Revenue Recognition

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table presents the Company's disaggregated revenue by channel, product and geographical region, including a reconciliation of disaggregated revenue by segment, for the years ended December 31.



	Twelve Months Ended December 31, 2019						Twelve Months Ended December 31, 2018
(in millions)	North America		International		Consolidated		North America		International		Consolidated
Channel
Wholesale	$	2,273.5	$	443.6	$	2,717.1	$	1,989.1	$	463.0	$	2,452.1
Direct	259.8		129.1		388.9		147.1		103.7		250.8
Net sales	$	2,533.3	$	572.7	$	3,106.0	$	2,136.2	$	566.7	$	2,702.9

	North America		International		Consolidated		North America		International		Consolidated
Product
Bedding	$	2,379.6	$	455.7	$	2,835.3	$	2,002.1	$	453.2	$	2,455.3
Other	153.7		117.0		270.7		134.1		113.5		247.6
Net sales	$	2,533.3	$	572.7	$	3,106.0	$	2,136.2	$	566.7	$	2,702.9

	North America		International		Consolidated		North America		International		Consolidated
Geographical region
United States	$	2,312.3	$	—	$	2,312.3	$	1,928.9	$	—	$	1,928.9
Canada	221.0		—		221.0		207.3		—		207.3
International	—		572.7		572.7		—		566.7		566.7
Net sales	$	2,533.3	$	572.7	$	3,106.0	$	2,136.2	$	566.7	$	2,702.9

The North America and International segments sell product through two channels: Wholesale and Direct. The Wholesale channel includes all product sales to third party retailers, including third party distribution, hospitality and healthcare. The Direct channel includes product sales to company-owned stores, e-commerce and call centers. The North America and International segments classify products into two major categories: Bedding and Other. Bedding products include mattresses, foundations and adjustable foundations. Other products include pillows, mattress covers, sheets, cushions and various other comfort products.

The Wholesale channel also includes income from royalties derived by licensing Sealy® and Stearns & Foster® brands, technology and trademarks to other manufacturers. The licenses include rights for the licensees to use trademarks as well as current proprietary or patented technology that the Company utilizes. The Company also provides its licensees with product specifications, research and development, statistical services and marketing programs. The Company recognizes royalty income based on the occurrence of sales of Sealy® and Stearns & Foster® branded products by various licensees. Royalty income was $22.6 million, $20.9 million and $20.8 million for the years ended December 31, 2019, 2018 and 2017, respectively.

For product sales in each of the Company's channels, the Company recognizes a sale when the obligations under the terms of the contract with the customer are satisfied, which is generally when control of the product has transferred to the customer. Transferring control of each product sold is considered a separate performance obligation. The Company transfers control and recognizes a sale when the customer receives the product. Each unit sold is considered an independent, unbundled performance obligation. The Company does not have any additional performance obligations other than product sales that are material in the context of the contract. The Company also offers assurance type warranties on certain of its products, which is not accounted for as separate performance obligations under the revenue model.

The transaction price is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives, and correspondingly, the revenue that is recognized, varies due to sales incentives and returns the Company offers to its Wholesale and Direct channel customers. Specifically, the Company extends volume discounts, as well as promotional allowances, floor sample discounts, commissions paid to retail associates and slotting fees to its Wholesale channel customers and reflects these amounts as a reduction of sales at the time revenue is recognized based on historical experience. The Company allows returns following a sale, depending on the channel and promotion. The Company reduces revenue and cost of sales for its estimate of the expected returns, which is primarily based on the level of historical sales returns. The Company does not offer extended payment terms beyond one year to customers. As such, the Company does not adjust its consideration for financing arrangements.

In certain jurisdictions, the Company is subject to certain non-income taxes including, but not limited to, sales tax, value added tax, excise tax and other taxes. These taxes are excluded from the transaction price, and therefore, excluded from revenue. The Company has elected to account for shipping and handling activities as a fulfillment cost as permitted by Topic 606. Accordingly, the Company reflects all amounts billed to customers for shipping and handling in revenue and the costs of fulfillment in cost of sales. Amounts included in net sales for shipping and handling were $19.3 million, $13.6 million and $11.3 million for the years ended December 31, 2019, 2018 and 2017, respectively.