factors that could impact results of operations the factors outlined below could impact our future results of operations . for more extensive discussion of these and other risk factors , please refer to `` risk factors `` , under part i , item1a in this report . general business and economic conditions our business has been affected by general business and economic conditions , and these conditions could have an impact on future demand for our products . the global economic environment continues to be challenging , and we expect the uncertainty to continue . in light of the macroeconomic environment , we continue to take steps to further align our cost structure with our anticipated level of net sales . we continued to make strategic investments , including : introducing new products ; investing in increasing our global brand awareness ; extending our presence and improving our retail account productivity and distribution ; investing in our operating infrastructure to meet the requirements of our business ; and taking actions to further strengthen our business . competition participants in the bedding industry compete primarily on price , quality , brand name recognition , product availability , and product performance . we compete with a number of different types of mattress alternatives , including standard innerspring mattresses , viscoelastic mattresses , foam mattresses , hybrid innerspring/foam mattresses , futons , air beds and other air-supported mattresses . these alternative products are sold through a variety of channels , including furniture and bedding stores , department stores , mass merchants , wholesale clubs , internet , telemarketing programs , television infomercials , television advertising and catalogs . our tempur north america segment competes in the non-innerspring mattress category and contributes 36.9 % of our net sales . beginning in the second half of 2012 , a significant number of new non-innerspring mattress products were introduced in this category and changed the competitive environment of the u.s. bedding industry . many of these new non-innerspring mattress products have been supported by aggressive marketing campaigns and promotions . as a result of this change , our results have been negatively impacted and we modified our business strategy to compete and expand our market share . our results could continue to be challenged . 31 financial leverage as of december 31 , 2013 , we had $ 1,836.5 million of debt outstanding , and our stockholders ' equity was $ 114.0 million . higher financial leverage makes us more vulnerable to general adverse competitive , economic and industry conditions . there can be no assurance that our business will generate sufficient cash flow from operations or that future borrowing will be available . as of december 31 , 2013 , our ratio of funded debt less qualified cash to ebitda was 4.4 times , within the covenant in our debt agreements which limits this ratio to 5.25 times for the year ended december 31 , 2013. for more information on this non-gaap measure , please refer to the section set forth below “ non-gaap financial measures ” . sealy integration our sealy acquisition is significant , and we may not be able to successfully integrate and combine the operations , personnel and technology of sealy with our operations . because of the size and complexity of sealy 's business , if we do not successfully manage integration , we may experience interruptions in our business activities , a deterioration in our employee and customer relationships , increased costs of integration and harm to our reputation , all of which could have a material adverse effect on our business , financial condition and results of operations . we may also experience difficulties in combining corporate cultures , maintaining employee morale and retaining key employees . the integration may also impose substantial demands on our management . there is no assurance that improved operating results will be achieved as a result of the sealy acquisition or that the businesses of sealy and tempur-pedic will be successfully integrated in a timely manner . gross margins our gross margin is primarily impacted by the relative amount of net sales between our business segments . the sealy segment operates at a significantly lower gross margin than the tempur north america and tempur international segments . if sealy 's net sales increase as a percentage of net sales , our gross margin will be negatively impacted . additionally , our tempur north america gross margin has historically been lower than that of our tempur international segment . our gross margin is also impacted by fixed cost leverage ; the cost of raw materials ; operational efficiency ; product , channel and geographic mix ; volume incentives offered to certain retail accounts ; and costs associated with new product introductions . future increases in raw material prices could have a negative impact on our gross margin if we do not raise prices to cover increased cost . our gross margin can also be impacted by our operational efficiencies , including the particular levels of utilization in our manufacturing facilities . if we increase our net sales significantly the effect of this operating leverage could have a significant positive impact on our gross margin . conversely , if we experience significant decreases in our net sales , the effect of this operating deleverage could have a significant negative impact on our gross margin . our margins are also impacted by the growth in our retail channel as sales in our retail channel are at wholesale prices whereas sales in our direct channel are at retail prices . in 2014 , we expect gross margin to benefit from cost synergies and leverage , offset by investments in new products and foreign exchange . floor model shipments will be elevated in the first half of 2014 as we complete our new product roll-outs . story_separator_special_tag during the full year 2013 , we also recorded royalty income , net of royalty expense , of $ 13.7 million and equity income in earnings of unconsolidated affiliates of $ 4.4 million . our royalty income is based on sales of sealy® and stearns & foster® branded products by various licensees and is offset by royalty expenses we pay to other entities for the use of their names on our sealy branded products . our equity income in earnings of unconsolidated affiliates represents our 50.0 % interest in the earnings of our asia-pacific joint ventures whose purpose is to develop markets for sealy branded products . during the full year 2013 , we incurred $ 18.7 million of transaction expenses and $ 25.9 million of integration expenses in connection with the sealy acquisition . during the full year 2012 , we incurred $ 8.9 million of transaction expenses and $ 3.7 million of integration expenses in connection with the sealy acquisition . year ended december 31 , 2012 compared to year ended december 31 , 2011 operating income decreased $ 92.2 million , or 27.1 % , and was primarily impacted by the factors discussed above . interest expense , net replace_table_token_10_th year ended december 31 , 2013 compared to the year ended december 31 , 2012 interest expense , net , increased $ 92.0 million , or 489.4 % . in 2013 , we incurred $ 19.9 million of incremental interest expense and fees on the senior notes and 2012 credit agreement for the period prior to march 18 , 2013 , commitment fees associated with financing for the closing of the sealy acquisition , and write off of deferred financing costs associated with the 2011 credit facility . in addition , we incurred $ 8.7 million in prepayment fees related to the refinancing of our term b facility in the second quarter of 2013. the remaining increase was due to higher debt levels as a result of the sealy acquisition . 39 year ended december 31 , 2012 compared to the year ended december 31 , 2011 interest expense , net , increased $ 6.9 million , or 58.0 % . the increase in interest expense was primarily attributable to an increase in our debt outstanding as of december 31 , 2012 compared to our debt outstanding as of december 31 , 2011 and an increase in our effective interest rate . our debt levels increased in anticipation of the sealy acquisition , which occurred on march 18 , 2013. income before income taxes replace_table_token_11_th year ended december 31 , 2013 compared to year ended december 31 , 2012 income before income taxes decreased $ 101.2 million , or 44.2 % . this decrease was a result of the factors discussed above . year ended december 31 , 2012 compared to year ended december 31 , 2011 income before income taxes decreased $ 99.2 million , or 30.2 % . this decrease was a result of the factors discussed above . income taxes replace_table_token_12_th income tax provision includes income taxes associated with taxes currently payable and deferred taxes , and includes the impact of net operating losses for certain of our foreign operations . year ended december 31 , 2013 compared to year ended december 31 , 2012 our income tax provision decreased $ 73.3 million and our effective tax rate decreased 15.0 % . during 2012 , we recorded $ 48.1 million of additional income tax expense related to our undistributed earnings from non-u.s. operations , which increased our effective tax rate by 21.0 % . this was recorded as deferred income tax expense in 2012 and a deferred tax liability at december 31 , 2012. during 2013 , we undertook a taxable transaction in which we recognized current taxable income based on the earnings of certain of our foreign subsidiaries . the resulting income tax payable was approximately $ 51.7 million . consequently , we reclassified the $ 48.1 million deferred tax liability recorded at december 31 , 2012 to current tax payable at december 31 , 2013 and recognized an incremental $ 3.6 million current income tax expense in 2013. year ended december 31 , 2012 compared to year ended december 31 , 2011 our income tax provision increased $ 13.6 million and our effective tax rate increased 20.3 % .we had made no historical provision for u.s. federal and or state income tax and foreign withholdings on our undistributed earnings from non-u.s. operations because we intended to reinvest such earnings indefinitely outside of the united states . during 2012 , we changed the classification of our undistributed earnings to reflect a change in management 's strategic objectives that could require the repatriation of foreign earnings . as a result of this change , we recognized $ 48.1 million of additional income tax expense in 2012 to record the applicable u.s. deferred income tax liability . we repatriated non-u.s. cash holdings upon the closing of the proposed sealy acquisition . 40 tempur north america segment summary replace_table_token_13_th year ended december 31 , 2013 compared to year ended december 31 , 2012 tempur north america net sales decreased $ 54.3 million , or 5.6 % . the decline was driven by a decrease in bedding net sales of $ 51.9 million , or 5.9 % . retail channel net sales decreased $ 30.9 million , or 3.5 % . direct channel net sales also decreased $ 27.0 million , or 35.4 % . during the first half of 2013 , tempur north america decreased advertising expenses to better align with lower net sales . we believe this reduction in advertising had a negative impact on the retail and direct channel net sales . retail net sales decreased in the first half of 2013 as compared to the prior year due to continued competition and decreased advertising spend , but retail net sales stabilized in the second half of 2013 as we implemented additional strategic initiatives

debt service our debt increased to $ 1,836.5 million as of december 31 , 2013 from $ 1,025.0 million as of december 31 , 2012. our debt as of december 31 , 2012 included $ 375.0 million of senior notes issued in december 2012 to finance a portion of the cost of the sealy acquisition . the increase in debt is due to funding of the 2012 credit agreement in conjunction with the closing of the sealy acquisition , partially offset by the payoff of the remaining balance under the 2011 credit facility . after giving effect to $ 74.5 million in borrowings under the revolver portion of the 2012 credit agreement and letters of credit outstanding of $ 22.9 million , total availability under the revolver was $ 252.6 million as of december 31 , 2013. refer to note 5 , “ debt ” , in our consolidated financial statements included in part ii , item 8 for further discussion of our debt . as of december 31 , 2013 , we were in compliance with all of the financial covenants in our debt agreements . the table below sets forth the calculation of our compliance with the covenant in the 2012 credit agreement that requires that we maintain a ratio of less than 5.25 times of consolidated funded debt less qualified cash to adjusted ebitda from october 1 , 2013 through december 31 , 2013. during 2014 , we are required to maintain this ratio at less than : 5.00 times through march 31 , 2014 ; 4.75 times through june 30 , 2014 ; and 4.50 times through december 31 , 2014. both consolidated funded debt and adjusted ebitda are terms that are not recognized under u.s. gaap and do not purport to be alternatives to net income as a measure of operating performance or total debt . under the terms of our consolidated interest coverage ratio covenant , we are required to maintain a ratio greater than 3.00 times adjusted ebitda to adjusted interest expense . as of december 31 , 2013 , our consolidated interest coverage ratio was 4.0 times . in the first quarter of 2014 , we will be required to pay $ 21.9


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```debt service our debt increased to $ 1,836.5 million as of december 31 , 2013 from $ 1,025.0 million as of december 31 , 2012. our debt as of december 31 , 2012 included $ 375.0 million of senior notes issued in december 2012 to finance a portion of the cost of the sealy acquisition . the increase in debt is due to funding of the 2012 credit agreement in conjunction with the closing of the sealy acquisition , partially offset by the payoff of the remaining balance under the 2011 credit facility . after giving effect to $ 74.5 million in borrowings under the revolver portion of the 2012 credit agreement and letters of credit outstanding of $ 22.9 million , total availability under the revolver was $ 252.6 million as of december 31 , 2013. refer to note 5 , “ debt ” , in our consolidated financial statements included in part ii , item 8 for further discussion of our debt . as of december 31 , 2013 , we were in compliance with all of the financial covenants in our debt agreements . the table below sets forth the calculation of our compliance with the covenant in the 2012 credit agreement that requires that we maintain a ratio of less than 5.25 times of consolidated funded debt less qualified cash to adjusted ebitda from october 1 , 2013 through december 31 , 2013. during 2014 , we are required to maintain this ratio at less than : 5.00 times through march 31 , 2014 ; 4.75 times through june 30 , 2014 ; and 4.50 times through december 31 , 2014. both consolidated funded debt and adjusted ebitda are terms that are not recognized under u.s. gaap and do not purport to be alternatives to net income as a measure of operating performance or total debt . under the terms of our consolidated interest coverage ratio covenant , we are required to maintain a ratio greater than 3.00 times adjusted ebitda to adjusted interest expense . as of december 31 , 2013 , our consolidated interest coverage ratio was 4.0 times . in the first quarter of 2014 , we will be required to pay $ 21.9
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 Suspicious Activity Report : factors that could impact results of operations the factors outlined below could impact our future results of operations . for more extensive discussion of these and other risk factors , please refer to `` risk factors `` , under part i , item1a in this report . general business and economic conditions our business has been affected by general business and economic conditions , and these conditions could have an impact on future demand for our products . the global economic environment continues to be challenging , and we expect the uncertainty to continue . in light of the macroeconomic environment , we continue to take steps to further align our cost structure with our anticipated level of net sales . we continued to make strategic investments , including : introducing new products ; investing in increasing our global brand awareness ; extending our presence and improving our retail account productivity and distribution ; investing in our operating infrastructure to meet the requirements of our business ; and taking actions to further strengthen our business . competition participants in the bedding industry compete primarily on price , quality , brand name recognition , product availability , and product performance . we compete with a number of different types of mattress alternatives , including standard innerspring mattresses , viscoelastic mattresses , foam mattresses , hybrid innerspring/foam mattresses , futons , air beds and other air-supported mattresses . these alternative products are sold through a variety of channels , including furniture and bedding stores , department stores , mass merchants , wholesale clubs , internet , telemarketing programs , television infomercials , television advertising and catalogs . our tempur north america segment competes in the non-innerspring mattress category and contributes 36.9 % of our net sales . beginning in the second half of 2012 , a significant number of new non-innerspring mattress products were introduced in this category and changed the competitive environment of the u.s. bedding industry . many of these new non-innerspring mattress products have been supported by aggressive marketing campaigns and promotions . as a result of this change , our results have been negatively impacted and we modified our business strategy to compete and expand our market share . our results could continue to be challenged . 31 financial leverage as of december 31 , 2013 , we had $ 1,836.5 million of debt outstanding , and our stockholders ' equity was $ 114.0 million . higher financial leverage makes us more vulnerable to general adverse competitive , economic and industry conditions . there can be no assurance that our business will generate sufficient cash flow from operations or that future borrowing will be available . as of december 31 , 2013 , our ratio of funded debt less qualified cash to ebitda was 4.4 times , within the covenant in our debt agreements which limits this ratio to 5.25 times for the year ended december 31 , 2013. for more information on this non-gaap measure , please refer to the section set forth below “ non-gaap financial measures ” . sealy integration our sealy acquisition is significant , and we may not be able to successfully integrate and combine the operations , personnel and technology of sealy with our operations . because of the size and complexity of sealy 's business , if we do not successfully manage integration , we may experience interruptions in our business activities , a deterioration in our employee and customer relationships , increased costs of integration and harm to our reputation , all of which could have a material adverse effect on our business , financial condition and results of operations . we may also experience difficulties in combining corporate cultures , maintaining employee morale and retaining key employees . the integration may also impose substantial demands on our management . there is no assurance that improved operating results will be achieved as a result of the sealy acquisition or that the businesses of sealy and tempur-pedic will be successfully integrated in a timely manner . gross margins our gross margin is primarily impacted by the relative amount of net sales between our business segments . the sealy segment operates at a significantly lower gross margin than the tempur north america and tempur international segments . if sealy 's net sales increase as a percentage of net sales , our gross margin will be negatively impacted . additionally , our tempur north america gross margin has historically been lower than that of our tempur international segment . our gross margin is also impacted by fixed cost leverage ; the cost of raw materials ; operational efficiency ; product , channel and geographic mix ; volume incentives offered to certain retail accounts ; and costs associated with new product introductions . future increases in raw material prices could have a negative impact on our gross margin if we do not raise prices to cover increased cost . our gross margin can also be impacted by our operational efficiencies , including the particular levels of utilization in our manufacturing facilities . if we increase our net sales significantly the effect of this operating leverage could have a significant positive impact on our gross margin . conversely , if we experience significant decreases in our net sales , the effect of this operating deleverage could have a significant negative impact on our gross margin . our margins are also impacted by the growth in our retail channel as sales in our retail channel are at wholesale prices whereas sales in our direct channel are at retail prices . in 2014 , we expect gross margin to benefit from cost synergies and leverage , offset by investments in new products and foreign exchange . floor model shipments will be elevated in the first half of 2014 as we complete our new product roll-outs . story_separator_special_tag during the full year 2013 , we also recorded royalty income , net of royalty expense , of $ 13.7 million and equity income in earnings of unconsolidated affiliates of $ 4.4 million . our royalty income is based on sales of sealy® and stearns & foster® branded products by various licensees and is offset by royalty expenses we pay to other entities for the use of their names on our sealy branded products . our equity income in earnings of unconsolidated affiliates represents our 50.0 % interest in the earnings of our asia-pacific joint ventures whose purpose is to develop markets for sealy branded products . during the full year 2013 , we incurred $ 18.7 million of transaction expenses and $ 25.9 million of integration expenses in connection with the sealy acquisition . during the full year 2012 , we incurred $ 8.9 million of transaction expenses and $ 3.7 million of integration expenses in connection with the sealy acquisition . year ended december 31 , 2012 compared to year ended december 31 , 2011 operating income decreased $ 92.2 million , or 27.1 % , and was primarily impacted by the factors discussed above . interest expense , net replace_table_token_10_th year ended december 31 , 2013 compared to the year ended december 31 , 2012 interest expense , net , increased $ 92.0 million , or 489.4 % . in 2013 , we incurred $ 19.9 million of incremental interest expense and fees on the senior notes and 2012 credit agreement for the period prior to march 18 , 2013 , commitment fees associated with financing for the closing of the sealy acquisition , and write off of deferred financing costs associated with the 2011 credit facility . in addition , we incurred $ 8.7 million in prepayment fees related to the refinancing of our term b facility in the second quarter of 2013. the remaining increase was due to higher debt levels as a result of the sealy acquisition . 39 year ended december 31 , 2012 compared to the year ended december 31 , 2011 interest expense , net , increased $ 6.9 million , or 58.0 % . the increase in interest expense was primarily attributable to an increase in our debt outstanding as of december 31 , 2012 compared to our debt outstanding as of december 31 , 2011 and an increase in our effective interest rate . our debt levels increased in anticipation of the sealy acquisition , which occurred on march 18 , 2013. income before income taxes replace_table_token_11_th year ended december 31 , 2013 compared to year ended december 31 , 2012 income before income taxes decreased $ 101.2 million , or 44.2 % . this decrease was a result of the factors discussed above . year ended december 31 , 2012 compared to year ended december 31 , 2011 income before income taxes decreased $ 99.2 million , or 30.2 % . this decrease was a result of the factors discussed above . income taxes replace_table_token_12_th income tax provision includes income taxes associated with taxes currently payable and deferred taxes , and includes the impact of net operating losses for certain of our foreign operations . year ended december 31 , 2013 compared to year ended december 31 , 2012 our income tax provision decreased $ 73.3 million and our effective tax rate decreased 15.0 % . during 2012 , we recorded $ 48.1 million of additional income tax expense related to our undistributed earnings from non-u.s. operations , which increased our effective tax rate by 21.0 % . this was recorded as deferred income tax expense in 2012 and a deferred tax liability at december 31 , 2012. during 2013 , we undertook a taxable transaction in which we recognized current taxable income based on the earnings of certain of our foreign subsidiaries . the resulting income tax payable was approximately $ 51.7 million . consequently , we reclassified the $ 48.1 million deferred tax liability recorded at december 31 , 2012 to current tax payable at december 31 , 2013 and recognized an incremental $ 3.6 million current income tax expense in 2013. year ended december 31 , 2012 compared to year ended december 31 , 2011 our income tax provision increased $ 13.6 million and our effective tax rate increased 20.3 % .we had made no historical provision for u.s. federal and or state income tax and foreign withholdings on our undistributed earnings from non-u.s. operations because we intended to reinvest such earnings indefinitely outside of the united states . during 2012 , we changed the classification of our undistributed earnings to reflect a change in management 's strategic objectives that could require the repatriation of foreign earnings . as a result of this change , we recognized $ 48.1 million of additional income tax expense in 2012 to record the applicable u.s. deferred income tax liability . we repatriated non-u.s. cash holdings upon the closing of the proposed sealy acquisition . 40 tempur north america segment summary replace_table_token_13_th year ended december 31 , 2013 compared to year ended december 31 , 2012 tempur north america net sales decreased $ 54.3 million , or 5.6 % . the decline was driven by a decrease in bedding net sales of $ 51.9 million , or 5.9 % . retail channel net sales decreased $ 30.9 million , or 3.5 % . direct channel net sales also decreased $ 27.0 million , or 35.4 % . during the first half of 2013 , tempur north america decreased advertising expenses to better align with lower net sales . we believe this reduction in advertising had a negative impact on the retail and direct channel net sales . retail net sales decreased in the first half of 2013 as compared to the prior year due to continued competition and decreased advertising spend , but retail net sales stabilized in the second half of 2013 as we implemented additional strategic initiatives

