Tickers

1. Composite Trajectory Verdict

All three financial statements carry roughly equal weight for SGI given its capital-intensive manufacturing/retail model, high post-acquisition leverage, and the need to service debt while integrating Mattress Firm.

Composite Trajectory: Mixed

The annual income statement shows mixed signals: GAAP revenue and operating income rose in absolute terms (10-K 2025-12-31, Consolidated Statements of Operations), but operating margin compressed 280 bps to 10.1% and diluted EPS fell 14.8% to $1.84 due to share dilution and doubled interest expense. The cash flow statement shows improving operating cash generation ($570.3M → $666.5M → $800.1M across 2023-2025, 10-K 2025-12-31, Consolidated Statements of Cash Flows), but investing and financing flows are dominated by the acquisition. The balance sheet shows deteriorated leverage (net debt/adjusted EBITDA 2.31x → 3.21x, 10-K 2025-12-31, Non-GAAP Financial Information) and a working capital swing from +$105.1M to -$271.1M (10-K 2025-12-31, MD&A Liquidity), though equity increased substantially from stock issuance. The February 2025 Mattress Firm acquisition makes 2025 annual results incomparable to 2024, and no complete quarterly YoY comparisons are available from the provided filings.

2. Red Flags

• GAAP net income flat ($384.3M → $384.1M) while operating income grew 19% ($634.2M → $754.9M), as net interest expense doubled ($134.8M → $267.9M) (10-K 2025-12-31, Consolidated Statements of Operations)
• Operating margin compressed 280 bps (12.9% → 10.1%) due to Mattress Firm's 5.4% segment margin diluting the consolidated rate (10-K 2025-12-31, MD&A Operating Income)
• Net leverage (consolidated indebtedness less netted cash / adjusted EBITDA per credit facility) rose from 2.31x to 3.21x (10-K 2025-12-31, Non-GAAP Financial Information)
• Working capital swung from +$105.1M to -$271.1M deficit, driven by $272.8M increase in short-term operating lease obligations from the acquisition (10-K 2025-12-31, MD&A Liquidity)
• Interest coverage (operating income / net interest expense) fell from 4.7x to 2.8x (10-K 2025-12-31, Consolidated Statements of Operations)
• Goodwill ($4,595.9M) and indefinite-lived intangibles ($2,572.4M) represent 62% of total assets (10-K 2025-12-31, Consolidated Balance Sheets)
• $114.2M in acquisition-related costs and $53.8M in business combination charges recorded in 2025 (10-K 2025-12-31, Non-GAAP Financial Information)
• Unaudited pro forma combined net income would have declined to $174.4M in 2025 from $276.9M in 2024 (10-K 2025-12-31, Note 3 Acquisitions and Divestitures)

3. Earnings Assessment (Income Statement)

Earnings Trajectory: Mixed

GAAP net sales increased 51.6% to $7,476.5M in 2025 vs $4,930.9M in 2024, but the increase was driven by $3,505.4M of Mattress Firm stub-period revenue (10-K 2025-12-31, MD&A Net Sales). Tempur Sealy North America net sales fell 28.7% to $2,701.2M, primarily from elimination of $976.2M in inter-segment sales to Mattress Firm (10-K 2025-12-31, MD&A Net Sales). Consolidated gross margin improved 150 bps to 42.6%, but this reflects mix shift from the elimination of low-margin wholesale sales to Mattress Firm (10-K 2025-12-31, MD&A Gross Profit). Operating income rose 19.0% to $754.9M, yet operating margin fell 280 bps to 10.1% due to Mattress Firm's 5.4% margin and corporate cost increases (10-K 2025-12-31, MD&A Operating Income). Net income was essentially flat ($384.1M vs $384.3M) and diluted EPS declined 14.8% to $1.84 as diluted shares outstanding rose 17.4% to 209.2M from stock issued for the acquisition (10-K 2025-12-31, Consolidated Statements of Operations). Tempur Sealy International showed organic growth: net sales +11.2% to $1,269.9M and operating income +13.5% to $221.2M (10-K 2025-12-31, MD&A Net Sales and Operating Income).

4. Cash Generation Assessment (Statement of Cash Flows)

Cash Trajectory: Improving

Net cash provided by operating activities grew each year: $570.3M (2023) → $666.5M (2024) → $800.1M (2025) (10-K 2025-12-31, Consolidated Statements of Cash Flows). Free cash flow (operating cash flow minus capital expenditures) increased from $384.9M (2023) to $569.2M (2024) to $633.2M (2025) (capex: $185.4M, $97.3M, $166.9M respectively) (10-K 2025-12-31, Consolidated Statements of Cash Flows and MD&A Capital Expenditures). Cash interest paid rose from $144.6M (2023) to $157.7M (2024) to $278.3M (2025) (10-K 2025-12-31, Consolidated Statements of Cash Flows Supplemental). Investing cash flow was heavily negative in 2025 (-$3,024.3M) due to the Mattress Firm acquisition (-$2,824.5M net of cash acquired) vs -$96.7M in 2024 (10-K 2025-12-31, Consolidated Statements of Cash Flows). Financing cash flow was +$616.9M in 2025 vs +$1,077.4M in 2024, with net borrowings of $849.8M vs $1,246.4M (10-K 2025-12-31, MD&A Liquidity).

5. Balance Sheet Assessment

Balance Sheet Trajectory: Deteriorating

Total assets doubled to $11,600.7M from $5,980.4M, driven by $3,493.9M of Mattress Firm goodwill and $1,880.0M of Mattress Firm trade name intangible (10-K 2025-12-31, Consolidated Balance Sheets and Note 4). Total debt increased to $4,717.3M from $3,844.5M (10-K 2025-12-31, Note 6 Debt). Consolidated indebtedness less netted cash rose to $4,582.4M from $2,134.8M (10-K 2025-12-31, Non-GAAP Financial Information). Net leverage (per credit facility) increased to 3.21x from 2.31x (10-K 2025-12-31, Non-GAAP Financial Information). Working capital moved from a $105.1M surplus to a $271.1M deficit, primarily from $272.8M higher short-term operating lease obligations (10-K 2025-12-31, MD&A Liquidity). Current portion of long-term debt rose to $112.4M from $69.5M (10-K 2025-12-31, Consolidated Balance Sheets). Stockholders' equity increased to $3,108.0M from $559.0M due to 34.2M shares issued for the acquisition (10-K 2025-12-31, Consolidated Statements of Stockholders' Equity). Deferred tax liabilities increased to $1,553.5M from $392.9M, largely from acquired intangibles and stock basis recapture (10-K 2025-12-31, Note 13 Deferred Income Tax Assets and Liabilities).

6. Data Gaps

• Quarterly GAAP income statements for Q2 2026 vs Q2 2025, Q1 2026 vs Q1 2025, Q3 2025 vs Q3 2024 (10-Q 2026-06-30, 10-Q 2026-03-31, 10-Q 2025-09-30, 10-Q 2025-06-30 Condensed Statements of Operations not fully provided)
• Quarterly GAAP cash flow statements for comparable quarters (same 10-Q filings)
• Quarterly balance sheets for March 31, June 30, September 30 2025 and March 31, June 30 2026 (same 10-Q filings)
• Segment-level quarterly net sales, gross profit, operating income for YoY comparison
• Organic revenue growth rates for Tempur Sealy North America and International excluding acquisition and divestiture impacts
• Full 2026 Q2 10-Q financial statements (filing truncated in provided documents)