remaining service periods and other applicable terms of the original Leggett & Platt awards. Outstanding Leggett & Platt PRSUs with remaining performance periods were converted into Company RSUs at maximum performance achievement, with 50 % to be settled in Company common stock and 50 % in cash upon vesting. Outstanding Leggett & Platt RSUs were converted into Company RSUs to be settled in Company common stock upon vesting. Outstanding Leggett & Platt stock options were converted into Company stock options to be settled in Company common stock upon exercise.
(9) Commitments and Contingencies
The Company is involved in various legal and administrative proceedings incidental to the operations of its business. Except as disclosed, the Company believes that the outcome of all such pending proceedings in the aggregate will not have a material adverse effect on its business, financial condition, liquidity or operating results. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable potential losses. Accordingly, the Company has not established material reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or the amount or range of losses is not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings in which it is involved, it could, in the future, enter into settlements of claims that could have a material adverse effect on the Company's financial position, results of operations or cash flows.
(10) Income Taxes
The Company's effective tax rates for the three months ended September 30, 2026 and 2025 were 26.8 % and 24.0 %, respectively. The Company's effective tax rates for the nine months ended September 30, 2026 and 2025 were 25.7 % and 14.9 %, respectively. The Company's effective tax rates for the three and nine months ended September 30, 2026 and 2025 differed from the U.S. federal statutory rate of 21.0% principally due to subpart F income (i.e., net CFC tested income, or "NCTI," earned by the Company's foreign subsidiaries), foreign income tax rate differentials, state and local taxes, changes in the Company's uncertain tax positions, the excess tax benefit related to stock-based compensation and certain other permanent items.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
(11) Earnings Per Common Share
The following table sets forth the components of the numerator and denominator for the computation of basic and diluted earnings per share for net income attributable to Somnigroup International Inc.:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (in millions, except per common share amounts) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income attributable to Somnigroup International Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Denominator for basic earnings per common share-weighted average shares | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Denominator for diluted earnings per common share-adjusted weighted average shares | |||||||||||||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | |||||||||||||||||||
The Company excludes shares issuable upon exercise of certain outstanding stock options from the diluted earnings per common share computation because their exercise price was greater than the average market price of Somnigroup International Inc.'s common stock or they were otherwise anti-dilutive.
As a result, the Company excluded 1.4 1.2 million shares for the three months ended September 30, 2025, and 0.4 million shares for the nine months ended September 30, 2025. Holders of non-vested stock-based compensation awards do not have voting rights but do participate in dividend equivalents distributed upon the award vesting.
(12) Business Segment Information
The Company operates in four segments : Mattress Firm, Leggett & Platt, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. The Mattress Firm segment consists of retail stores and distribution centers located in the U.S. The Leggett & Platt segment consists of manufacturers located in North America, Europe, Asia-Pacific and Latin America that design and produce a broad range of engineered components and products for bedding, furniture, flooring, textile, automotive, and industrial end markets. The Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). The Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). The Company evaluates segment performance based on net sales, gross profit and operating income.
The Company's Leggett & Platt, Tempur Sealy North America and Tempur Sealy International segment assets include investments in subsidiaries that are appropriately eliminated in the Company's accompanying Condensed Consolidated Financial Statements. The remaining inter-segment balance sheet eliminations are comprised of intercompany accounts receivable and payable. Inter-segment sales are made primarily at prices that approximate market-based selling prices.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes total assets by segment:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Mattress Firm | $ | $ | |||||||||
| Leggett & Platt | |||||||||||
| Tempur Sealy North America | |||||||||||
| Tempur Sealy International | |||||||||||
| Corporate | |||||||||||
| Inter-segment eliminations | ( | ( | |||||||||
| Total assets | $ | $ | |||||||||
The following table summarizes property, plant and equipment, net, by segment:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Mattress Firm | $ | $ | |||||||||
| Leggett & Platt | |||||||||||
| Tempur Sealy North America | |||||||||||
| Tempur Sealy International | |||||||||||
| Corporate | |||||||||||
| Total property, plant and equipment, net | $ | $ | |||||||||
The following table summarizes operating lease right-of-use assets by segment:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| Mattress Firm | $ | $ | |||||||||
| Leggett & Platt | |||||||||||
| Tempur Sealy North America | |||||||||||
| Tempur Sealy International | |||||||||||
| Corporate | |||||||||||
| Total operating lease right-of-use assets | $ | $ | |||||||||
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the three months ended September 30, 2026:
| (in millions) | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Corporate | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | — | $ | — | $ | ||||||||||||||||||||||||||||||||
| Inter-segment sales | — | ( | — | ||||||||||||||||||||||||||||||||||||||
| Total net sales and inter-segment sales | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Inter-segment royalty expense (income) | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Advertising expenses | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Other selling and marketing expenses | — | ||||||||||||||||||||||||||||||||||||||||
| General, administrative and other expenses | — | ||||||||||||||||||||||||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | |||||||||||||||||||||||||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization (1) | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||||||||||||
| Capital expenditures | — | ||||||||||||||||||||||||||||||||||||||||
(1)Depreciation and amortization includes stock-based compensation amortization expense.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the three months ended September 30, 2025:
| (in millions) | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | Corporate | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | — | $ | — | $ | |||||||||||||||||||||||||||||||||
| Inter-segment sales | — | ( | — | ||||||||||||||||||||||||||||||||||||||
| Total net sales and inter-segment sales | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Inter-segment royalty expense (income) | — | ( | — | — | — | ||||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Advertising expenses | — | — | |||||||||||||||||||||||||||||||||||||||
| Other selling and marketing expenses | — | ||||||||||||||||||||||||||||||||||||||||
| General, administrative and other expenses | — | ||||||||||||||||||||||||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | ( | $ | — | $ | |||||||||||||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization (1) | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||||||||||
| Capital expenditures | — | ||||||||||||||||||||||||||||||||||||||||
(1)Depreciation and amortization includes stock-based compensation amortization expense.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the nine months ended September 30, 2026:
| (in millions) | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Corporate | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | — | $ | — | $ | ||||||||||||||||||||||||||||||||
| Inter-segment sales | — | ( | — | ||||||||||||||||||||||||||||||||||||||
| Total net sales and inter-segment sales | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Inter-segment royalty expense (income) | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Advertising expenses | — | — | |||||||||||||||||||||||||||||||||||||||
| Other selling and marketing expenses | — | ||||||||||||||||||||||||||||||||||||||||
| General, administrative and other expenses | — | ||||||||||||||||||||||||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | |||||||||||||||||||||||||||||||||||||||||
| Other income, net | ( | ||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization (1) | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||||||||||||
| Capital expenditures | — | ||||||||||||||||||||||||||||||||||||||||
(1)Depreciation and amortization includes stock-based compensation amortization expense.
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SOMNIGROUP INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (unaudited) (continued)
The following table summarizes segment information for the nine months ended September 30, 2025:
| (in millions) | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | Corporate | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | — | $ | — | $ | |||||||||||||||||||||||||||||||||
| Inter-segment sales | — | — | ( | — | |||||||||||||||||||||||||||||||||||||
| Total net sales and inter-segment sales | ( | ||||||||||||||||||||||||||||||||||||||||
| Inter-segment royalty expense (income) | — | ( | — | — | — | ||||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Advertising expenses | — | — | |||||||||||||||||||||||||||||||||||||||
| Other selling and marketing expenses | — | ||||||||||||||||||||||||||||||||||||||||
| General, administrative and other expenses | — | ||||||||||||||||||||||||||||||||||||||||
| — | — | — | |||||||||||||||||||||||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | ( | $ | — | $ | |||||||||||||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | ||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization (1) | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||||||||||||||||||||
| Capital expenditures | — | ||||||||||||||||||||||||||||||||||||||||
(1)Depreciation and amortization includes stock-based compensation amortization expense.
The following table summarizes property, plant and equipment, net by geographic region:
(in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| United States | $ | $ | |||||||||
| All other | |||||||||||
Total property, plant and equipment, net | $ | $ | |||||||||
The following table summarizes operating lease right-of-use assets by geographic region:
| (in millions) | September 30, 2026 | December 31, 2025 | |||||||||
| United States | $ | $ | |||||||||
| All other | |||||||||||
| Total operating lease right-of-use assets | $ | $ | |||||||||
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the 2025 Annual Report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in ITEM 7 of Part II of the 2025 Annual Report, and the accompanying Condensed Consolidated Financial Statements and notes thereto included in this Report. Unless otherwise noted, all of the financial information in this Report is consolidated financial information for the Company. The forward-looking statements in this discussion regarding the mattress and pillow industries, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are subject to numerous risks and uncertainties. See "Special Note Regarding Forward-Looking Statements" elsewhere in this Report and in the 2025 Annual Report, the section titled "Risk Factors" contained in ITEM 1A of Part I of the 2025 Annual Report. Our actual results may differ materially from those contained in any forward-looking statements.
In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three and nine months ended September 30, 2026, 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.
Business Overview
General
We are the world's leading bedding company, dedicated to transforming how the world sleeps. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in more than 100 countries worldwide through our fully-owned businesses, Mattress Firm, Leggett & Platt, Tempur Sealy and Dreams.
We operate in four segments: Mattress Firm, Leggett & Platt, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. Our Mattress Firm segment consists of retail stores and distribution centers located in the U.S. Our Leggett & Platt segment consists of manufacturers located in North America, Europe, Asia-Pacific and Latin America that design and produce a broad range of engineered components and products for bedding, furniture, flooring, textile, automotive and industrial end markets. Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results. We evaluate segment performance based on net sales, gross profit and operating income. For additional information, refer to Note 12, "Business Segment Information," included in Part I, ITEM 1 of this Report.
Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy®, Stearns & Foster® and Sleepy's®, enhanced by Leggett & Platt's diversified component engineering expertise. Our global omni-channel platform and extensive consumer touchpoints enable us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored solutions.
As of September 30, 2026, we operated 2,875 company-owned stores, including 2,152 Mattress Firm stores, Tempur Sealy owned stores, Dreams stores and joint venture stores. Our distribution model operates through an omni-channel strategy. The Mattress Firm segment sells products through one channel: Direct bedding. The Leggett & Platt segment sells products through two channels: Wholesale bedding and furnishings and Specialized products. The Tempur Sealy North America and Tempur Sealy International operating business segments sell products through two channels: Direct bedding and Wholesale bedding and furnishings. Our Direct bedding channel includes sales to consumers through our company-owned retail stores and websites, consisting of branded and private-label bedding products. Our Wholesale bedding and furnishings channel includes sales to third-party bedding retailers and other manufacturers, consisting of branded bedding products, private-label and OEM bedding products and components, as well as furniture components, private-label finished furniture, flooring products, textiles and geo components. Our Specialized products channel includes sales to automotive manufacturers and material-handling and heavy construction industries, consisting of automotive comfort and in-car motion systems, hydraulic cylinders and other engineered products.
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General Business and Economic Conditions
Over the last decade, consumers have made the connection between a good night's sleep and overall health and wellness. As consumers make this connection, they are willing to invest more in their bedding purchases. We believe the bedding industry is structured for sustained long-term growth, driven by product innovation, sleep technology advancements, consumer confidence, housing formations and population growth. Due to our dedication to product innovation and other competitive advantages, we believe Somnigroup is well-positioned to take advantage of the industry’s long-term growth potential.
The global bedding industry was challenged in 2025 due to certain macroeconomic pressures on the consumer and remains pressured in 2026. Ongoing geopolitical conflicts, including trade disputes and the imposition of tariffs, along with the U.S. government shutdowns, may also introduce further uncertainty for the consumer. We have taken actions to mitigate the impact of tariffs, and we implemented pricing actions to mitigate the remaining impact. The majority of our products sold in the U.S. are also manufactured in the U.S. Accordingly, we believe tariffs will not have a material impact on our results of operations in 2026. However, the duration and extent of tariffs remain uncertain, and we are continuing to evaluate the potential future impacts of the imposition of tariffs. We expect to outperform the bedding industry as a result of our investments in new product launches and continued investments in innovation, quality, advertising and customer service.
Acquisition of Leggett & Platt
On August 26, 2026, the Company completed its Leggett & Platt Acquisition for an aggregate purchase price of approximately $730.0 million, net of cash acquired of $560.2 million. The total consideration of $1.3 billion consisted of approximately 19.9 million shares of the Company's common stock valued at $64.09 per share, which represents the closing price per share of the Company's 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.
Leggett & Platt operates as a separate business segment. Leggett & Platt's financial results for the period August 26, 2026 through September 30, 2026 (the "Leggett & Platt stub period") are included in our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2026.
Acquisition of Mattress Firm
On February 5, 2025, we completed the Mattress Firm Acquisition for an aggregate purchase price of approximately $5.1 billion, net of cash acquired of $0.3 billion. The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of 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.
Mattress Firm operates as a separate business segment. Mattress Firm's financial results for the period July 1, 2025 through September 30, 2025 and February 5, 2025 through September 30, 2025 (the "Mattress Firm stub period") are included in our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2025, respectively.
On May 1, 2025, we completed the previously announced divestiture of 73 Mattress Firm retail locations and our Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers, to MW SO Holdings Company, LLC ("Mattress Warehouse").
Product Launches
In 2026, we launched an all-new collection of Stearns & Foster products in North America. This new line is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings and providing a refreshed aesthetic.
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Results of Operations
A summary of our results for the three months ended September 30, 2026 includes:
•Total net sales increased 10.8% to $2,350.8 million as compared to $2,122.6 million in the third quarter of 2025, primarily driven by the inclusion of $372.6 million of Leggett & Platt net sales for the Leggett & Platt stub period.
•Gross margin was 42.0% as compared to 44.9% in the third quarter of 2025. Adjusted gross margin, which is a non-GAAP financial measure, was 43.0% as compared to 45.6% in the third quarter of 2025.
•Operating income decreased 5.5% to $297.4 million as compared to $314.7 million in the third quarter of 2025, primarily driven by costs incurred during the quarter related to the Leggett & Platt Acquisition. Adjusted operating income, which is a non-GAAP financial measure, increased 6.0% to $364.2 million as compared to $343.7 million in the third quarter of 2025.
•Net income decreased 7.8% to $163.5 million as compared to $177.4 million in the third quarter of 2025. Adjusted net income, which is a non-GAAP financial measure, increased 13.7% to $228.9 million as compared to $201.4 million in the third quarter of 2025.
•Earnings per diluted share ("EPS") decreased 10.8% to $0.74 as compared to $0.83 in the third quarter of 2025. Adjusted EPS, which is a non-GAAP financial measure, increased 9.5% to $1.04 as compared to $0.95 in the third quarter of 2025.
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, earnings or other historical financial information on a "constant currency basis," which is a non-GAAP financial measure. These references to constant currency basis do not include operational impacts that could result from fluctuations in foreign currency rates. To provide information on a constant currency basis, the applicable financial results are adjusted based on a simple mathematical model that translates current period results in local currency using the comparable prior corresponding period's currency conversion rate. This approach is used for countries where the functional currency is the local country currency. This information is provided so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby facilitating period-to-period comparisons of business performance. Constant currency information is not recognized under GAAP, and it is not intended as an alternative to GAAP measures. Refer to Part I, ITEM 3 of this Report for a discussion of our foreign currency exchange rate risk.
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THREE MONTHS ENDED SEPTEMBER 30, 2026 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 2025
The following table sets forth the various components of our Condensed Consolidated Statements of Income and expresses each component as a percentage of net sales:
| Three Months Ended September 30, | |||||||||||||||||||||||
| (in millions, except percentages and per share amounts) | 2026 | 2025 | |||||||||||||||||||||
| Net sales | $ | 2,350.8 | 100.0 | % | $ | 2,122.6 | 100.0 | % | |||||||||||||||
| Cost of sales | 1,363.1 | 58.0 | 1,169.8 | 55.1 | |||||||||||||||||||
| Gross profit | 987.7 | 42.0 | 952.8 | 44.9 | |||||||||||||||||||
| Selling and marketing expenses | 476.4 | 20.3 | 480.8 | 22.7 | |||||||||||||||||||
| General, administrative and other expenses | 217.0 | 9.2 | 160.4 | 7.6 | |||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | (3.1) | (0.1) | (3.1) | (0.1) | |||||||||||||||||||
| Operating income | 297.4 | 12.7 | 314.7 | 14.8 | |||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Interest expense, net | 59.3 | 2.5 | 69.9 | 3.3 | |||||||||||||||||||
| Loss on extinguishment of debt | 13.0 | 0.6 | — | — | |||||||||||||||||||
| Other expense, net | 1.8 | 0.1 | 10.9 | 0.5 | |||||||||||||||||||
| Total other expense, net | 74.1 | 3.2 | 80.8 | 3.8 | |||||||||||||||||||
| Income before income taxes | 223.3 | 9.5 | 233.9 | 11.0 | |||||||||||||||||||
| Income tax provision | (59.9) | (2.5) | (56.2) | (2.6) | |||||||||||||||||||
| Net income before non-controlling interest | 163.4 | 7.0 | 177.7 | 8.4 | |||||||||||||||||||
| Less: Net (loss) income attributable to non-controlling interest | (0.1) | — | 0.3 | — | |||||||||||||||||||
| Net income attributable to Somnigroup International Inc. | $ | 163.5 | 7.0 | % | $ | 177.4 | 8.4 | % | |||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | 0.75 | $ | 0.85 | |||||||||||||||||||
| Diluted | $ | 0.74 | $ | 0.83 | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 217.9 | 209.9 | |||||||||||||||||||||
| Diluted | 220.2 | 212.5 | |||||||||||||||||||||
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NET SALES
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Consolidated | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales by channel | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct bedding | $ | 1,279.8 | $ | 1,383.3 | $ | 1,008.3 | $ | 1,070.8 | $ | — | $ | — | $ | 111.6 | $ | 109.7 | $ | 159.9 | $ | 202.8 | |||||||||||||||||||||||||||||||||||||||
| Wholesale bedding and furnishings | 969.7 | 739.3 | — | — | 271.3 | — | 581.5 | 626.4 | 116.9 | 112.9 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Specialized products | 101.3 | — | — | — | 101.3 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 2,350.8 | $ | 2,122.6 | $ | 1,008.3 | $ | 1,070.8 | $ | 372.6 | $ | — | $ | 693.1 | $ | 736.1 | $ | 276.8 | $ | 315.7 | |||||||||||||||||||||||||||||||||||||||
Net sales increased 10.8%, and on a constant currency basis increased 10.8%. The change in net sales was driven by the following:
•Mattress Firm net sales decreased $62.5 million, or 5.8%, primarily driven by softer online sales. Mattress Firm same store sales decreased slightly as compared to the third quarter of 2025. All Mattress Firm sales are reported through the Direct bedding channel.
•Leggett & Platt net sales were $372.6 million for the Leggett & Platt stub period, with $271.3 million reported in the Wholesale bedding and furnishings channel and $101.3 million reported in the Specialized products channel.
•Tempur Sealy North America net sales decreased $43.0 million, or 5.8%, primarily driven by market conditions. Net sales to Mattress Firm increased 0.4% to $315.2 million as compared to $314.0 million in the third quarter of 2025. These sales are eliminated on a reported basis. Net sales in the Wholesale bedding and furnishings channel decreased $44.9 million, or 7.2%. Net sales in the Direct bedding channel increased $1.9 million, or 1.7%.
•Tempur Sealy International net sales decreased $38.9 million, or 12.3%, primarily driven by decreased net sales at Dreams of 34.7% following the implementation of a new ERP system amid challenging market conditions. The implementation resulted in temporary operational disruptions, including manufacturing delays and extended delivery times, which adversely affected customer conversion and resulted in lost sales. On a constant currency basis, International net sales decreased 11.7%. Net sales in the Direct bedding channel decreased 20.5% on a constant currency basis. Net sales in the Wholesale bedding and furnishings channel increased 4.0% on a constant currency basis.
GROSS PROFIT
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||
| (in millions, except percentages) | Gross Profit | Gross Margin | Gross Profit | Gross Margin | Margin Change | |||||||||||||||||||||||||||
| Tempur Sealy North America | $ | 448.4 | 64.7 | % | $ | 429.6 | 58.4 | % | 6.3 | % | ||||||||||||||||||||||
| Tempur Sealy International | 126.0 | 45.5 | % | 155.1 | 49.1 | % | (3.6) | % | ||||||||||||||||||||||||
| Mattress Firm | 347.3 | 34.4 | % | 368.1 | 34.4 | % | — | % | ||||||||||||||||||||||||
| Leggett & Platt | 66.0 | 17.7 | % | — | — | % | 17.7 | % | ||||||||||||||||||||||||
| Consolidated gross margin | $ | 987.7 | 42.0 | % | $ | 952.8 | 44.9 | % | (2.9) | % | ||||||||||||||||||||||
Costs associated with net sales are recorded in cost of sales and include the costs of producing, shipping, warehousing, receiving and inspecting goods during the period, as well as depreciation and amortization of long-lived assets used in the manufacturing process. Cost of sales also includes retail store occupancy costs such as rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.
Our gross margin is primarily impacted by the relative amount of net sales contributed by our premium or value products. Our premium products have higher gross margins than our value products. An increase in sales of our premium priced products can positively impact gross margins, while an increase in sales of our value priced products can negatively impact gross margins across all segments. Our margins are also impacted by the relative amount of net sales contributed by each channel.
Our gross margin is also impacted by fixed cost leverage based on manufacturing unit volumes; the cost of raw materials; operational efficiencies due to the utilization in our manufacturing facilities; product, brand, channel and country mix; foreign exchange fluctuations; volume incentives offered to certain retail accounts; participation in our retail cooperative advertising programs; vendor incentives earned on supply agreements, retail store fixed cost leverage based on unit volumes and costs associated with new product introductions. Future changes in raw material prices could have a significant impact on our gross margin.
Gross margin declined 290 basis points. The primary drivers of changes in gross margin by segment are discussed below:
•Mattress Firm gross margin was flat as compared to the third quarter of 2025. The factors impacting gross margin were investments in Mattress Firm's stores of 70 basis points and consumer financing costs. Additionally, in 2025, we incurred $12.7 million of charges related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan, which were not incurred in 2026.
•Leggett & Platt gross margin was 17.7% for the Leggett & Platt stub period.
•Tempur Sealy North America gross margin improved 630 basis points. The improvement in gross margin was primarily driven by the achievement of synergies from the Mattress Firm Acquisition of 420 basis points, approximately $20.0 million of tariff refunds, or 300 basis points, and favorable mix of 100 basis points. These improvements were partially offset by inflation of 120 basis points, including elevated transportation costs.
•Tempur Sealy International gross margin declined 360 basis points. The decline in gross margin was primarily driven by unfavorable mix of 160 basis points and temporary deleverage at Dreams of 150 basis points.
OPERATING EXPENSES
Selling and marketing expenses include sales and marketing compensation, advertising and media production associated with the promotion of our brands, and other marketing materials such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials. We also include in selling and marketing expense certain new product development costs, including market research and new product testing.
General, administrative and other expenses include salaries and related expenses, information technology, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing, distribution and retail store operations, expenses for administrative functions and research and development costs.
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Consolidated | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Corporate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising expenses | $ | 183.2 | $ | 192.0 | $ | 50.1 | $ | 59.2 | $ | — | $ | — | $ | 110.8 | $ | 111.0 | $ | 22.3 | $ | 21.8 | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other selling and marketing expenses | 293.2 | 288.8 | 155.5 | 170.7 | 10.6 | — | 62.0 | 62.6 | 57.7 | 50.5 | 7.4 | 5.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General, administrative and other expenses | 217.0 | 160.4 | 47.2 | 57.0 | 34.4 | — | 45.4 | 41.6 | 23.0 | 28.9 | 67.0 | 32.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 693.4 | $ | 641.2 | $ | 252.8 | $ | 286.9 | $ | 45.0 | $ | — | $ | 218.2 | $ | 215.2 | $ | 103.0 | $ | 101.2 | $ | 74.4 | $ | 37.9 | |||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses increased $52.2 million, or 8.1%, and decreased 70 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
•Mattress Firm operating expenses decreased $34.1 million, or 11.9%, and decreased 170 basis points as a percentage of net sales. The decrease was primarily driven by decreases in general, administrative and other expenses, other selling and marketing expenses and advertising expenses.
•Leggett & Platt operating expenses were $45.0 million for the Leggett & Platt stub period.
•Tempur Sealy North America operating expenses increased $3.0 million, or 1.4%, and increased 230 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by increases in general,
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administrative and other expenses, partially offset by decreases in advertising expenses and other selling and marketing expenses.
•Tempur Sealy International operating expenses increased $1.8 million, or 1.8%, and increased 510 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
•Corporate operating expenses increased $36.5 million, or 96.3%. The increase in operating expenses was primarily driven by increased transaction costs related to the Leggett & Platt Acquisition.
Research and development expenses for the three months ended September 30, 2026 were $8.6 million, compared to $8.8 million for the three months ended September 30, 2025, a decrease of $0.2 million, or 2.3%.
OPERATING INCOME
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||
| (in millions, except percentages) | Operating Income | Operating Margin | Operating Income | Operating Margin | Margin Change | |||||||||||||||||||||||||||
| Mattress Firm | $ | 94.5 | 9.4 | % | $ | 81.2 | 7.6 | % | 1.8 | % | ||||||||||||||||||||||
| Leggett & Platt | 21.0 | 5.6 | % | — | — | % | 5.6 | % | ||||||||||||||||||||||||
| Tempur Sealy North America | 230.2 | 33.2 | % | 214.4 | 29.1 | % | 4.1 | % | ||||||||||||||||||||||||
| Tempur Sealy International | 25.9 | 9.4 | % | 57.0 | 18.1 | % | (8.7) | % | ||||||||||||||||||||||||
| 371.6 | 352.6 | |||||||||||||||||||||||||||||||
| Corporate expenses | (74.2) | (37.9) | ||||||||||||||||||||||||||||||
| Total operating income | $ | 297.4 | 12.7 | % | $ | 314.7 | 14.8 | % | (2.1) | % | ||||||||||||||||||||||
Operating income decreased $17.3 million and operating margin declined 210 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
•Mattress Firm operating income increased $13.3 million and operating margin improved 180 basis points. The improvement in operating margin was primarily driven by the operating expense leverage of 170 basis points.
•Leggett & Platt operating income was $21.0 million and operating margin was 5.6% for the Leggett & Platt stub period.
•Tempur Sealy North America operating income increased $15.8 million and operating margin improved 410 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 630 basis points, partially offset by operating expense deleverage of 230 basis points.
•Tempur Sealy International operating income decreased $31.1 million and operating margin declined 870 basis points. The decline in operating margin was primarily driven by the decline in gross margin of 360 basis points and operating expense deleverage of 510 basis points.
•Corporate operating loss increased $36.3 million, which negatively impacted our consolidated operating margin.
INTEREST EXPENSE, NET
| Three Months Ended September 30, | |||||||||||||||||
| (in millions, except percentages) | 2026 | 2025 | % Change | ||||||||||||||
| Interest expense, net | $ | 59.3 | $ | 69.9 | (15.2) | % | |||||||||||
Interest expense, net, decreased $10.6 million, or 15.2%. The decrease in interest expense, net, was primarily driven by decreased average levels of outstanding variable rate debt.
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INCOME TAX PROVISION
| Three Months Ended September 30, | |||||||||||||||||
| (in millions, except percentages) | 2026 | 2025 | % Change | ||||||||||||||
| Income tax provision | $ | 59.9 | $ | 56.2 | 6.6 | % | |||||||||||
| Effective tax rate | 26.8 | % | 24.0 | % | |||||||||||||
Our income tax provision includes income taxes associated with taxes currently payable and deferred taxes and includes the impact of net operating losses for certain of our domestic and foreign operations.
Our income tax provision increased $3.7 million due to a decrease in income before income taxes and certain discrete items, as discussed below. Our effective tax rate for the three months ended September 30, 2026 as compared to the prior year increased by 280 basis points. The effective tax rate as compared to the U.S. federal statutory rate for the three months ended September 30, 2026 and 2025 included the impacts of state and local taxes as well as the net favorable impact of other discrete items.
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NINE MONTHS ENDED SEPTEMBER 30, 2026 COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 2025
The following table sets forth the various components of our Condensed Consolidated Statements of Income and expresses each component as a percentage of net sales:
| Nine Months Ended September 30, | |||||||||||||||||||||||
| (in millions, except percentages and per share amounts) | 2026 | 2025 | |||||||||||||||||||||
| Net sales | $ | 5,975.8 | 100.0 | % | $ | 5,608.1 | 100.0 | % | |||||||||||||||
| Cost of sales | 3,394.0 | 56.8 | 3,247.6 | 57.9 | |||||||||||||||||||
| Gross profit | 2,581.8 | 43.2 | 2,360.5 | 42.1 | |||||||||||||||||||
| Selling and marketing expenses | 1,358.4 | 22.7 | 1,303.9 | 23.3 | |||||||||||||||||||
| General, administrative and other expenses | 549.0 | 9.2 | 545.8 | 9.7 | |||||||||||||||||||
| Loss on disposal of business | — | — | 13.9 | 0.2 | |||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | (11.8) | (0.2) | (10.9) | (0.2) | |||||||||||||||||||
| Operating income | 686.2 | 11.5 | 507.8 | 9.1 | |||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Interest expense, net | 178.3 | 3.0 | 203.7 | 3.6 | |||||||||||||||||||
| Loss on extinguishment of debt | 13.0 | 0.2 | — | — | |||||||||||||||||||
| Other (income) expense, net | (13.5) | (0.2) | 16.8 | 0.3 | |||||||||||||||||||
| Total other expense, net | 177.8 | 3.0 | 220.5 | 3.9 | |||||||||||||||||||
| Income before income taxes | 508.4 | 8.5 | 287.3 | 5.1 | |||||||||||||||||||
| Income tax provision | (130.5) | (2.2) | (42.9) | (0.8) | |||||||||||||||||||
| Net income before non-controlling interest | 377.9 | 6.3 | 244.4 | 4.4 | |||||||||||||||||||
| Less: Net (loss) income attributable to non-controlling interest | (0.7) | — | 1.1 | — | |||||||||||||||||||
| Net income attributable to Somnigroup International Inc. | $ | 378.6 | 6.3 | % | $ | 243.3 | 4.3 | % | |||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic | $ | 1.78 | $ | 1.19 | |||||||||||||||||||
| Diluted | $ | 1.76 | $ | 1.17 | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 212.9 | 204.7 | |||||||||||||||||||||
| Diluted | 215.1 | 207.9 | |||||||||||||||||||||
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NET SALES
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Consolidated | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales by channel | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct bedding | $ | 3,678.4 | $ | 3,527.4 | $ | 2,816.4 | $ | 2,613.3 | $ | — | $ | — | $ | 299.0 | $ | 335.8 | $ | 563.0 | $ | 578.3 | |||||||||||||||||||||||||||||||||||||||
| Wholesale bedding and furnishings | 2,196.1 | 2,080.7 | — | — | 271.3 | — | 1,559.4 | 1,744.9 | 365.4 | 335.8 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Specialized products | 101.3 | — | — | — | 101.3 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 5,975.8 | $ | 5,608.1 | $ | 2,816.4 | $ | 2,613.3 | $ | 372.6 | $ | — | $ | 1,858.4 | $ | 2,080.7 | $ | 928.4 | $ | 914.1 | |||||||||||||||||||||||||||||||||||||||
Net sales increased 6.6%, and on a constant currency basis increased 5.9%. The change in net sales was driven by the following:
•Mattress Firm net sales increased $203.1 million, or 7.8%, primarily driven by the inclusion of net sales for a full quarter in the first quarter of 2026 as compared to the first quarter of 2025, which included Mattress Firm for the Mattress Firm stub period. All Mattress Firm sales are reported through the Direct bedding channel.
•Leggett & Platt net sales were $372.6 million for the Leggett & Platt stub period with $271.3 million reported in the Wholesale bedding and furnishings channel, and $101.3 million reported in the Specialized products channel.
•Tempur Sealy North America net sales decreased $222.3 million, or 10.7%. Net sales in the Wholesale bedding and furnishings channel decreased $185.5 million, or 10.6%, primarily driven by the accounting elimination of sales to Mattress Firm for a full quarter in the first quarter of 2026 as compared to the first quarter of 2025, which eliminated sales to Mattress Firm for the Mattress Firm stub period. Net sales in the Direct bedding channel decreased $36.8 million, or 11.0%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters.
•Tempur Sealy International net sales increased $14.3 million, or 1.6%, primarily driven by strong performance in key markets. On a constant currency basis, International net sales decreased $11.9 million, or 1.3%. Net sales in the Direct bedding channel decreased 5.3% on a constant currency basis. Net sales in the Wholesale bedding and furnishings channel increased 5.6% on a constant currency basis.
GROSS PROFIT
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||
| (in millions, except percentages) | Gross Profit | Gross Margin | Gross Profit | Gross Margin | Margin Change | |||||||||||||||||||||||||||
| Tempur Sealy North America | $ | 1,142.6 | 61.5 | % | $ | 1,017.8 | 48.9 | % | 12.6 | % | ||||||||||||||||||||||
| Tempur Sealy International | 445.5 | 48.0 | % | 446.0 | 48.8 | % | (0.8) | % | ||||||||||||||||||||||||
| Mattress Firm | 927.7 | 32.9 | % | 896.7 | 34.3 | % | (1.4) | % | ||||||||||||||||||||||||
| Leggett & Platt | 66.0 | 17.7 | % | — | — | % | 17.7 | % | ||||||||||||||||||||||||
| Consolidated gross margin | $ | 2,581.8 | 43.2 | % | $ | 2,360.5 | 42.1 | % | 1.1 | % | ||||||||||||||||||||||
Costs associated with net sales are recorded in cost of sales and include the costs of producing, shipping, warehousing, receiving and inspecting goods during the period, as well as depreciation and amortization of long-lived assets used in the manufacturing process. Cost of sales also includes retail store occupancy costs such as rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.
Gross margin improved 110 basis points. The primary drivers of changes in gross margin by segment are discussed below:
•Mattress Firm gross margin declined 140 basis points. The decline in gross margin was primarily driven by product mix of 70 basis points, consumer financing costs of 70 basis points and investments in Mattress Firm's stores of 70
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basis points. Additionally, in 2025, we incurred $17.4 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.
•Leggett & Platt gross margin was 17.7% for the Leggett & Platt stub period.
•Tempur Sealy North America gross margin improved 1,260 basis points. The improvement in gross margin was primarily driven by the achievement of synergies from the Mattress Firm Acquisition of 570 basis points, elimination of intercompany sales to Mattress Firm of 200 basis points, approximately $20.0 million of tariff refunds, or 110 basis points, and favorable mix. These improvements were partially offset by inflation. Additionally, in 2025, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.
•Tempur Sealy International gross margin declined 80 basis points. The decline in gross margin was primarily driven by unfavorable mix, inflation and temporary deleverage at Dreams.
OPERATING EXPENSES
Selling and marketing expenses include sales and marketing compensation, advertising and media production associated with the promotion of our brands, and other marketing materials such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials. We also include in selling and marketing expense certain new product development costs, including market research and new product testing.
General, administrative and other expenses include salaries and related expenses, information technology, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing, distribution and retail store operations, expenses for administrative functions and research and development costs.
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Consolidated | Mattress Firm | Leggett & Platt | Tempur Sealy North America | Tempur Sealy International | Corporate | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising expenses | $ | 511.2 | $ | 524.4 | $ | 126.8 | $ | 154.9 | $ | — | $ | — | $ | 312.2 | $ | 297.9 | $ | 72.2 | $ | 71.6 | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other selling and marketing expenses | 847.2 | 779.5 | 463.6 | 424.0 | 10.6 | — | 185.3 | 194.6 | 168.2 | 148.0 | 19.5 | 12.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General, administrative and other expenses | 549.0 | 545.8 | 150.0 | 162.5 | 34.4 | — | 127.3 | 130.7 | 87.8 | 89.4 | 149.5 | 163.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 1,907.4 | $ | 1,849.7 | $ | 740.4 | $ | 741.4 | $ | 45.0 | $ | — | $ | 624.8 | $ | 623.2 | $ | 328.2 | $ | 309.0 | $ | 169.0 | $ | 176.1 | |||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses increased $57.7 million, or 3.1%, and decreased 110 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
•Mattress Firm operating expenses decreased $1.0 million, or 0.1%, and decreased 210 basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by decreases in advertising expenses and general, administrative and other expenses, partially offset by increases in other selling and marketing expenses.
•Leggett & Platt operating expenses were $45.0 million for the Leggett & Platt stub period.
•Tempur Sealy North America operating expenses increased $1.6 million, or 0.3%, and increased 360 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in advertising, offset by decreases in general, administrative and other expenses and other selling and marketing expenses.
•Tempur Sealy International operating expenses increased $19.2 million, or 6.2%, and increased 160 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
•Corporate operating expenses decreased $7.1 million, or 4.0%. The decrease in operating expenses was primarily driven by decreased transaction costs related to the Mattress Firm Acquisition, partially offset by transaction costs related to the Leggett & Platt Acquisition.
Research and development expenses were $27.3 million for the nine months ended September 30, 2026 as compared to $24.7 million for the nine months ended September 30, 2025, an increase of $2.6 million, or 10.5%.
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OPERATING INCOME
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||
| (in millions, except percentages) | Operating Income | Operating Margin | Operating Income | Operating Margin | Margin Change | |||||||||||||||||||||||||||
| Tempur Sealy North America | $ | 517.8 | 27.9 | % | $ | 384.8 | 18.5 | % | 9.4 | % | ||||||||||||||||||||||
| Tempur Sealy International | 128.0 | 13.8 | % | 147.9 | 16.2 | % | (2.4) | % | ||||||||||||||||||||||||
| Mattress Firm | 187.3 | 6.7 | % | 151.2 | 5.8 | % | 0.9 | % | ||||||||||||||||||||||||
| Leggett & Platt | 21.0 | 5.6 | % | — | — | % | 5.6 | % | ||||||||||||||||||||||||
| 854.1 | 683.9 | |||||||||||||||||||||||||||||||
| Corporate expenses | (167.9) | (176.1) | ||||||||||||||||||||||||||||||
| Total operating income | $ | 686.2 | 11.5 | % | $ | 507.8 | 9.1 | % | 2.4 | % | ||||||||||||||||||||||
Operating income increased $178.4 million and operating margin improved 240 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
•Mattress Firm operating income increased $36.1 million and operating margin improved 90 basis points. The improvement in operating margin was primarily driven by operating expense leverage of 210 basis points, offset by the decline in gross margin of 140 basis points. Additionally, in 2025, we incurred a $4.1 million loss on disposal of business associated with the divestiture of 73 retail stores, which was not incurred in 2026.
•Leggett & Platt operating income was $21.0 million and operating margin was 5.6% for the Leggett & Platt stub period.
•Tempur Sealy North America operating income increased $133.0 million and operating margin improved 940 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 1,260 basis points, offset by operating expense deleverage of 360 basis points. Additionally, in 2025, we incurred a $9.8 million loss on disposal of business associated with the divestiture of Sleep Outfitters, which was not incurred in 2026.
•Tempur Sealy International operating income decreased $19.9 million and operating margin declined 240 basis points. The decline in operating margin was primarily driven by operating expense deleverage of 160 basis points and the decline in gross margin of 80 basis points.
•Corporate operating loss decreased $8.2 million, which positively impacted our consolidated operating margin.
INTEREST EXPENSE, NET
| Nine Months Ended September 30, | ||||||||||||||||||||
| (in millions, except percentages) | 2026 | 2025 | % Change | |||||||||||||||||
| Interest expense, net | $ | 178.3 | $ | 203.7 | (12.5) | % | ||||||||||||||
Interest expense, net, decreased $25.4 million, or 12.5%. The decrease in interest expense, net, was primarily driven by decreased average levels of outstanding variable rate debt.
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INCOME TAX PROVISION
| Nine Months Ended September 30, | ||||||||||||||||||||
| (in millions, except percentages) | 2026 | 2025 | % Change | |||||||||||||||||
| Income tax provision | $ | 130.5 | $ | 42.9 | 204.2 | % | ||||||||||||||
| Effective tax rate | 25.7 | % | 14.9 | % | ||||||||||||||||
Our income tax provision increased $87.6 million driven by an increase in income before income taxes and certain discrete items, as discussed below. Our effective tax rate for the nine months ended September 30, 2026 as compared to the prior year increased 1,080 basis points. The effective tax rate as compared to the U.S. federal statutory rate for the nine months ended September 30, 2026 included the impact of state and local taxes as well as the net favorable impact of the deductibility of stock compensation in the U.S. and the net favorable impact of other discrete items. The effective tax rate as compared to the U.S. federal statutory rate for the nine months ended September 30, 2025 included the net favorable impact of the deductibility of stock compensation in the U.S., which was offset by the impact of state and local taxes as well as the unfavorable impact of other discrete items.
Liquidity and Capital Resources
Liquidity
Our principal sources of funds are cash flows from operations, supplemented with borrowings in the capital markets and made pursuant to our credit facilities and cash and cash equivalents on hand. Primary uses of funds consist of payments of principal and interest on our debt facilities, acquisitions, payments of dividends to our shareholders, capital expenditures and working capital needs.
Cash and Working Capital
Cash and cash equivalents were $612.1 million and $134.9 million as of September 30, 2026 and December 31, 2025, respectively. We had a working capital surplus of $572.4 million as of September 30, 2026, as compared to working capital deficit of $271.1 million as of December 31, 2025.
The amount of cash and cash equivalents held in various jurisdictions outside of the U.S. which is not readily available for repatriation is not material to our overall liquidity or financial position.
Cash Provided by (Used in) Operations
The table below presents net cash provided by (used in) operating, investing and financing activities from operations for the periods indicated below:
| Nine Months Ended September 30, | ||||||||||||||
| (in millions) | 2026 | 2025 | ||||||||||||
| Net cash provided by (used in) operations: | ||||||||||||||
| Operating activities | $ | 831.9 | $ | 700.7 | ||||||||||
| Investing activities | 405.3 | (2,948.4) | ||||||||||||
| Financing activities | (744.5) | 605.9 | ||||||||||||
Cash provided by operating activities increased $131.2 million in the nine months ended September 30, 2026 as compared to the same period in 2025, primarily driven by increased net income and deferred income taxes, partially offset by changes in working capital.
Cash provided by investing activities increased $3,353.7 million in the nine months ended September 30, 2026 as compared to the same period in 2025. The increase in cash provided by investing activities was primarily driven by $560.2 million of cash acquired from the Leggett & Platt Acquisition in 2026 as compared to a $2,824.5 million use of cash for the Mattress Firm Acquisition in 2025.
Cash used in financing activities increased $1,350.4 million in the nine months ended September 30, 2026 as compared to the same period in 2025. We had net repayments of $583.9 million on our credit facilities in 2026 as compared to net borrowings of $801.2 million in 2025, which were driven by the Mattress Firm Acquisition. Share repurchases of our common stock to satisfy tax withholding obligations upon the vesting of our long-term incentive plans decreased $106.1 million in 2026 as compared to 2025. Dividends paid to shareholders increased $12.2 million in 2026 as compared to 2025. Proceeds from exercise of stock options decreased $49.4 million in 2026 as compared to 2025.
Capital Expenditures
Capital expenditures totaled $174.3 million and $108.6 million for the nine months ended September 30, 2026 and 2025, respectively. We currently expect our 2026 capital expenditures to be approximately $255 million, including $75 million of one-time investments to refresh Mattress Firm stores.
Indebtedness
Our total debt increased to $5,627.0 million as of September 30, 2026 from $4,717.3 million as of December 31, 2025, primarily driven by the Leggett & Platt Acquisition. Total availability under our revolving senior secured credit facility was $1,182.7 million as of September 30, 2026. Refer to Note 5, "Debt," in the "Notes to Condensed Consolidated Financial Statements," under Part I, ITEM 1 for further discussion of our debt.
As of September 30, 2026, our ratio of consolidated indebtedness less netted cash to adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), which is a non-GAAP financial measure, in accordance with our 2023 Credit Agreement was 2.69 times. This ratio is within the terms of the financial covenants for the maximum consolidated total net leverage ratio as set forth in the 2023 Credit Agreement, which limits this ratio to 5.00 times. As of September 30, 2026, 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 2023 Credit Agreement, 2029 Senior Notes and 2031 Senior Notes contain similar limitations which, subject to certain conditions, allow unlimited restricted payments at times when the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, remains below 3.75 times in the case of the 2023 Credit Agreement and remains below 3.50 times in the cases of the 2029 Senior Notes and 2031 Senior Notes. In addition, these agreements permit limited restricted payments under certain conditions when the ratio of consolidated indebtedness less netted cash to adjusted EBITDA is above 3.75 times in the case of the 2023 Credit Agreement and above 3.50 times in the cases of the 2029 Senior Notes and 2031 Senior Notes. The limit on restricted payments under the 2023 Credit Agreement, 2029 Senior Notes and 2031 Senior Notes is in part determined by a basket that grows at 50% of adjusted net income each quarter, reduced by restricted payments that are not otherwise permitted.
On July 27, 2026, we entered into an Amendment No. 5 to the 2023 Credit Agreement ("Amendment No. 5"), which provides for (i) a term loan A of $1,200.0 million (the "Term A Loans") and (ii) an incremental revolving commitment of $510.0 million. The proceeds of the Term A Loans were used to refinance the amounts outstanding under the term loan facility and the Delayed Draw Term A Loan under the 2023 Credit Agreement. Our commitments under the revolving credit facility were $1,700.0 million after giving effect to Amendment No. 5.
Amendment No. 5 was executed in connection with the then-pending Leggett & Platt Acquisition and extended the maturity dates of the Term A Loans and the revolving credit facility to July 27, 2031. Borrowings under the Term A Loans and the revolving credit facility will generally bear interest at either (i) a base rate plus an applicable margin of 0.125% to 0.875%, (ii) a term SOFR rate plus an applicable margin of 1.125% to 1.875% or (iii) a daily simple SOFR rate plus an applicable margin of 1.125% to 1.875%. For the Term A Loans and the revolving credit facility, the applicable margin is determined by a pricing grid based on the consolidated total net leverage ratio.
In connection with Amendment No. 5, we prepaid $700.0 million of the outstanding Term B Loan with the remaining proceeds from the Term A Loans and revolving credit facility.
In connection with the Leggett & Platt Acquisition, the Leggett & Platt Senior Notes of $1.5 billion remain outstanding as general unsecured senior obligations of Leggett & Platt, Incorporated and do not benefit from any guarantees. The outstanding senior notes consist of $500.0 million aggregate principal amount of 3.50% senior notes due 2027, $500.0 million aggregate principal amount of 4.40% senior notes due 2029, and $500.0 million aggregate principal amount of 3.50% senior notes due 2051.
On October 1, 2026, the Company prepaid $200.0 million of the outstanding Term B Loan with cash acquired from the Leggett & Platt Acquisition and cash from operations.
For additional information, refer to "Non-GAAP Financial Information" below for the calculation of the ratio of consolidated indebtedness less netted cash to adjusted EBITDA calculated in accordance with the 2023 Credit Agreement. Both consolidated indebtedness and adjusted EBITDA as used in discussion of the 2023 Credit Agreement are non-GAAP financial measures and do not purport to be alternatives to net income as a measure of operating performance or total debt.
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. During the nine months ended September 30, 2026, we did not repurchase shares under our share repurchase program. As of September 30, 2026, we had $774.5 million remaining under our share repurchase authorization.
We manage our share repurchase program based on current and expected cash flows, share price and alternative investment opportunities. For a complete description of our share repurchase program, please refer to ITEM 5 under Part II, "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities," in the 2025 Annual Report. Please also refer to "Issuer Purchases of Equity Securities" in ITEM 2(c) of Part II of this Report.
Future Liquidity Sources and Uses
As of September 30, 2026, we had $1,794.8 million of liquidity, including $612.1 million of cash on hand and $1,182.7 million available under our 2023 Credit Agreement. The amount of cash on hand not readily available for repatriation is not material to our overall liquidity. In addition, we expect to generate cash flow from operations in the full year 2026. 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.
Our capital allocation strategy follows a balanced approach focused on supporting the business, returning shareholder value through strategic acquisition opportunities that enhance our global competitiveness, as well as quarterly dividends and opportunistic share repurchases. During the nine months ended September 30, 2026, we repurchased 0.3 million shares valued at $26.3 million to satisfy tax withholding obligations upon the vesting of certain long-term incentive awards in the ordinary course of business.
The Board of Directors declared a dividend of $0.17 per share for the fourth quarter of 2026. The dividend is payable on December 7, 2026 to shareholders of record as of November 23, 2026.
As of September 30, 2026, we had $5,627.0 million in total debt outstanding and consolidated indebtedness less netted cash, which is a non-GAAP financial measure, of $5,014.9 million. Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, was 2.69 times for the trailing twelve months ended September 30, 2026. Our target leverage ratio of consolidated indebtedness less netted cash to adjusted EBITDA, which is a non-GAAP financial measure, is 2.0 to 3.0 times in 2026. Total cash interest payments related to our borrowings are expected to be approximately $240 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. The timing and size of any new business ventures or acquisitions that we may complete may also impact our cash requirements and debt service obligations.
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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 these non-GAAP financial measures provide investors with performance measures that better reflect our underlying operations and trends, providing a perspective not immediately apparent from net income, gross profit, gross margin, operating income (expense) and operating margin. 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.
We believe that exclusion of these items assists in providing a more complete understanding of our underlying results from 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. Limitations associated with the use of these non-GAAP financial measures include that these measures do not present all of the amounts associated with our results as determined in accordance with GAAP. These non-GAAP financial measures should be considered supplemental in nature and should not be construed as more significant than comparable financial measures defined by GAAP. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. For more information about these non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure, please refer to the reconciliations on the following pages.
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Adjusted Net Income and Adjusted EPS
A reconciliation of reported net income to adjusted net income and the calculation of adjusted EPS is provided 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.
The following table sets forth the reconciliation of our reported net income to adjusted net income and the calculation of adjusted EPS for the three months ended September 30, 2026 and 2025:
| Three Months Ended | |||||||||||
| (in millions, except per share amounts) | September 30, 2026 | September 30, 2025 | |||||||||
| Net income | $ | 163.5 | $ | 177.4 | |||||||
Transaction costs (1) | 35.5 | (0.9) | |||||||||
Business combination charges, Leggett & Platt (2) | 14.8 | — | |||||||||
Loss on extinguishment of debt (3) | 13.0 | — | |||||||||
Non-cash effects of purchase accounting (4) | 10.0 | — | |||||||||
Business combination charges, Mattress Firm (5) | 9.0 | 32.2 | |||||||||
Supply chain transition costs (6) | — | 7.3 | |||||||||
Disposition-related costs (7) | — | 1.3 | |||||||||
Adjusted income tax provision (8) | (16.9) | (15.9) | |||||||||
| Adjusted net income | $ | 228.9 | $ | 201.4 | |||||||
| Adjusted earnings per common share, diluted | $ | 1.04 | $ | 0.95 | |||||||
| Diluted shares outstanding | 220.2 | 212.5 | |||||||||
| (1) | In the third quarter of 2026, we recorded $35.5 million of transaction costs, primarily associated with legal and professional fees related to the Leggett & Platt Acquisition. In the third quarter of 2025, we recorded a benefit of $0.9 million of transaction costs related to the Mattress Firm Acquisition. | ||||
| (2) | In the third quarter of 2026, we recorded $14.8 million of business combination charges related to the Leggett & Platt Acquisition. | ||||
| (3) | In the third quarter of 2026, we recognized $13.0 million of loss on extinguishment of debt associated with the refinancing of our senior secured credit facilities. | ||||
| (4) | In the third quarter of 2026, we recorded $10.0 million of non-cash charges related to fair value adjustments recorded in accordance with business combination accounting. | ||||
| (5) | In the third quarter of 2026, we recorded $9.0 million of business combination charges related to the Mattress Firm Acquisition. In the third quarter of 2025, we recorded $32.2 million of business combination charges related to the Mattress Firm Acquisition. | ||||
| (6) | In the third quarter of 2025, we recognized $7.3 million in supply chain transition costs, primarily related to a manufacturing facility lease termination. | ||||
| (7) | In the third quarter of 2025, we recognized $1.3 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse. | ||||
| (8) | Adjusted income tax provision represents the tax effects associated with the aforementioned items and other non-recurring discrete items. | ||||
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Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income (Expense) and Adjusted Operating Margin
The following table sets forth the reconciliation of our reported gross profit and operating income (expense) to the calculation of adjusted gross profit and adjusted operating income (expense) for the three months ended September 30, 2026.
| Three months ended September 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | Consolidated | Margin | Mattress Firm | Margin | Leggett & Platt | Margin | Tempur Sealy North America | Margin | Tempur Sealy International | Margin | Corporate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 2,350.8 | $ | 1,008.3 | $ | 372.6 | $ | 693.1 | $ | 276.8 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 987.7 | 42.0 | % | $ | 347.3 | 34.4 | % | $ | 66.0 | 17.7 | % | $ | 448.4 | 64.7 | % | $ | 126.0 | 45.5 | % | $ | — | |||||||||||||||||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination charges, Leggett & Platt (1) | 12.7 | — | 12.7 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination charges, Mattress Firm (2) | 7.3 | 2.0 | — | 5.3 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-cash effects of purchase accounting (3) | 2.9 | — | 2.9 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 22.9 | 2.0 | 15.6 | 5.3 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted gross profit | $ | 1,010.6 | 43.0 | % | $ | 349.3 | 34.6 | % | $ | 81.6 | 21.9 | % | $ | 453.7 | 65.5 | % | $ | 126.0 | 45.5 | % | $ | — | |||||||||||||||||||||||||||||||||||||||||||
| Operating income (expense) | $ | 297.4 | 12.7 | % | $ | 94.5 | 9.4 | % | $ | 21.0 | 5.6 | % | $ | 230.2 | 33.2 | % | $ | 25.9 | 9.4 | % | $ | (74.2) | |||||||||||||||||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transaction costs (4) | 35.5 | — | 2.1 | — | — | 33.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination charges, Leggett & Platt (1) | 14.8 | — | 13.2 | — | — | 1.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-cash effects of purchase accounting (3) | 9.1 | — | 4.5 | — | — | 4.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination charges, Mattress Firm (2) | 7.4 | 2.0 | — | 5.4 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 66.8 | 2.0 | 19.8 | 5.4 | — | 39.6 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted operating income (expense) | $ | 364.2 | 15.5 | % | $ | 96.5 | 9.6 | % | $ | 40.8 | 11.0 | % | $ | 235.6 | 34.0 | % | $ | 25.9 | 9.4 | % | $ | (34.6) | |||||||||||||||||||||||||||||||||||||||||||
| (1) | In the third quarter of 2026, we recorded $14.8 million of business combination charges related to the Leggett & Platt Acquisition. Cost of sales included $12.7 million of charges primarily related to one-time business combination accounting adjustments. Operating expenses included $2.1 million of professional fees and restructuring costs. | ||||
| (2) | In the third quarter of 2026, we recorded $9.0 million of business combination charges related to the Mattress Firm Acquisition. Cost of sales included $7.3 million of charges primarily related to costs to achieve supply chain synergies. Operating expenses included $0.1 million of professional fees and restructuring costs. Other expense included $1.6 million of charges related to Mattress Firm store refreshes. | ||||
| (3) | In the third quarter of 2026, we recorded $10.0 million of non-cash charges related to fair value adjustments recorded in accordance with business combination accounting. Cost of sales included $2.9 million of depreciation expense. Operating expenses included $6.2 million of depreciation and amortization expense. Other expense included $0.9 million of interest expense. | ||||
| (4) | In the third quarter of 2026, we recorded $35.5 million of transaction costs, primarily associated with legal and professional fees related to the Leggett & Platt Acquisition, which are included in operating expenses. | ||||
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The following table sets forth a reconciliation of our reported gross profit and operating income (expense) to the calculation of adjusted gross profit and adjusted operating income (expense) for the three months ended September 30, 2025.
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | Consolidated | Margin | Mattress Firm | Margin | Tempur Sealy North America | Margin | Tempur Sealy International | Margin | Corporate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 2,122.6 | $ | 1,070.8 | $ | 736.1 | $ | 315.7 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | $ | 952.8 | 44.9 | % | $ | 368.1 | 34.4 | % | $ | 429.6 | 58.4 | % | $ | 155.1 | 49.1 | % | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination charges, Mattress Firm (1) | 13.4 | 12.7 | 0.7 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supply chain transition costs (2) | 0.9 | — | 0.9 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 14.3 | 12.7 | 1.6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted gross profit | $ | 967.1 | 45.6 | % | $ | 380.8 | 35.6 | % | $ | 431.2 | 58.6 | % | $ | 155.1 | 49.1 | % | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (expense) | $ | 314.7 | 14.8 | % | $ | 81.2 | 7.6 | % | $ | 214.4 | 29.1 | % | $ | 57.0 | 18.1 | % | $ | (37.9) | |||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business combination charges, Mattress Firm (1) | 26.0 | 19.4 | 0.7 | — | 5.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transaction costs (4) | 1.2 | 0.3 | — | — | 0.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supply chain transition costs (2) | 0.9 | — | 0.9 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposition-related costs (3) | 0.9 | — | 0.9 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 29.0 | 19.7 | 2.5 | — | 6.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted operating income (expense) | $ | 343.7 | 16.2 | % | $ | 100.9 | 9.4 | % | $ | 216.9 | 29.5 | % | $ | 57.0 | 18.1 | % | $ | (31.1) | |||||||||||||||||||||||||||||||||||||||||||||||
| (1) | In the third quarter of 2025, we recorded $32.2 million of business combination charges. Cost of sales included $13.4 million of charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan. Operating expenses included $12.6 million of professional fees and restructuring costs. Other expenses included $6.2 million of charges. | ||||
| (2) | In the third quarter of 2025, we recorded $7.3 million of supply chain transition costs associated with the consolidation of certain manufacturing facilities. Cost of sales included $0.9 million of transition costs. Other expenses included $6.4 million of costs, primarily related to a manufacturing facility lease termination. | ||||
| (3) | In the third quarter of 2025, we recorded $1.3 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse. Operating expenses and other expenses included $0.9 million and $0.4 million of costs, respectively. | ||||
| (4) | In the third quarter of 2025, we recorded a benefit of $0.9 million of transaction costs related to the Mattress Firm Acquisition. Operating expenses included $1.2 million of costs, and other expenses included a benefit of $2.1 million. This benefit relates to reimbursements for previously recorded transaction costs. | ||||
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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 leverage.
The 2023 Credit Agreement provides the definition of adjusted EBITDA. Accordingly, we present adjusted EBITDA to provide information regarding our compliance with requirements under the 2023 Credit Agreement.
The following table sets forth the reconciliation of our reported net income to the calculations of EBITDA and adjusted EBITDA for the three months ended September 30, 2026 and 2025:
| Three Months Ended | |||||||||||
| (in millions) | September 30, 2026 | September 30, 2025 | |||||||||
| Net income | $ | 163.5 | $ | 177.4 | |||||||
| Interest expense, net | 58.4 | 69.9 | |||||||||
Non-cash effects of purchase accounting, interest expense (1) | 0.9 | — | |||||||||
| Income tax provision | 59.9 | 56.2 | |||||||||
| Depreciation and amortization | 83.4 | 75.5 | |||||||||
Non-cash effects of purchase accounting, depreciation & amortization (1) | 9.1 | — | |||||||||
| EBITDA | $ | 375.2 | $ | 379.0 | |||||||
| Adjustments: | |||||||||||
Transaction costs (2) | 35.5 | (0.9) | |||||||||
Business combination charges, Leggett & Platt (3) | 14.8 | — | |||||||||
Loss on extinguishment of debt (4) | 13.0 | — | |||||||||
Business combination charges, Mattress Firm (5) | 9.0 | 32.2 | |||||||||
Supply chain transition costs (6) | — | 7.3 | |||||||||
Disposition-related costs (7) | — | 1.3 | |||||||||
| Adjusted EBITDA | $ | 447.5 | $ | 418.9 | |||||||
| (1) | In the third quarter of 2026, we recorded $10.0 million of non-cash charges related to fair value adjustments recorded in accordance with business combination accounting. | ||||
| (2) | In the third quarter of 2026, we recorded $35.5 million of transaction costs, primarily associated with legal and professional fees related to the Leggett & Platt Acquisition. In the third quarter of 2025, we recorded a benefit of $0.9 million of transaction costs related to the Mattress Firm Acquisition. | ||||
| (3) | In the third quarter of 2026, we recorded $14.8 million of business combination charges related to the Leggett & Platt Acquisition. | ||||
| (4) | In the third quarter of 2026, we recognized $13.0 million of loss on extinguishment of debt associated with the refinancing of our senior secured credit facilities. | ||||
| (5) | In the third quarter of 2026, we recorded $9.0 million of business combination charges related to the Mattress Firm Acquisition. In the third quarter of 2025, we recorded $32.2 million of business combination charges related to the Mattress Firm Acquisition. | ||||
| (6) | In the third quarter of 2025, we recognized $7.3 million in supply chain transition costs, primarily related to a manufacturing facility lease termination. | ||||
| (7) | In the third quarter of 2025, we recognized $1.3 million of disposition-related costs, primarily related to retail store transition costs incurred for the divestiture to Mattress Warehouse. | ||||
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The following table sets forth the reconciliation of our net income to the calculations of EBITDA and adjusted EBITDA for the trailing twelve months ended September 30, 2026:
| Trailing Twelve Months Ended | |||||
| (in millions) | September 30, 2026 | ||||
| Net income | $ | 519.4 | |||
| Interest expense, net | 241.6 | ||||
Non-cash effects of purchase accounting, interest expense (1) | 0.9 | ||||
| Income tax provision | 183.3 | ||||
| Depreciation and amortization | 310.6 | ||||
Non-cash effects of purchase accounting, depreciation & amortization (1) | 9.1 | ||||
| EBITDA | $ | 1,264.9 | |||
| Adjustments: | |||||
Transaction costs (2) | 47.5 | ||||
Business combination charges, Mattress Firm (3) | 34.3 | ||||
Business combination charges, Leggett & Platt (4) | 14.8 | ||||
Loss on extinguishment of debt (5) | 13.0 | ||||
Legal and other charges (6) | 8.6 | ||||
Cloud-based computing arrangements impairment (7) | 6.2 | ||||
| Adjusted EBITDA | $ | 1,389.3 | |||
Earnings from Leggett & Platt prior to acquisition (8) | 330.5 | ||||
Future cost synergies to be realized from Leggett & Platt Acquisition (9) | 75.0 | ||||
Future cost synergies to be realized from Mattress Firm Acquisition (10) | 70.0 | ||||
| Adjusted EBITDA per credit facility | $ | 1,864.8 | |||
| Consolidated indebtedness less netted cash | $ | 5,014.9 | |||
| Ratio of consolidated indebtedness less netted cash to adjusted EBITDA per credit facility | 2.69 times | ||||
| (1) | In the trailing twelve months ended September 30, 2026, we recorded $10.0 million of non-cash charges related to fair value adjustments recorded in accordance with business combination accounting. | ||||
| (2) | In the trailing twelve months ended September 30, 2026, we recognized $47.5 million of transaction costs primarily related to the Leggett & Platt Acquisition. | ||||
| (3) | In the trailing twelve months ended September 30, 2026, we recognized $34.3 million of business combination charges primarily related to the floor model transition associated with the refinement of Mattress Firm's multi-branded merchandising plan, professional fees and restructuring costs. | ||||
| (4) | In the trailing twelve months ended September 30, 2026, we recorded $14.8 million of business combination charges related to the Leggett & Platt Acquisition. | ||||
| (5) | In the trailing twelve months ended September 30, 2026, we recognized $13.0 million of loss on extinguishment of debt associated with the refinancing of our senior secured credit facilities. | ||||
| (6) | In the trailing twelve months ended September 30, 2026, we recorded $8.6 million of one-time charges, including $6.1 million of legal fees and $2.5 million of customer-related charges. | ||||
| (7) | In the trailing twelve months ended September 30, 2026, we recorded $6.2 million of impairment charges related to certain cloud-based computing arrangements. | ||||
| (8) | We completed the Leggett & Platt Acquisition on August 26, 2026 and designated this subsidiary as restricted under the 2023 Credit Agreement. For covenant compliance purposes, we included $330.5 million of Leggett & Platt adjusted EBITDA for the period prior to acquisition in our calculation of adjusted EBITDA per credit facility for the trailing twelve months ended September 30, 2026. | ||||
| (9) | In the trailing twelve months ended September 30, 2026, we are permitted to include $75.0 million of future cost synergies expected to be realized in connection with the Leggett & Platt Acquisition for the purpose of calculating our adjusted EBITDA in accordance with the 2023 Credit Agreement. | ||||
| (10) | In the trailing twelve months ended September 30, 2026, we are permitted to include $70.0 million of future cost synergies expected to be realized in connection with the Mattress Firm Acquisition for the purpose of calculating our adjusted EBITDA in accordance with the 2023 Credit Agreement. | ||||
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Under the 2023 Credit Agreement, the ratio of consolidated indebtedness less netted cash to adjusted EBITDA was 2.69 times for the trailing twelve months ended September 30, 2026. 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 September 30, 2026. "Consolidated Indebtedness" and "Netted Cash" are terms used in the 2023 Credit Agreement for purposes of certain financial covenants.
| (in millions) | September 30, 2026 | ||||
| Total debt, net | $ | 5,381.6 | |||
Plus: Deferred financing costs (1) | 245.4 | ||||
| Consolidated indebtedness | 5,627.0 | ||||
Less: Netted cash (2) | 612.1 | ||||
| Consolidated indebtedness less netted cash | $ | 5,014.9 | |||
| (1) | We present deferred financing costs as a direct reduction from the carrying amount of the related debt in the Condensed Consolidated Balance Sheets. For purposes of determining total debt for financial covenant purposes, we have added these costs back to total debt, net as calculated per the Condensed Consolidated Balance Sheets. | ||||
| (2) | Netted cash includes cash and cash equivalents for domestic and foreign subsidiaries designated as restricted subsidiaries in the 2023 Credit Agreement. | ||||
Critical Accounting Policies and Estimates
For a discussion of our critical accounting policies and estimates, please refer to ITEM 7 under Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the 2025 Annual Report. There have been no material changes to our critical accounting policies and estimates in 2026.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risks are discussed in detail in ITEM 7A of Part II of our 2025 Annual Report. Management has reassessed the quantitative and qualitative market risk disclosures described in our 2025 Annual Report and determined there were no material changes to the Company's foreign currency exposure for the nine months ended September 30, 2026.
Interest Rate Risk
Our primary exposure to interest rate risk is due to our variable-rate debt agreements, including our 2023 Credit Agreement. These variable-rate debt agreements use Secured Overnight Financing Rate ("SOFR"), which is subject to fluctuation and uncertainty. As of September 30, 2026, the value of our variable-rate debt was $2,425.8 million. A sensitivity analysis indicates that, holding other variables constant, including levels of indebtedness, a one hundred basis point increase in interest rates on our variable-rate debt as of September 30, 2026 would cause an estimated reduction in income before income taxes of approximately $24.3 million. We continue to evaluate the interest rate environment and look for opportunities to improve our debt structure and minimize interest rate risk and expense.
Foreign Currency Exchange Risk
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 a rate of 1.9809%. We have designated these cross currency swap agreements as net investment hedges.
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ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2026, and were designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting:
We completed the Mattress Firm Acquisition on February 5, 2025. We are currently evaluating the design and controls assessment of Mattress Firm's internal control over financial reporting to incorporate into our financial reporting processes, which will be included in our assessment of internal control over financial reporting for the year ended December 31, 2026.
During the third quarter of 2026, the Company implemented a new enterprise resource planning ("ERP") system to replace the financial systems for Dreams. The Company completed significant pre-implementation testing and post-implementation testing and monitoring to ensure the effectiveness of internal controls over financial reporting. As a result of this implementation, the Company modified certain existing internal controls over financial reporting and implemented new controls and procedures related to the new ERP system.
During the third quarter of 2026, the Company completed the Leggett & Platt Acquisition on August 26, 2026. As a result, the Company began integrating Leggett & Platt's internal controls within our internal controls over financial reporting framework and commenced controls assessment activities. In accordance with the SEC's published guidance, because we acquired these operations during the fiscal year, these operations will be excluded from our assessment of internal controls over financial reporting for the year ending December 31, 2026.
There were no other changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding legal proceedings can be found in Note 9, "Commitments and Contingencies," of the "Notes to Condensed Consolidated Financial Statements," under Part I, ITEM 1, "Financial Statements" of this Report and is incorporated by reference herein.
ITEM 1A. RISK FACTORS
None.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) Issuer Purchases of Equity Securities
The following table sets forth purchases of our common stock for the three months ended September 30, 2026:
| 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) | ||||||||||||||||||||||
| July 1, 2026 - July 31, 2026 | — | $— | — | $774.5 | ||||||||||||||||||||||
| August 1, 2026 - August 31, 2026 | 766 | (1) | $65.33 | — | $774.5 | |||||||||||||||||||||
| September 1, 2026 - September 30, 2026 | — | $— | — | $774.5 | ||||||||||||||||||||||
| Total | 766 | — | ||||||||||||||||||||||||
| (1) | Includes shares withheld upon the vesting of certain equity awards to satisfy tax withholding obligations. The shares withheld were valued at the closing price of the common stock on the NYSE on the vesting date or prior business day. | ||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a) Not applicable.
(b) Not applicable.
(c) During the quarter ended September 30, 2026, none
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ITEM 6. EXHIBITS
The following is an index of the exhibits included in this report:
| 2.1 | Agreement and Plan of Merger, dated as of April 13, 2026, by and among Somnigroup International Inc., Sparrow Unity Corporation and Leggett & Platt, Incorporated (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K as filed on April 13, 2026).(1) | ||||
| 3.1 | Amended and Restated Certificate of Incorporation of Tempur-Pedic International Inc. (filed as Exhibit 3.1 to Amendment No. 3 to the Registrant's registration statement on Form S-1/A (File No. 333-109798) as filed on December 12, 2003). (1) | ||||
| 3.2 | Amendment to Certificate of Incorporation of Tempur-Pedic International Inc. (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K as filed on May 24, 2013). (1) | ||||
| 3.3 | Second Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Tempur Sealy International, Inc. (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K as filed on May 10, 2021). (1) | ||||
| 3.4 | Third Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Somnigroup International Inc. (filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K as filed on February 18, 2025). (1) | ||||
| 3.5 | Eighth Amended and Restated By-laws of Somnigroup International Inc. (filed as Exhibit 3.2 to the Registrant's Current Report on Form 8-K as filed on February 18, 2025). (1) | ||||
| 4.1 | Indenture, dated as of March 25, 2021, among Tempur Sealy International, Inc., the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee (filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K as filed on March 25, 2021). (1) | ||||
| 4.2 | Form of 4.00% Senior Notes due 2029 (included in Exhibit 4.1 to the Registrant's Current Report on Form 8-K as filed on March 25, 2021). (1) | ||||
| 4.3 | Supplemental Indenture, dated as of April 4, 2025, among Somnigroup International Inc. (f/k/a Tempur Sealy International, Inc.), the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee for 4.00% Senior Notes due 2029 (filed as Exhibit 4.3 to the Registrant's Quarterly Report on Form 10-Q as filed on August 8, 2025). (1) | ||||
| 4.4 | Indenture, dated as of September 24, 2021 among Tempur Sealy International, Inc., the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee (filed as Exhibit 10.1 (but numbered 4.1) to the Registrant's Current Report on Form 8-K as filed on September 24, 2021). (1) | ||||
| 4.5 | Form of 3.875% Senior Notes due 2031 (included in Exhibit 10.1 (but numbered 4.2) to the Registrant's Current Report on Form 8-K as filed on September 24, 2021). (1) | ||||
| 4.6 | Supplemental Indenture, dated as of April 4, 2025, among Somnigroup International Inc. (f/k/a Tempur Sealy International, Inc.), the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee for 3.875% Senior Notes due 2031 (filed as Exhibit 4.6 to the Registrant's Quarterly Report on Form 10-Q as filed on August 8, 2025). (1) | ||||
| 4.7 | Description of Securities (filed as Exhibit 4.6 to the Registrant's Annual Report on Form 10-K as filed on February 28, 2025). (1) | ||||
| 10.1 | Amendment No. 5 dated as of July 27, 2026 by and among Somnigroup International Inc., as parent borrower, Tempur-Pedic Management, LLC and Somnigroup Management LLC, as additional borrowers, the subsidiary guarantors party thereto, each lender party thereto, and Bank of America, N.A., as administrative agent (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed on July 27, 2026). (1) | ||||
| 31.1 | Certification of Chief Executive Officer, pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 31.2 | Certification of Chief Financial Officer, pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
| 101 | The following materials from Somnigroup International Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements. | ||||
| 104 | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL. | ||||
| (1) | Incorporated by reference. | ||||
| * | This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78r), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SOMNIGROUP INTERNATIONAL INC. | ||||||||
| Date: November 9, 2026 | By: | /s/ BHASKAR RAO | ||||||
| Bhaskar Rao | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
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