UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 18, 2015
TEMPUR SEALY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-31922 | 33-1022198 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1000 Tempur Way
Lexington, Kentucky 40511
(Address of principal executive offices) (Zip Code)
(800) 878-8889
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01. | Regulation FD Disclosure |
On February 18, 2015, Tempur Sealy International, Inc. will host a webcast of its Investor Day. Attached as Exhibit 99.1 to this report and furnished under this Item 7.01 are copies of slides used by Tempur Sealy International, Inc. for the investor presentation at its Investor Day.
The information in this report (including Exhibit 99.1) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits
| Exhibit |
Description | |
| 99.1 | Tempur Sealy International, Inc. Investor Day Presentation | |
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 hereunto duly authorized.
Date: February 18, 2015
| Tempur Sealy International, Inc. | ||
| By: | /s/ DALE E. WILLIAMS | |
| Name: | Dale E. Williams | |
| Title: | Executive Vice President and Chief Financial Officer | |
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Tempur Sealy International, Inc. Investor Day Presentation | |
 Tempur Sealy 2015 Investor Day
New York, NY
February 18, 2015
“Improving
the
Sleep
of
More
People
Every
Night,
All
Around
the
World
”
Exhibit 99.1 |
 Mark Rupe
Vice President, Investor Relations
2 |
 •
Mark Sarvary
Investment Highlights & Strategy
•
Tim Yaggi
North America
•
David Montgomery
International
•
Dale Williams
Financial Overview
•
Leadership Team
Q&A Session
Webcast
participants
may
email
questions
to:
investor.relations@tempursealy.com
Agenda
3
Tim Yaggi
Chief Operating Officer
Mark Sarvary
CEO and President
David Montgomery
EVP and President,
International
Dale Williams
EVP and CFO
Barry Hytinen
EVP, Corporate
Development & Finance
Company Participants
Mark Rupe
VP, Investor
Relations |
 4
Forward-Looking Statements
This investor presentation contains "forward-looking statements,” within the meaning of
the federal securities laws, which include information concerning one or more of the Company's
plans, objectives, goals, strategies, and other information that is not historical information. When used in this presentation, the words "assumes," "estimates,"
"expects," “guidance,” "anticipates," "projects," "plans,"
“proposed,” "intends," "believes," and variations of such words or similar expressions are intended to identify
forward-looking statements. These forward-looking statements include, without limitation,
statements relating to the Company’s expectations regarding its key strategic growth
initiatives and strategic priorities, expectations regarding the Company’s net sales, revenue performance, adjusted EBITDA, adjusted EPS, operating cash flow, free
cash flow, synergies and pricing increases and related assumptions for 2015 and subsequent years,
expectations regarding net sales growth rates, sales growth opportunities for Sealy in
international markets and for the TEMPUR-Flex line of products, margin improvements, expansion of distribution, AUSP growth, the impact of
foreign exchange, the Company’s leverage ratio, and expectations regarding growth opportunities
relating to acquisitions and returning value to stockholders. All forward looking statements
are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations
or that these beliefs will prove correct.
Numerous factors, many of which are beyond the Company's control, could cause actual results to differ
materially from those expressed as forward-looking statements in this investor
presentation. These risk factors include risks associated with the Company’s capital structure and increased debt level; the ability to successfully integrate
Sealy into the Company’s operations and realize cost and revenue synergies and other benefits
from the transaction; whether the Company will realize the anticipated benefits from its asset
dispositions in 2014 and the acquisition of brand rights in certain international markets in 2014; general economic, financial and industry conditions,
particularly in the retail sector, as well as consumer confidence and the availability of consumer
financing; changes in product and channel mix and the impact on the Company's gross margin;
changes in interest rates; the impact of the macroeconomic environment in both the U.S. and internationally on the Company's business
segments; uncertainties arising from global events; the effects of changes in foreign exchange rates
on the Company’s reported net sales and earnings; consumer acceptance of the
Company’s products; industry competition; the efficiency and effectiveness of the Company’s advertising campaigns and other marketing programs; the
Company’s ability to increase sales productivity within existing retail accounts and to further
penetrate the Company’s retail channel, including the timing of opening or expanding
within large retail accounts and the timing and success of product launches; the effects of consolidation of retailers on revenues and costs; the Company’s ability
to expand brand awareness, distribution and new products; the Company’s ability to continuously
improve and expand its product line, maintain and improve efficient, timely and
cost-effective production and delivery of its products, and manage its growth; the effects of strategic investments on the Company’s operations; changes in foreign tax
rates and changes in tax laws generally, including the ability to utilize tax loss carry forwards; the
outcome of various pending tax audits or other tax proceedings; changing commodity costs; and
the effect of future legislative or regulatory changes. Additional information concerning these and other risks and uncertainties are discussed in the
Company's filings with the Securities and Exchange Commission, including without limitation the
Company's 2014 Annual Report on Form 10-K filed on February 13, 2015 with the SEC, under the headings "Special Note Regarding Forward-Looking
Statements" and "Risk Factors." Any forward-looking statement speaks only as of the
date on which it is made, and the Company undertakes no obligation to update any
forward-looking statements for any reason, including to reflect events or circumstances after the
date on which such statements are made or to reflect the occurrence of anticipated or
unanticipated events or circumstances. Note
Regarding
Historical
Financial
Information:
In this investor presentation we provide or refer to certain historical information for the
Company. For a more detailed discussion of the Company’s financial performance
please refer to the Company’s SEC filings.
Note
Regarding
Trademarks,
Trade
Names
and
Service
Marks:
TEMPUR, Tempur-Pedic, TEMPUR-Cloud, TEMPUR-Choice, TEMPUR-Weightless,
TEMPUR-Contour, TEMPUR-Rhapsody, TEMPUR-Flex, GrandBed, TEMPUR-Simplicity,
TEMPUR-Ergo, TEMPUR-UP, TEMPUR-Neck, TEMPUR-Symphony, TEMPUR-Comfort,
TEMPUR-Traditional, TEMPUR-Home, Sealy, Sealy Posturepedic, Stearns & Foster, and
Optimum are trademarks, trade names or service marks of Tempur Sealy International, Inc. and/or its
subsidiaries. All other trademarks, trade names and service marks in this presentation
are the property of the respective owners. |
 5
Mark Sarvary
President & Chief Executive Officer |
 Investment Highlights
Industry Landscape
Strategy
Summary
Key Topics
6 |
 7
Largest And Only Truly Global Bedding Company
Comprehensive Portfolio of Iconic Brands
Complete and Complementary Product Offering
Strong Management Team, Executing A Compelling Strategy
Significant Sales, Margin and Earnings Growth Opportunity
Strong Cash Flow |
 The
Industry’s Only Truly Global Company Note: Presence includes
subsidiaries, joint ventures, third party, and licensee markets. 8
Tempur Sealy Presence |
 Complete
and Complementary Portfolio of Brands Luxury
Premium
Mid-Price
Value
9
Tempur-Pedic
•
#1 US Brand People Are Most Interested In Purchasing
Sealy
•
#1 US Brand In Total Awareness
•
#1 US Brand People Are Most Likely To Buy
Stearns & Foster
•
#1 US Brand In Luxury Innerspring Sales
Note 1: 2014 Mattress Industry Consumer Research – U.S. Market
Note 2: Stearns & Foster #1 US Brand in Luxury Innerspring Sales based on management
estimates. |
 Complete
Range Of Products Innerspring
Hybrid
Stearns & Foster
TEMPUR-Flex
Adjustable Comfort
TEMPUR-Cloud
Memory Foam, Gel Visco, Latex
Tempur Material
Other Specialty
10
Adjustable Bases
TEMPUR-Ergo Plus
Pillows
TEMPUR Pillows |
 Strong,
Established Management Team 11
Experienced Management Team With Proven Track
Record Of Execution
Years with
Consumer
Tempur
Name
Position
Prior Experience
Products
Inter'l
Sealy
Mark Sarvary
President and CEO
President, Campbell Soup North America
CEO, J. Crew Group
6
President, Stouffer's Frozen Food Division at Nestle
Tim Yaggi
COO
Group President, Masco Corporation
EVP, Whirlpool Corporation
2
Norelco (Philips)
Dale Williams
EVP and CFO
CFO, Honeywell Control Products
CFO, Saga Systems
11
CFO, GE Information Systems
Rick Anderson
EVP and President,
VP, Gillette
North America
Gillette / Procter & Gamble
8
David Montgomery
EVP and President,
President, Rubbermaid Europe
International
VP, Black & Decker Europe, Middle East, Africa
12
Jay Spenchian
EVP and Chief Marketing
EVP and CMO, Olive Garden and Red Lobster
Officer
Executive Director, Marketing, General Motors
Prior Experience
Joined in
2014 |
 Tempur
Sealy Strategic Priorities Leverage and Strengthen Our Comprehensive
Portfolio Of Iconic Brands & Products
Expand Distribution And Seek Highest Dealer
Advocacy
Expand Margins With Focus On Driving
Significant Cost Improvement
Accretive Acquisitions Of Licensees And Joint
Ventures
Leverage Global Scale For Competitive
Advantage
Delivering
Value
For
Stockholders
Note 1: Management estimates. Please refer to “Forward Looking Statements”.
Note 2: Targets are based on constant currency. For information on the methodology used to
present constant currency information please refer to slide 167.
Note 3: Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction and
integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring
component facilities and related equipment, interest and fees incurred in connection with debt
refinancings, normalized tax rate adjustments and to exclude certain non-recurring items. Please refer to
the reconciliations on slide 160 and the Company’s SEC filings for more information regarding the
definition of adjusted EPS. 12
•
Base Annual
Targets:
Sales Growth Of 6% And Adjusted
EPS Growth Of 15%
•
Strong Cash Flow To Reduce Debt
And Return Value to Stockholders |
 13
Strategic Accomplishments 2009 –
2014
Grew Tempur-Pedic US net sales from $525 million in 2009 to $1.0 billion in
2014, a 14% CAGR Introduced the highly successful TEMPUR-Cloud line,
which doubled the Company’s U.S. mattress business Grew
Tempur
International
net
sales
from
$306
million
in
2009
to
$472
million
in
2014,
a
9%
CAGR
Increased distribution and brand awareness and expanded product offering
significantly since 2009 Positioned
the
Company
for
future
growth
through
acquisitions
of
Third
Party
Distributors
in
several
key
markets, including China, Korea, Brazil and Mexico
Completely
revamped
Tempur
North
America
mattress
and
adjustable
base
product
offering
Strengthened US retailer economics
Strategic acquisition of Sealy Corporation created significant stockholder
value TPX shares have appreciated over 100% from the day prior to the
acquisition announcement Today, Tempur Sealy has a complete and complementary
brand and product portfolio, with unique global capabilities and unmatched
growth opportunities around the world Enhanced stockholder value through the
repurchase of 20 million shares between 2009 and 2012 EPS of $1.12 in 2009
grew to adjusted EPS of $2.65 in 2014, a 19% CAGR Note 1: US market share is based on
management estimates. Note 2: 2009 EPS of $1.12 had no items of the type excluded in adjustments to determine the
Company’s adjusted EPS. Note 3: TPX share price on September 26, 2012 was $26.78.
Note 4: Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction and
integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring
component facilities and related equipment, interest and fees incurred in connection with debt
refinancings, normalized tax rate adjustments and to exclude certain non-recurring items. Please refer to
the reconciliations on slide 160 and the Company’s SEC filings for more information regarding the
definition of adjusted EPS. Responded aggressively when the competitive environment in North America changed in 2012 Increased US market share from 8% in 2009 to an
estimated 13% in 2014 |
 Focused
On Execution Financial
Results
Operational
Achievements
14
Actions Have Positioned Us For Enhanced Future
Growth And Margin Improvement
Initiated
major
cost
reduction
projects
related
to
Sealy
in
late
2014
Acquired strategic growth platforms and divested non-core assets
Organizational integration with Sealy essentially complete in North America
Returned Tempur North America to a position of strength and growth in 2014
2014 Reduced debt $234 million, consistent with deleveraging strategy after Sealy
acquisition 2014 Operating Cash Flow was $225 million vs. $98 million in
2013 2014 Adjusted EPS increased 11% (constant currency +18%)
2014 Net Sales increased 21% (estimated net sales growth would have been +8% had we owned Sealy for all of
2013) Note 1: Estimated net sales growth of 8% for 2014 is based on Tempur Sealy
International consolidated net sales for 2013 plus management’s estimates for Sealy sales for the period of January
1, 2013 to March 17, 2013. The Sealy acquisition was completed on March 18, 2013. Note 2: Adjusted EPS
(which is a non-GAAP measure) is EPS adjusted for Sealy transaction and integration costs, loss on disposal of business related to the disposition of the three U.S.
innerspring component facilities and related equipment, interest and fees incurred in connection with
debt refinancings, normalized tax rate adjustments and to exclude certain
non-recurring items. Please refer to the reconciliations on slide 160 and the Company’s SEC
filings for more information regarding the definition of adjusted EPS. GAAP EPS for 2014 was
$1.75. Note 3:
For information on the methodology used to present constant currency information please refer to slide 167.
|
 15
DELEVERAGING TO 3X AND RETURN VALUE TO SHAREHOLDERS
SALES GROWTH
OPERATING MARGIN IMPROVEMENT
ADJUSTED EPS GROWTH
6%
50bps
15%
Annual Base Growth Targets 2015-2018
Targets are based on Constant Currency
Note 1: Management estimates. Please refer to “Forward Looking Statements”.
Note 2: Targets are based on constant currency, excluding the impact from foreign exchange. For
information on the methodology used to present constant currency information please refer to slide 167.
Note 3: Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction and
integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring component facilities and
related equipment, interest and fees incurred in connection with debt refinancings, normalized tax rate
adjustments and to exclude certain non-recurring items. Please refer to the reconciliations on slide 160 and the
Company’s SEC filings for more information regarding the definition of adjusted EPS.
|
 Internal
Target: 100bps Annual Operating Margin Improvement
16
2015 -2018
Objective
2014
Annual
Incremental
Operating
Income
1
Initiative
Sealy US Gross Margin Improvement
30%
33%
$45 million
Cost Synergies
4
$45 million
$70 million
$25 million
Adjusted Operating Expense Leverage
29%
28%
$30 million
$125 million
2015 Pricing
–
$25 million
$25 million
These Initiatives Alone Provide More Than 300bps Of
Operating Margin Improvement
2
3
Note 1: Represents initiatives to be achieved by 2018. Our expectation is that they will ramp
through the period. Approximately 30% of the total $125 million is incorporated into our full year 2015 adjusted EPS
guidance. See “Forward Looking Statements”.
Note 2: Refers to Sealy gross margin in the U.S. of 30% in 2014. Sealy US gross margin
improvement excludes the benefit from cost synergies. Note 3: Adjusted operating expense leverage is a non-GAAP measure. For information on the
methodology used to present adjusted operating expense leverage and a reconciliation to GAAP operating
expense leverage please refer to slide 164.
Note 4: Cost synergies reflect annualized cost synergies realized from the Sealy transaction.
|
 2015
Guidance Consistent With Targets 17
FX Adjusted
1,2
Guidance Range
1
Net Sales Growth
2% to 5%
5.5% to 8.5%
Adjusted Operating Margin
3
Growth
~10 to 80bps
~80 to 150bps
Adjusted EPS Growth
2% to 17%
12% to 27%
Guidance
Mid-Point
FX Adjusted
1,2
7.0%
~115bps
20%
Note 1: The Company issued guidance on February 5, 2015 for full year 2015 Net Sales of $3.050 billion
to $3.150 billion and Adjusted EPS of $2.70 to $3.10. Note 2: For information on the methodology used to present constant currency information please refer
to slide 167. Note 3: Adjusted operating margin is a non-GAAP measure. For information on the methodology
used to present adjusted operating margin please refer to slide 165.
Note 4: Management estimates. Please refer to “Forward Looking Statements”.
|
 18
Investment Highlights
Industry Landscape
Strategy
Summary
Key Topics |
 19
Global Mattress Industry Is Large And Growing
Note: CSIL World Mattress Report, 2014 (Top 35 Markets Mattress Consumption)
($ in billions at
wholesale)
Doubled In 10 Years |
 US
Manufacturer Consolidation US Bedding Specialty Stores Consolidation
New Channels
Technological Innovations
20
Industry Evolving, Particularly In US
Tempur Sealy Is Well-Positioned To Capitalize On The
Industry Evolution
Source of Tempur Sealy
Advantage
Examples
Serta Simmons
•
Leader of the consolidation
•
Strong complementary brands
•
Very strong, strategic
relationship
•
Single sales force
•
Direct sales expertise
•
Industry leading investment
and expertise at product
development |
 Investment Highlights
Industry Landscape
Strategy
Summary
Key Topics
21 |
 Clear
Strategic Priorities Leverage and Strengthen Our Comprehensive
Portfolio Of Iconic Brands & Products
Expand Margins With Focus On Driving
Significant Cost Improvement
Delivering Value
For Stockholders
22
Expand Distribution And Seek Highest Dealer
Advocacy
Leverage Global Scale For Competitive
Advantage
Accretive Acquisitions Of Licensees And Joint
Ventures
Note 1: Management estimates. Please refer to “Forward Looking Statements”.
Note 2: Targets are based on constant currency. For information on the methodology used to
present constant currency information please refer to slide 167.
Note 3: Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction and
integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring
component facilities and related equipment, interest and fees incurred in connection with debt
refinancings, normalized tax rate adjustments and to exclude certain non-recurring items. Please refer to
the reconciliations on slide 160 and the Company’s SEC filings for more information regarding the
definition of adjusted EPS. •
Strong Cash Flow To Reduce
Debt And Return Value to
Stockholders
•
Base
Annual
Targets:
Sales Growth Of 6% And Adjusted
EPS Growth Of 15% |
 23
Drivers Of Mattress Industry Growth
Total Sales
Growth
Driven By Brand Strength
And Innovation
Total Unit
Growth
Price
Growth
Driven By Population Growth
And Replacement
Note 1: Mattress industry growth information is based on ISPA 2013 Mattress Industry
Report of Sales & Trends. 2014 is based on management estimates. Note 2:
Information for Tempur-Pedic share of industry growth is based on management estimates.
Tempur-Pedic accounted for ~22% of mattress
industry growth from 1999 - 2014 |
 24
We Are Committed To Driving Retail AUSPs Higher
Tempur-Pedic US
Avg. Transaction Value
+9% CAGR
Tempur-Pedic US
Mattress AUSP
+6% CAGR
Stearns & Foster
Mattress AUSP
+7% CAGR
$0
$1,000
$2,000
2011
2012
2013
2014
Note: All numbers are based on wholesale price growth. Transaction value is defined as
“Bedding sales”, which
includes mattresses and foundations, divided by mattress unit shipments. |
 Industry
Leading Investment In Breakthrough Marketing
25
Tempur Sealy Invested Over $500 million In Global Marketing in 2014
|
 U.S.
Consumers Are Most Likely To Buy Our Brands 35%
15%
11%
26
Note:
2014
Mattress
Industry
Consumer
Research
–
U.S.
Market
Tempur-Pedic
Simmons
Serta
Sleep Number
Sealy
Brands Most Likely To Buy –
Prospective US Buyers
Tempur Sealy
Serta Simmons
Select Comfort |
 27
Our Investment In Product Innovation Exceeds Our
Competitors
Over 2x
Greater
Note 1: Reflects R&D spend in 2014.
Note 2: Competitor information is based on management estimates.
Tempur Sealy
Competitor A & B
Competitor C |
 28
Last
Year’s
Innovative
New
Products
Were
A
Major
Success
Tempur Cloud & Contour
Optimum & Sealy
Stearns & Foster
Tempur Breeze
Execution of a record number of product introductions in 2014
Delivered compelling consumer benefits
Drove US market share increases |
 29
Investing To Drive Additional Growth In 2015 And
Beyond
Tempur Pillows
Posturepedic
Tempur North
Tempur Flex
Note: Tempur-Flex products are priced at queen set retail price points above
$2,000. We believe TEMPUR-Flex expands consumer appeal and can drive
incremental sales above $2,000 New Posturepedic offering will have expanded
placement Robust future pipeline |
 30
Furniture and bedding retailers
Department stores
Warehouse / club stores
Company-owned stores (over 100)
Electronics and appliance retailers
Mass merchant and discount stores
Direct-to-consumer (e-commerce/call center)
Hospitality and contract
15,400
16,900
Broad Distribution In Traditional And Alternative
Channels
Channels
9,400
11,700
6,000
5,200
0
5,000
10,000
15,000
20,000
Tempur
Sealy
Retail Doors
North America
International |
 31
Integrated
Sales Team
Best
Dealer
Support
Best Partner
To Deliver
Gross Profit $
Category
Management
Integrated
Product
Portfolio
Best Brands
In-Store
Marketing &
Training
Striving For Highest Dealer Advocacy
Tempur, Sealy,
Stearns & Foster
Innerspring, Hybrid,
Tempur material,
Adjustable bases, Pillows
Fully integrated sales
force in North America
in 2015
Significant investment in
in-store marketing
support and training
Improving slot
productivity and trade
spend
Coordinated portfolio
that drives traffic and
average ticket |
 32
The Industry’s Only Truly Global Company
Tempur Sealy Presence
Note: Presence includes subsidiaries, joint ventures, third party, and licensee
markets. |
 Tempur
Sealy Has A Significant Market Share Opportunity
33
Market Leader
Top 5 Market Position
Underpenetrated
Asia Pacific
Europe
US and Canada
Latin America |
 US
Canada
Europe
Asia Pacific
Latin America
34
Capitalizing On Opportunity Different By Geography
Marketing
Product
Innovation
Opening Own
Stores
Leveraging
Distribution
Synergies
Leverage
JV
(CR) |
 35
Global Scale And Capabilities Provides A Distinct
Competitive Advantage
Tempur Sealy Is Uniquely Positioned To Capitalize On Its
Integrated Product And Brand Portfolio On A Global Basis
•
Procurement
•
R&D
•
Engineering and design
Product Development
•
Cloud and Breeze Beds
•
Stearns & Foster
•
Posturepedic Hybrid
Distribution
Brand |
 Licensees and Third Party Distributors
36
Acquired
2014
Since 2006 we have acquired brand rights and distributors or distribution rights in
several markets More than 65 Tempur 3
rd
Party Distributors
Existing Licensee & 3
rd
Party Distributor Markets
Note: In certain markets where we have licensees there is no current option to
purchase and thus if we wanted to make an acquisition we would need to negotiate.
Sealy Brand Rights
Tempur Distribution Rights
Australia
Brazil
Colombia
Dominican Republic
Honduras
Israel
Jamaica
New Jersey
Paraguay
Saudi Arabia
South Africa
Thailand
United Kingdom
Venezuela |
 Own
50% with option to purchase remaining 50% in 2020 JV Partner is Sealy of
Australia, a Sealy brand Licensee ~$100 million in annual 2014 sales, with
25%+ CAGR since 2009 Accretive operating margin profile
Asia Joint Ventures
37
Note 1: Sales and operating margin figures for Asia JV is based on 2014 sales.
Note 2: CAGR calculation based on historical results for 2009-2014
period. Asia JV Markets
China
Hong Kong
India
S. Korea
Taiwan
Malaysia
Singapore
Indonesia
New Zealand
Sealy China |
 Own 45% with option to purchase remaining 55% in 2017
JV Partner is industry pioneer and founder of Sleep Innovations
Comfort Revolution JV
38 |
 Investment Highlights
Industry Landscape
Strategy
Summary
Key Topics
39 |
 Tempur
Sealy Strategic Priorities Leverage and Strengthen Our Comprehensive
Portfolio Of Iconic Brands & Products
Delivering
Value
For
Stockholders
40
•
Base
Annual
Targets:
Sales Growth Of 6% And Adjusted
EPS Growth Of 15%
•
Strong Cash Flow To Reduce Debt
And Return Value to Stockholders
Expand Distribution And Seek Highest Dealer
Advocacy
Expand Margins With Focus On Driving
Significant Cost Improvement
Leverage Global Scale For Competitive
Advantage
Accretive Acquisitions Of Licensees And Joint
Ventures
Note 1: Management estimates. Please refer to “Forward Looking Statements”.
Note 2: Targets are based on constant currency. For information on the methodology used to
present constant currency information please refer to slide 167.
Note 3: Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction and
integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring
component facilities and related equipment, interest and fees incurred in connection with debt
refinancings, normalized tax rate adjustments and to exclude certain non-recurring items. Please refer to
the reconciliations on slide 160 and the Company’s SEC filings for more information regarding the
definition of adjusted EPS. |
 Annual
Base Growth Targets 2015-2018 41
Internal Target: 100bps Annual Operating Margin Improvement
Targets are based on Constant Currency
DELEVERAGING TO 3X AND RETURN VALUE TO SHAREHOLDERS
SALES GROWTH
OPERATING MARGIN IMPROVEMENT
ADJUSTED EPS GROWTH
6%
50bps
15%
Note
1:
Management
estimates.
Please
refer
to
“Forward
Looking
Statements”.
Note
2:
Targets
are
based
on
constant
currency,
excluding
the
impact
from
foreign
exchange.
For
information
on
the
methodology
used
to
present
constant
currency
information
please
refer
to
slide
167.
Note
3:
Adjusted
EPS
(which
is
a
non-GAAP
measure)
is
EPS
adjusted
for
Sealy
transaction
and
integration
costs,
loss
on
disposal
of
business
related
to
the
disposition
of
the
three
U.S.
innerspring
component
facilities
and
related equipment, interest and fees incurred in connection with debt refinancings, normalized tax rate
adjustments and to exclude certain non-recurring items. Please refer to the reconciliations on slide 160 and the
Company’s SEC filings for more information regarding the definition of adjusted EPS.
|
 Committed, Capable People With Strong Shared
Values
42 |
 Tim Yaggi
Chief Operating Officer
43 |
 Overview
Industry Update
2014 Review
Growth Initiatives
Profitability Focus
Summary
North America Key Topics
44 |
 North America Segment
45
North America –
A $2.4 Billion Segment |
 Tempur
Sealy North America 46
Comprehensive portfolio of iconic brands
Complete and complementary product offering
Luxury
Premium
Mid-Price
Value
2014 Sales by Brand
Tempur-Pedic
Posturepedic
Stearns & Foster
Sealy
Broadly
distributed
across
all
key
channels
–
sold
in
well
over
10,000
doors
Address every key consumer preference – price point and technology
|
 47
Best Brands With Distinct Roles And Messaging
The Best Sleep
There’s only one Tempur-Pedic
®
; nothing precisely adapts, supports and aligns like
TEMPUR
®
47
Unsurpassed Back Support |
 48
Complete Range Of Mattress Technologies –
TEMPUR Material |
 49
Complete Range Of Mattress Technologies –
Hybrid |
 50
Complete Range Of Mattress Technologies –
Innerspring |
 Complete
Range Of Mattress Technologies – Other
Specialty
Memory Foam and Gel Visco
Latex
Adjustable Comfort
51 |
 Complete
Range Of Adjustable Bases – Tempur-Pedic
TEMPUR-Ergo Premier
TEMPUR-Ergo Plus
TEMPUR-UP
52 |
 Complete
Range Of Pillows And Comfort Products 53 |
 Overview
Industry Update
2014 Review
Growth Initiatives
Profitability Focus
Summary
North America Key Topics
54 |
 55
($ in billions at
wholesale)
representative sample for 2006 and 2011. Specialty data not available prior to 2004.
2014 is based on management estimates.
US Mattress Industry Sales At Record Level
15 Year CAGR: +5%
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Innerspring
Specialty
Market
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
$2.8
$3.0
$3.1
$3.3
$3.6
$4.1
$4.8
$5.2
$5.3
$4.8
$4.4
$4.6
$5.0
$5.5
$5.7
$6.0
Note: Based on ISPA 2013 Mattress Industry Report of Sales & Trends,
with ISPA revised |
 US
Mattress Industry Units Well Below Prior Peak 56
Units
(units in thousands)
($ in billions at
wholesale)
15 Year CAGR: 0%
Innerspring
Specialty
Market
representative sample for 2006 and 2011. Specialty data not available prior to 2004.
2014 is based on management estimates.
21,345
21,675
21,233
21,484
22,022
22,481
23,985
22,583
21,766
19,587
18,134
19,257
19,063
19,874
20,077
20,375
0
5,000
10,000
15,000
20,000
25,000
30,000
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
Note: Based on ISPA 2013 Mattress Industry Report of Sales & Trends,
with ISPA revised |
 57
Growth Mostly Driven By Higher Mattress Prices
($ at wholesale)
15 Year CAGR: +5%
$133
$140
$145
$153
$163
$182
$199
$229
$242
$244
$240
$239
$261
$278
$286
$296
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
Note: Based on ISPA 2013 Mattress Industry Report of Sales & Trends,
with ISPA revised representative sample for 2006 and 2011. 2014 is
based on management estimates. |
 58
Tempur Sealy Is A Key Driver Of Industry AUSP
Note 1: Based on gross wholesale mattress AUSP.
Note 2: Information for competitors is based on management estimates and ISPA
data. Average US Mattress Unit Wholesale Price
Competitors
Tempur-Pedic
2011
2012
2013
2014 |
 US
Industry Adjustable Base Sales Have More Than Doubled
Note 1: Adjustable base shipment data is based on ISPA 2013 Mattress Industry Report
of Sales & Trends. 2014 is based on management estimates. Note 2:
Information for Tempur-Pedic share of adjustable base industry growth is based on management estimates.
($ in millions at
wholesale)
59
Tempur-Pedic is the market share leader and
has accounted for ~33% of adjustable base
industry sales growth from 2011 -
2014
$204
$328
$403
$500
2011
2012
2013
2014E
US Industry Adjustable Base Shipments |
 Overview
Industry Update
2014 Review
Growth Initiatives
Profitability Focus
Summary
North America Key Topics
60 |
 61
Built Capabilities in 2014
Product Development:
Launch execution
Global innovation pipeline
Brand Marketing:
New talent and enhanced capabilities, strong media campaign
Strong creative development and media buying
Channel:
Combined field selling organization
Category management
Operations:
Began the combination of our TS logistics network
Started the transformation of Sealy manufacturing organization
|
 62
2014 Product Launch Capability
Record number of launches
All delivered on time with high quality
Supporting materials on time
Transitions from old to new were well managed
Contained compelling consumer benefits
Supported with rigorous market research
Offered strong value propositions
Delivered benefits aligned with the brand promises
Demonstrated Capability To Develop And Execute Major Product
Launches That Drive Market Share |
 63
2014 Product Launch Results
Tempur Cloud/Contour launch was largest ever and very effective
Stearns & Foster launch delivered all-time sales record
Sealy Innerspring launch returned brand to double-digit growth
Sealy Optimum 2.0 line revitalized |
 Solid
Growth From Other Key Products Posturepedic
Adjustable Bases
64
Achieved Growth Across The Portfolio
Dramatic growth in adjustable bases with attach rates exceeding 50%
Continued success of Breeze and Posturepedic
TEMPUR-Breeze |
 Invested
Media Synergies In 2014 20%+
Higher
Tempur Sealy TRPs In 2014
Kantar
media
data
from
January
–
September,
2014.
TRPs
are
target
rating
points
and
are
a
65
2014
2013
measure of reach for a specifically targeted audience.
Source: |
 Effective National TV Ad Campaigns
66
New Creative Tested Extremely Well With Our
Target Audience |
 Strong
Results From Marketing Investments Website Visits
+24%
Target Rating Points
>+20%
Adjustable Base
Sales +32%
Retail Locator Visits
+62%
67
Note: Data reflects 2014 versus 2013. |
 Overview
Industry Update
2014 Review
Growth Initiatives
Profitability Focus
Summary
North America Key Topics
68 |
 69
Introducing TEMPUR-Flex
–
Breakthrough 3
rd
Feel
Responsive support that moves with you, with the personalized
comfort of TEMPUR
•
Prima
($2,299)
•
Supreme
($2,899)
•
Elite
($3,499)
Note: Retail list price point for queen set. |
 Extends
Tempur-Pedic Brand Appeal and Addressable Opportunity
70
2015 Tempur-Pedic Core Portfolio
TEMPUR-Cloud®
Prima
TEMPUR-Cloud®
Supreme
TEMPUR-Contour™
Supreme
TEMPUR-Flex™
Supreme
TEMPUR-Cloud®
Elite
TEMPUR-Contour™
Elite
TEMPUR-Flex™
Elite
TEMPUR-Cloud®
Luxe
TEMPUR-Contour™
Rhapsody Luxe
TEMPUR-Cloud®
Luxe Breeze
TEMPUR-Contour™
Rhapsody Breeze
TEMPUR-Cloud®
Supreme Breeze
TEMPUR-Flex™
Prima
Cloud
Contour
Flex
New |
 71
Supported With In-Store Marketing Investment |
 72
Rededicating Posturepedic Brand To Its Heritage
Of Unsurpassed Back Support
For
Posturepedic
has
stood
for…
:
The
Original
Posturepedic
Mattress
1950 |
 73
New 2015 Posturepedic Collection –
Significantly
Improved Value Proposition
POSTUREPEDIC
POSTUREPEDIC
PLUS
POSTUREPEDIC
PREMIER
HYBRID
HYBRID experience
TRADITIONAL experience
($999-$1,399)
($699-$999)
($1,299-$1,999)
Improved Aesthetics And
Core Support Center In Every Model
Note: Retail list price point for queen set. |
 74
Showcased In New Sealy Showroom |
 75
New Stearns & Foster Limited Edition Collection
Better Materials
Better Craftsmanship
Better Design
Priced at $1,799-$1,999
Note: Retail list price point for queen set. |
 76
Enhancing Stearns & Foster Brand Message |
 77
New Tempur-Pedic Pillows
2015
Late 2014
TEMPUR-Cloud Pillows
77 |
 78
MOBILE
DIRECT MAIL
WEBSITE
PRINT
Marketing Investments Pervasive Across Platforms
We Remain Committed To Investing In Our Brands |
 Partnering With Retailers To Leverage Ad Spend
79
Proactively working with customers to leverage our collective efforts
Joint creative and media buying opportunities
Best in class In-store execution |
 80
Effective Key National Holiday Promotions |
 North
America Key Topics 81
Overview
Industry Update
2014 Review
Growth Initiatives
Profitability Focus
Summary |
 Significant Margin Improvement Opportunities
82
2015 -2018
Objective
2014
Annual
Incremental
Operating
Income
Initiative
Sealy US Gross Margin Improvement
2
30%
33%
$45 million
Cost Synergies
4
$45 million
$70 million
$25 million
Adjusted Operating Expense Leverage
3
29%
28%
$30 million
$125 million
2015 Pricing
–
$25 million
$25 million
These Initiatives Alone Provide More Than 300bps Of
Operating Margin Improvement
Note 1: Represents initiatives to be achieved by 2018. Our expectation is that they will ramp
through the period. Approximately 30% of the total $125 million is incorporated into our full year
2015 adjusted EPS guidance. See “Forward Looking Statements”. Note 2: Refers to Sealy
gross margin in the U.S. of 30% in 2014. Sealy US gross margin improvement excludes the benefit from cost synergies.
Note 3: Adjusted operating expense leverage is a non-GAAP measure. For information on the
methodology used to present adjusted operating expense leverage and a reconciliation of
operating expense leverage please refer to slide 164. Note 4: Cost synergies
reflect annualized cost synergies realized from the Sealy transaction.
1 |
 Sealy
Assembly Transformation 83
Key Initiatives Within The Plants
Standardize best practices
Embed lean principles and eliminate waste
Improve hiring and staffing
Smooth production, reduce overtime
Elevate focus on quality and customer satisfaction, lower returns
Key Initiatives Across The Network
Improve forecasting and demand planning
Reduce SKU complexity
Optimize combined TSI network
Drive Total Cost Reduction |
 84
Warehouse/Distribution Network Initiatives
Timing
Consolidated Sealy Ft. Worth, TX facility into Brenham, TX facility
2014
Announced closure of Sealy Batavia, IL facility
2015
Opening Tempur Sealy multi-purpose facility in Plainfield, IN
(Indianapolis) 2Q 2015
Opening Tempur Sealy multi-purpose facility in Williamsport, MD
2015
Repositioning Tempur warehouses
2014/2015
Warehouse/Distribution Network Initiatives |
 Sealy Distribution Points
Tempur Warehouses
Tempur Sealy Multi-Purpose Facility
85
Distribution network to service national retailers with considerable efficiency
opportunities Optimizing Warehouse/Distribution Network (2015)
|
 86
Tempur Sealy Multi-Purpose Facility –
Plainfield, IN |
 87
Tempur Distribution Center –
Plainfield, IN |
 Capitalize On Tempur-Pedic’s Brand Strength
Price increase on Tempur-Pedic adjustable bases (select) in late 2014
Price increase on Tempur-Pedic mattresses (select) in March 2015
88
Note: Prices were increased on select models.
Low Single-Digit Pricing Actions Drive $25 Million Of
Margin Improvement |
 Overview
Industry Update
2014 Review
Growth Initiatives
Profitability Focus
Summary
North America Key Topics
89 |
 North
America Summary Tempur Sealy Has A Complete And Complementary Portfolio Of
Brands And Products We Expect Strong Market Share Gains In 2014 To
Continue Growth From New Products, Effective Marketing And Channel
Synergies Robust Product Pipeline
Commitment To Strengthening Brands
Effective Trade Customer Support
Focused On Improving Profitability
Driving Pricing And Mix
Capturing Synergies
Operating Cost Productivity
90
Well Positioned To Continue To Gain Market Share
And Drive Margin Improvement |
 David Montgomery
Executive Vice President & President, International
91 |
 Overview
2014 Review
Growth Initiatives
Summary
International Key Topics
92 |
 International
Segment 93
International Is A $600 Million Segment |
 Estimated Wholesale Bedding Sales by Region
94
Large Markets Outside Of North America
Note: Based on CSIL World Mattress Report, 2014 (Top 35 Markets Mattress
Consumption) ($ in
millions
at wholesale)
$8,188
$5,090
$1,616
Asia/Australia
Europe
Rest of World |
 Geographic Commentary
95
Europe growth is muted, due in particular to a challenged Central European
region Tempur’s distribution is significant in Europe
Sealy’s opportunity in Europe is large
Asia-Pacific region continues to experience solid growth
Tempur has a mixed distribution model with traditional and company-owned
stores Asia JV represents Sealy brand in most countries (excluding
Japan) Latin America market is small, but growing
Tempur Sealy has a solid market position in Mexico and Argentina, and rapidly
growing business in Brazil |
 Tempur
Sealy International 96
Sealy
Tempur
Sales by Brand
Tempur
Sealy
has
strong
market
positions
in
Europe,
Asia
Pacific
and
Latin
America
Mix
of
wholly-owned
subsidiaries,
JVs,
licensees
and
3
rd
party
distributors
Broadly distributed across all key channels
Blend of wholesale distribution and managed retail stores
Supply chain mixture of wholly-owned and contract-manufactured
By Region
Asia/Australia
Europe
Latin America
60%
20%
20% |
 Range
Of
Mattress
Technologies
–
TEMPUR
Material
97
Cloud
Original
Sensation |
 Range Of
Mattress Technologies – Innerspring,
Hybrid And Luxury Innerspring
98
Innerspring
Luxury Innerspring
Hybrid |
 Complete
Range Of Adjustable Bases And Bed Systems
99
Flex
Tempur North
Zero G |
 Complete Range Of Pillows And Accessories
Original
Millennium
Breeze
EasyClean
100 |
 Overview
2014 Review
Growth Initiatives
Summary
International Key Topics
101 |
 102
2014 Review
2014 sales growth driven by double-digit increases in Asia Pacific and positive
growth in Latin America and Europe
Tempur-branded direct channel sales increased 39% on a constant currency basis
in 2014 Operating margin pressured by Sealy introduction in Europe,
unfavorable FX and country mix Acquired
Sealy
brand
rights
in
Japan,
Continental
Europe
and
the
Southern
Territory
of
Brazil
Acquired Tempur distribution rights in Mexico |
 103
Overview
2014 Review
Growth Initiatives
Summary
International Key Topics |
 Sealy Europe
Growth Initiatives
Tempur Sealy Japan
104
Distribution Growth
Production Innovation & Marketing
` |
 Sealy Europe
Sealy Europe Is A $200+ Million Opportunity
Tempur Sealy Japan
105
Distribution Growth
Product Innovation & Marketing
Note: Management estimates. Please refer to “Forward Looking Statements”.
|
 106
Sealy Europe Is A Key Growth Investment
Sealy Europe is a $200+ million opportunity
Tempur has mid-single digit share of the $4+ billion Continental European
market Sealy Europe opportunity based on achieving a similar market share
level to Tempur Build scale through mixed manufacturing model
Stearns & Foster products are being manufactured in North America and exported
to Europe Sealy Hybrid products transitioning to a higher quality new
supplier in Eastern Europe in 1Q Leveraging Tempur Europe infrastructure and
premium retail distribution strength Roll-out occurring in all key
markets except the UK Investing to build brand awareness and profitable
product portfolio across technologies Note:
Market
share
and
market
size
information
is
based
on
CSIL
World
Mattress
Report,
2014
(Top
35
Markets Mattress Consumption) and management estimates.
Secured
over
1,000
retail
doors
for
initial
placement
of
Stearns
&
Foster
and
Sealy
in
Europe |
 107
Premium Brand Positioning
Stearns & Foster positioned as an All-American style luxury-priced
mattress Sealy
Hybrid
targets
mainstream
core
with
pricing
beneath
Tempur
and
Stearns
&
Foster |
 108
Investing To Support Distribution And Build
Awareness
In-Store Marketing
Advertising |
 109
Sealy Europe
Significant Distribution Growth Potential
Tempur Sealy Japan
Distribution Growth
Product Innovation & Marketing
109 |
 110
Growth Of Distribution Around The World
Tempur distributes through ~6,000 retail doors and Sealy distributes through ~5,200
retail doors Focused on expanding distribution in 2015
|
 Significant Tempur Brand Direct Sales Growth
111
Tempur brand direct sales growth in the International segment has been driven by an
increase in the number of company-owned stores and e-commerce
|
 Tempur
Branded Company-Owned Stores 112
Approaching 100 Tempur Sealy owned stores in Europe, Asia Pacific and Latin
America China
Holland
Singapore
Norway
U.K. |
 Tempur
Sealy Owned Stores In Latin America 113
Argentina Store
Approximately 50 Sealy stores in Latin America |
 Sealy
Branded Stores Operated By Our Asia JVs 114
Over 175 Sealy-branded stores operated by our Asia JVs
|
 Tempur
Branded Stores Operated By Our 3 Party Distributors
115
South Africa
Dubai
India
Saudi Arabia
Kuwait
Philippines
Over 100 Tempur-branded or Tempur-only stores operated by third party
distributors rd |
 Sealy Europe
Tempur Sealy Japan Is A Key Growth Opportunity
Tempur Sealy Japan
116
Distribution Growth
Product Innovation & Marketing
` |
 Tempur
Sealy Japan – Growth Opportunity
Acquired Sealy brand rights in July 2014 and subsequently integrated into Tempur
Japan Integration strengthens Tempur Sealy’s market positioning and
provides significant growth opportunities to leverage portfolio by expanding
product offering and distribution 117 |
 Sealy Europe
Robust Product Pipeline Provides Large Market
Share Opportunity
Tempur Sealy Japan
Distribution Growth
Product Innovation & Marketing
`
118 |
 Leveraging global product development scale and capabilities –
significant plans for 2016
Robust Pipeline Of Consumer Preferred Products
TEMPUR-Breeze
TEMPUR-Cloud
TEMPUR North
TEMPUR Adjustable Bases
119 |
 Committed To Building Brand Awareness
120
“For a more restful sleep
than ever”
Tempur France
China
“Weightless”
Campaign
Tempur brand awareness internationally is below 50%, and well below level in North
America Note: Management estimates. |
 Effective TV Ad Campaigns
121 |
 Effective Promotions
122 |
 Increasing Focus On Digital Communication
123 |
 124
Effective In-Store Marketing/Product Investments |
 Integrated
Sales Team
Best
Dealer
Support
Best Partner
To Deliver
Gross Profit $
Category
Management
Integrated
Product
Portfolio
Best Brands
In-Store
Marketing &
Training
Striving For Highest Dealer Advocacy
Tempur, Sealy,
Stearns & Foster
Innerspring, Hybrid,
Tempur material,
Adjustable bases, Pillows
Significant investment in
in-store marketing
support and training
Improving slot
productivity and trade
spend
Coordinated portfolio
that drives traffic and
average ticket
125
Europe and Japan |
 Overview
2014 Review
Growth Initiatives
Summary
International Key Topics
126 |
 International Summary
2014 Growth Was Driven Largely By Higher Sales In Asia Pacific And Latin
America Investing In Future Growth –
Sealy Europe Is A Significant Opportunity, Tempur Sealy Japan
Will Expand Distribution –
Traditional Retailers and Company-Owned Stores
Robust Product Pipeline Provides Large Market Share Gain Opportunity
Remain Committed To Marketing Investments To Build Brand Awareness Of All
Brands Expect To Improve Efficiencies Related To Sealy Europe Ramp
127 |
 Dale Williams
Executive Vice President & Chief Financial Officer
128 |
 Financial Overview
Financial Outlook
Capital Structure and Cash Flow
Financial Key Topics
129 |
 New
Reporting Structure 130 |
 Globally Diverse Bedding Provider Largely Sold In
The Retail Channel
2014 Net Sales
By Segment
International
North America
131
By Geographic Region
Europe
US
Canada
Asia Pacific
Latin America
Other
Retail
By Channel
Other
By Product
Bedding |
 North
America – Bedding Products Principally Sold
In Retail Channel
132
Other
Retail
By Channel
Other
Bedding
By Product
2014 Net Sales
North America Segment
Mattresses Account For ~85% Of Bedding
Pillows Account For ~67% Of Other |
 133
Other
Retail
By Channel
Other
Bedding
By Product
2014 Net Sales
International Segment
International –
Higher Mix Of Other Products Sold
In Other Channels Versus North America
Mattresses Account For ~80% Of Bedding
Pillows Account For ~75% Of Other |
 134
Balanced Cost Of Goods Sold Mix
Consolidated
Other Materials
Commodities (Foam/Steel)
Logistics
Manufacturing/Overhead
Labor |
 Financial Overview
Financial Outlook
Capital Structure and Cash Flow
Financial Key Topics
135 |
 Annual
Base Growth Targets 2015-2018 Internal Target: 100bps Annual Operating
Margin Improvement Targets are based on Constant Currency
DELEVERAGING TO 3X AND RETURN VALUE TO SHAREHOLDERS
SALES GROWTH
OPERATING MARGIN IMPROVEMENT
ADJUSTED EPS GROWTH
6%
50bps
15%
136
Note 1: Management estimates. Please refer to “Forward Looking Statements”.
Note 2: Targets are based on constant currency, excluding the impact from foreign
exchange. For information on the methodology used to present constant currency information please refer to slide 167.
Note 3: Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction and
integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring
component facilities and related equipment, interest and fees incurred in connection with debt
refinancings, normalized tax rate adjustments and to exclude certain non-recurring items. Please refer to
the reconciliations on slide 160 and the Company’s SEC filings for more information regarding the
definition of adjusted EPS. |
 2015
Financial Guidance – Net Sales & Adjusted
EPS Growth
Note
1:
Management
estimates.
Please
refer
to
“Forward
Looking
Statements”.
Note
2:
Growth
presented
is
based
on
the
Company’s
guidance
issued
on
February
5,
2015,
which
consisted
of
full
year
2015
Net
Sales
of
$3.050
billion
to
$3.150
billion
and
Adjusted
EPS
of
$2.70
to
$3.10.
Note
3:
For
information
on
the
methodology
used
to
present
constant
currency
information
please
refer
to
slide
167.
Note
4:
Adjusted
EPS
(which
is
a
non-GAAP
measure)
is
EPS
adjusted
for
Sealy
transaction
and
integration
costs,
interest
and
fees
incurred
in
connection
with
debt
refinancings,
normalized
tax
rate
adjustments
and
to
exclude certain non-recurring items. Please refer to the reconciliations on
slide 160 and the Company’s SEC filings for more information regarding the definition of adjusted EPS.
Consolidated Net Sales
FY 2015 vs. FY 2014
Net Sales Growth
+2% to +5%
Currency
-3.5%
Constant Currency Sales Growth
+5.5% to +8.5%
Adj. Earnings Per Share
FY 2015 vs. FY 2014
Adjusted EPS Growth
+2 to +17%
Currency
-10.0%
Constant Currency Adj. EPS Growth
+12% to +27%
137 |
 2015
Segment Assumptions – Net Sales Growth
North America
FY 2015 vs. FY 2014
Net Sales Growth
+3% to +5%
Currency
-1%
Constant Currency Sales Growth
+4% to +6%
International
FY 2015 vs. FY 2014
Net Sales Growth
-1% to +6%
Currency
-13%
Constant Currency Sales Growth
+12% to +19%
Note 1: Updated historical financial information based on new segments was
provided in a Form 8-K filed with the SEC on February 13, 2015. Note
2: For information on the methodology used to present constant currency information please refer to slide 167.
Note 3: Management estimates. Please refer to “Forward Looking
Statements”. 138 |
 Expect
To Reverse Gross Margin Trend In 2015 2015
margin
improvement
to
be
driven
by
pricing,
volume
leverage
and
cost
efficiencies,
offset
partially
by unfavorable currency, product and channel mix and slight commodity
inflation Excluding FX, gross margin is expected to be up approximately
150bps to 200bps Note 1: For information on the methodology used to
present constant currency information please refer to slide 167. Note 2:
Management estimates. Please refer to “Forward Looking Statements”.
139 |
 (GAAP Reported Operating Margin)
2014
GAAP
operating
margin
includes
$43.8
million
of
integration
costs
(1.5%
of
sales)
Excluding integration and financing costs, operating margin is expected to be up
10bps to 80bps in 2015 On a constant currency basis, and excluding
integration and financing costs, operating margin is expected to be up 75bps
to 150bps in 2015 Operating Margin Expansion In 2015
Note 1: 2015 operating margin improvement based on management estimates.
Please refer to “Forward Looking Statements”. Note 2: Adjusted
operating margin is a non-GAAP measure. For information on the methodology used to present Adjusted operating margin and a reconciliation to GAAP operating margin please refer to slide 165.
Note 3: For information on the methodology used to present constant currency
information please refer to slide 167. Adjusted Operating
Margin
Adjusted Operating
Margin
140 |
 Tempur
North America Margins Are Improving Our first half of 2014 investments are
paying off as sales grew double-digits and margins expanded considerably
in the second half of 2014 as compared to the second half of 2013 2015
guidance assumes significant further margin improvement Volume leverage, cost
productivity, pricing, and fewer floor model launch costs Note
1:
2015
operating
margin
improvement
based
on
management
estimates.
Please
refer
to
“Forward
Looking
Statements”.
Note
2:
Adjusted
operating
margin
(operating
margin
less
corporate
expense)
is
a
non-GAAP
measure.
For
information
on
Tempur
North
America
Adjusted
Operating
Margin
and
a
reconciliation
to
GAAP
operating
margin
please refer to slide 163.
141
370bps
Improvement |
 Focused
On Driving Sealy Margin Improvement Note 1: Targeted Sealy US gross
margin improvement based on management estimates. Please refer to “Forward Looking Statements”.
Sealy operating margins deteriorated in the second half of 2014 vs. the second half
of 2013 due primarily to manufacturing inefficiencies and unfavorable
FX Targeting 300bps of Sealy US gross margin improvement in the US (valued at
$45 million in annual incremental gross profit when fully achieved) during
2015-2018 142 |
 Tempur
International Margins Pressured By Sealy Mix
Note: Please refer to “Forward Looking Statements”.
Tempur International operating margins deteriorated in 2014 vs. 2013 due primarily
to launch of Sealy Europe, unfavorable FX and market weakness in Central
Europe International
margins
will
continue
to
be
pressured
by
increased
Sealy
mix,
however
in
the
future
margin
dollars will increase as Sealy sales grow in international markets
143 |
 Significant Margin Improvement Opportunities
Internal Target: 100bps Annual Operating Margin Improvement
2015 -2018
Objective
2014
Annual
Incremental
Operating
Income
1
Initiative
Sealy US Gross Margin Improvement
2
30%
33%
$45 million
Cost Synergies
4
$45 million
$70 million
$25 million
Adjusted
Operating
Expense
Leverage
3
29%
28%
$30 million
$125 million
2015 Pricing
–
$25 million
$25 million
144
Note 1: Represents initiatives to be achieved by 2018. Our expectation is that they will ramp
through the period. Approximately 30% of the total $125 million is incorporated into our full year 2015 adjusted EPS
guidance. See “Forward Looking Statements”.
Note 2: Refers to Sealy gross margin in the U.S. of 30% in 2014. Sealy US gross margin
improvement excludes the benefit from cost synergies. Note 3: Adjusted operating
expense leverage is a non-GAAP measure. For information on the methodology used to present adjusted operating expense leverage and a reconciliation to GAAP operating margin
please refer to slide 164.
Note 4: Cost synergies reflect annualized cost synergies realized from the Sealy transaction.
|
 Targeting Base Annual Adjusted EPS Growth Of 15%
Note
1:
Management
estimates.
Please
refer
to
“Forward
Looking
Statements”.
Note
2:
GAAP
EPS
for
2013
was
$1.28
and
GAAP
EPS
for
2014
was
$1.75.
Note 3:
2015P is based on the Company’s February 5, 2015 issued guidance for Adjusted
EPS for full year 2015 of $2.70 to $3.10. Note 4:
Base Annual Adjusted EPS Growth Target is based on constant currency. For
information on the methodology used to present constant currency information please refer to slide 167.
Note 5:
Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction
and integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring component facilities and
related
equipment,
interest
and
fees
incurred
in
connection
with
debt
refinancings,
normalized
tax
rate
adjustments
and
to
exclude
certain
non-recurring
items.
Please
refer
to
the
reconciliations
on
slide
160
and
the
Company’s SEC filings for more information regarding the definition of adjusted
EPS. 2015 Adjusted EPS is expected to grow 12% to 27% on a constant currency
basis 145 |
 Strengthening US Dollar Against Key Currencies
Note: Factset, based on currency rates as of February 1, 2015.
146 |
 Significant Profit Impact From Unfavorable FX
2014
FX
~$13M
Operating
Income
Impact
2015P
FX
~$24M
Operating
Income
Impact
-$37M Operating Income
IMPACT
Note 1: For information on the methodology used to present constant currency
information please refer to slide 167. Note 2: 2015 impact from FX based on
management estimates for the mid-point of the Company’s 2015 financial guidance. Please refer to “Forward Looking Statements”.
2014
FX
~$0.15
EPS Impact
2015P
FX
$0.27
Projected
EPS Impact
-$0.42 Adj. EPS
IMPACT
147 |
 We Are
On Track To Our 2016 Targets Adjusted EPS
Based On High End Of 2015 Guidance And Our Annual Growth Targets, We
Would Be On Pace To Achieve Our 2016 $4.00 Adj. EPS Target, On A
Constant Currency Basis
148
Note 1: Management estimates. Please refer to “Forward Looking Statements”.
Note 2: Growth presented for 2015 is based on the Company’s guidance issued on
February 5, 2015, which consisted of full year 2015 Net Sales of $3.050 billion to $3.150 billion and Adjusted EPS of $2.70 to $3.10.
Note 3: 2015 Constant Currency Adjusted EPS adjusts for the negative foreign exchange impact to
adjusted EPS during 2014 and anticipated in 2015. 2016 EPS projection is based on the Company’s guidance for 2015
and the Company’s Adjusted EPS growth targets for 2015-2018 and is based on constant currency.
For information on the methodology used to present constant currency information please refer to slide 167.
Note 4: Adjusted EPS (which is a non-GAAP measure) is EPS adjusted for Sealy transaction and
integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring component facilities
and related equipment, interest and fees incurred in connection with debt refinancings, normalized tax
rate adjustments and to exclude certain non-recurring items. Please refer to the reconciliations on slide 160
and the Company’s SEC filings for more information regarding the definition of adjusted EPS.
|
 Financial Overview
Financial Outlook
Capital Structure and Cash Flow
Financial Key Topics
149 |
 Revolving credit
facility $16.0
2018
Term A Facility
$484.5
2018
Term B Facility
$594.4
2020
Senior Notes (6.875%)
$375.0
2020
Sealy Notes (8.0%)
$104.7
2016
Capital lease obligations and other
$27.7
Total
$1,602.3
Dec. 31, 2014
Maturity
Efficient Capital Structure
150
Considerable covenant headroom and sufficient liquidity
Debt
($ in millions)
Note 1: Sealy 8% Notes outstanding is based on present value of notes still outstanding using a
market discount rate. The principal amount of the notes accrete 8% per annum accruing semi-annually and mature on July 15,
2016. Note holders can convert the notes into cash at any time until maturity. For more
information regarding the terms of the Sealy 8% Notes please refer to the Company’s SEC filings.
Note 2: Total revolving credit facility is $350.0 million.
Note 3: Please refer to slide 162 and the Company’s SEC filings for more information
regarding the calculation of the leverage ratio for purposes of the Company’s senior secured facility. |
 Strong
Cash Flow Characteristics 151
($ in millions)
Operating and Free Cash Flow
Note 1: Management estimates. Please refer to “Forward Looking
Statements”. Note
2:
Free
cash
flow
is
a
non-GAAP
measure.
For
information
on
the
methodology
used
to
present
free
cash
flow
information
and
a
reconciliation
to
operating
cash
flow
please
refer
to
slide
166.
Note
3:
2015
Operating
cash
flow
and
free
cash
flow
projections
include
the
impact
from
foreign
exchange.
Note 4: For information on the methodology used to present constant currency
information please refer to slide 167. Multi-year add back to net income
as D&A should continue to exceed annual Capex by $30M+ On a constant
currency basis, based on our 2015 guidance, operating cash flow in 2015 would
exceed $250 million and free cash flow would exceed $200 million
|
 Solid
Adjusted EBITDA Growth 152
($ in millions)
Adjusted EBITDA
Note 1: Management estimates. Please refer to “Forward Looking
Statements”. Note 2: For information on the methodology used to
present constant currency information please refer to slide 167. Note 3:
Adjusted EBITDA (which is a non-GAAP measure) represents EBITDA adjusted for the loss on disposal of business, Sealy transaction and integration costs, and purchase price allocation (“PPA”) inventory
adjustments related to the Sealy acquisition, financing and refinancing costs,
non-cash compensation, restructuring and other. Please refer to the reconciliation included on slide 161 of this presentation and the
Company’s SEC filings for more information regarding the definition of adjusted
EBITDA and the calculation of the leverage ratio for purposes of the Company’s senior secured facility.
Currency negatively impacted Adjusted EBITDA by $13 million in 2014 and expected to
impact Adjusted EBITDA $24 million in 2015 based on the mid-point of 2015
guidance Ex.
FX
Ex.
FX |
 153
Adjusting Leverage Target To 3x
($ in millions)
Consolidated Funded Debt Less
Qualified Cash to Adjusted EBITDA
As a larger more stable company, our optimal capital structure is 3x
2014 credit agreement amendment allows cash utilization flexibility below 3.5x
Value creation generated through deleverage and/or returning value to
shareholders Note 1: Information for 2015 based on management estimates. Please refer to
“Forward Looking Statements”. Note 2: Adjusted EBITDA (which is a
non-GAAP measure) represents EBITDA adjusted for the loss on disposal of business, Sealy transaction and integration costs, and purchase price allocation (“PPA”) inventory
adjustments related to the Sealy acquisition, financing and refinancing costs, non-cash
compensation, restructuring and other. Please refer to the reconciliation included on slides 161-162 of this presentation and
the Company’s SEC filings for more information regarding the definition of adjusted EBITDA and the
calculation of consolidated funded debt less qualified cash and the calculation of the leverage ratio for purposes
of the Company’s senior secured facility (which are non-GAAP measures).
|
 Significant Operating Cash Flow With Commitment To
Enhance Stockholder Value
($ in millions)
Prior to the Sealy acquisition, repurchased 49 million shares between 2005 and 2012
for $1.3 billion ($26.46 average price)
154 |
 Mark Sarvary
President & Chief Executive Officer
155 |
 Tempur
Sealy Strategic Priorities Leverage and Strengthen Our Comprehensive
Portfolio Of Iconic Brands & Products
Expand Distribution And Seek Highest Dealer
Advocacy
Expand Margins With Focus On Driving
Significant Cost Improvement
Leverage Global Scale For Competitive
Advantage
Delivering Value
For Stockholders
156
•
Base
Annual
Targets:
Sales Growth Of 6% And Adjusted
EPS Growth Of 15%
•
Strong Cash Flow To Reduce Debt
And Return Value to Stockholders
Accretive Acquisitions Of Licensees And Joint
Ventures
Note 1: Management estimates. Please refer to “Forward Looking Statements”.
Note 2: Targets are based on constant currency. For information on the methodology used to
present constant currency information please refer to slide 167. Note 3: Adjusted EPS
(which is a non-GAAP measure) is EPS adjusted for Sealy transaction and integration costs, loss on disposal of business related to the disposition of the three U.S. innerspring component facilities and
related equipment, interest and fees incurred in connection with debt refinancings, normalized tax rate
adjustments and to exclude certain non-recurring items. Please refer to the reconciliations on slide 160 and the
Company’s SEC filings for more information regarding the definition of adjusted EPS.
|
 Q&A with Leadership Team
157 |
 Appendix
158 |
 Use of
Non-GAAP Financial Measures In this investor presentation and certain of
its press releases and SEC filings, the Company provides information regarding adjusted net income, adjusted earnings per share,
earnings before interest, taxes, depreciation, and amortization
(“EBITDA”), adjusted EBITDA, and consolidated funded debt and consolidated funded debt less qualified cash,
Tempur North America adjusted operating income and operating margin, adjusted
operating expenses, adjusted operating income and operating margin and free cash flow,
which are not recognized terms under U.S. Generally Accepted Accounting Principles
(“GAAP”) and do not purport to be alternatives to net income as a measure of operating
performance or total debt. Because not all companies use identical calculations,
these presentations may not be comparable to other similarly titled measures of other
companies.
Adjusted Net Income/Adjusted EPS
A reconciliation of adjusted net income and adjusted earnings per share is provided
on slide 160. Management believes that the use of these non-GAAP financial measures
provides investors with additional useful information with respect to the impact of
various costs associated with the Sealy acquisition and the disposal of the three U.S.
innerspring component facilities and the accelerated amortization of deferred
financing charges for voluntary prepayment of Term A and Term B loans, other
income related to certain other non-recurring items, including income
from a partial settlement of a legal dispute, and adjustment of taxes to a
normalized rate related to the aforementioned items and other discrete
income tax events. EBITDA/Adjusted EBITDA
A reconciliation of EBITDA and adjusted EBITDA to the Company’s net income and
a reconciliation of total debt to consolidated funded debt and consolidated funded debt less
qualified cash are provided on slides 161 and 162. Management believes that the use
of EBITDA and adjusted EBITDA also provides investors with useful information with
respect to the terms of the Company’s senior secured credit facility and the
Company’s compliance with key financial covenants. For more information
regarding adjusted EPS, adjusted EBITDA and other terms used in the
Company’s senior secured facility, please refer to the Company’s SEC filings.
Tempur North America Adjusted Operating Income and Margin Reconciliation
A reconciliation of Tempur North America GAAP operating income and operating margin
to adjusted operating income and operating margin, which are GAAP operating
income and GAAP operating margin less certain corporate expenses, is provided on
slide 163. Management believes that the use of these non-GAAP
financial measures provides investors with additional useful information
with respect to Tempur North America’s operating performance excluding the impact of certain corporate expenses.
Adjusted Operating Expenses
A reconciliation of GAAP operating expenses to adjusted operating expenses, which
is GAAP operating expenses less integration and financing costs, is provided on slide
164. Management believes that the use of this non-GAAP financial measure
provides investors with additional useful information with respect to the
Company’s operating performance and initiative to deleverage operating
expenses during 2015-2018. The reconciliation provides information on the methodology
used to present operating
expenses, including the exclusion of integration and financing costs related to the
Sealy acquisition. Adjusted Operating Income and Margin
A reconciliation of GAAP operating income and operating margin to adjusted
operating income and operating margin, which are GAAP operating income and
GAAP operating margin less integration and financing costs, is provided on
slide 165. Management believes that the use of these non-GAAP financial measures provides investors with
additional useful information with respect to the Company’s operating income
and margin performance excluding the impact of integration and financing costs related to the
Sealy acquisition.
Free Cash Flow
A reconciliation of cash provided by operating activities to free cash flow, which
is cash provided by operating activities less purchases of property, plant
and equipment, is presented on slide 166. Management believes that the use
of this non-GAAP financial measure provides investors with additional
useful information with respect to the
Company’s cash generation and financial strength.
159 |
 2014
Adjusted EPS Reconciliation
2013 and 2014 Adjusted EPS
(1) Loss on disposal of business represents costs associated with the disposition of
the three U.S. innerspring component facilities and related equipment. (2)
Transaction and integration represents costs, including legal fees, professional fees and other charges to align the businesses related to the Sealy acquisition.
(3) Financing costs represent costs incurred in connection with the amendment and
refinancing of our senior secured credit facility in 2014 and 2013, respectively.
(4)
Other
income
includes
certain
other
non-recurring
items,
including
income
from
a
partial
settlement
of
a
legal
dispute.
(5) Adjustment of taxes to normalized rate represents adjustments associated with
the aforementioned items and other discrete income tax events. Note: 2013
includes Sealy from March 18 to December 31, 2013. 160
Year Ended
Year Ended
(in millions, except per share amounts)
December 31,
December 31,
2013
2014
Net income
78.6
$
108.9
$
Plus:
Loss on disposal of business, net of tax
(1)
--
16.7
Transaction costs, net of tax
(2)
13.2
--
Integration costs, net of tax
(2)
37.2
30.6
Financing costs, net of tax
(3)
6.5
3.4
Other income, net of tax
(4)
--
(11.3)
Adjustment of taxes to normalized rate
(5)
10.9
16.3
Adjusted net income
146.4
$
164.6
$
Earnings per share, diluted
1.28
$
1.75
$
Loss on disposal of business, net of
tax (1)
--
0.27
Transaction costs, net of tax
(2)
0.21
--
Integration costs, net of tax
(2)
0.60
0.49
Financing costs, net of tax
(3)
0.11
0.05
Other income, net of tax
(4)
--
(0.18)
Adjustment of taxes to normalized rate
(5)
0.18
0.27
Adjusted earnings per share, diluted
2.38
$
2.65
$
Diluted shares outstanding
61.6
62.1 |
 Adjusted EBITDA Reconciliation
2013 and 2014 Adjusted EBITDA
161
Year Ended
Year Ended
(in millions)
December 31,
December 31,
2013
(1)
2014
Net income attributable to Tempur Sealy International, Inc.
75.6
$
108.9
$
Interest expense
133.2
91.9
Income taxes
39.0
64.9
Depreciation & amortization
98.6
89.7
EBITDA
346.4
$
355.4
$
Adjustments for financial covenant purposes:
Transaction costs
(2)
25.2
Integration costs
(2)
15.3
40.3
Financing and Refinancing charges
(3)
2.4
1.3
Non-cash compensation
(4)
5.8
Restructuring and impairment related charges
(5)
7.8
Loss on disposal of business and discontinued operations
(6)
0.6
23.2
Other
(7)
7.6
(15.6)
Adjusted EBITDA
411.1
$
404.6
$
(1) 2013 is presented according to the methodology used for the Company’s senior
secured facilities and is based on trailing twelve month Adjusted EBITDA for both Tempur-Pedic and Sealy.
(2) Transaction and integration represent costs related to the Sealy Acquisition, including
legal fees, professional fees and other charges to align the businesses. (3)
Financing costs represent costs incurred in connection with the amendment of our senior secured credit facility and refinancing charges represent costs associated with debt refinanced by Sealy prior
to the Sealy Acquisition.
(4) Non-cash compensation represent costs associated with various share-based
awards. (5) Restructuring and impairment represent costs related to restructuring
the Tempur Sealy business and asset impairment costs recognized by Sealy prior to the Sealy Acquisition.
(6) Loss on disposal of business represents costs associated with the disposition of the
three U.S. innerspring component production facilities and related equipment and discontinued operations
represent losses from Sealy's divested operation prior to the Sealy Acquisition.
(7) Other income in 2014 includes certain other non-recurring items, including income
from a partial settlement of a legal dispute. —
—
— |
 Debt
Reconciliation and Leverage Ratio Calculation Reconciliation of Total Debt to
Consolidated Funded Debt Less Qualified Cash (1)
Qualified
cash
as
defined
in
the
Company's
senior
secured
credit
facility
equals
100.0%
of
unrestricted
domestic
cash
plus
60.0%
of
unrestricted
foreign
cash.
For
purposes
of
calculating
leverage
ratios,
qualified
cash
is
capped at $150.0 million.
(2)
The ratio of consolidated debt less qualified cash to adjusted EBITDA was 3.89
times, within the Company's covenant, which requires this ratio to be less than 4.75 times at December 31, 2014.
Note: For more details regarding consolidated funded debt, consolidated funded debt
less qualified cash and Adjusted EBITDA, please refer to the Company’s SEC filings.
162
As of
(in millions, except ratio)
December 31,
2014
Total debt
1,602.3
$
Plus:
Letters of credit outstanding
18.2
Consolidated funded debt
1,620.5
Less:
Domestic qualified cash
(1)
25.9
Foreign qualified cash
(1)
21.9
Consolidated funded debt less qualified cash
1,572.7
$
Adjusted EBITDA
404.6
Consolidated funded debt less qualified cash to Adjusted EBITDA
(2)
3.89 times |
 Tempur
North America Adjusted Operating Margin Reconciliation
Tempur North America
Adjusted Operating Income And Operating Margin
163
Tempur North America 2013 - 2014
Year Ended
Year Ended
(in millions, except percentage amounts)
December 31,
December 31,
2013
2014
Operating Income, Tempur North America segment
$67.6
$84.9
Tempur North America Net Sales
910.0
993.2
Operating Margin (GAAP)
7.4%
8.5%
Corporate expenses included in Tempur North America segment
83.0
75.5
Adjusted Operating Income less corporate expenses
$150.6
$160.4
Tempur North America Net Sales
910.0
993.2
Adjusted Operating Margin
16.5%
16.1%
Tempur North America 2H 2013 vs. 2H 2014
Six Months Ended
Six Months Ended
(in millions, except percentage amounts)
December 31,
December 31,
2013
2014
Operating Income, Tempur North America segment
$41.5
$65.5
Tempur North America Net Sales
468.6
542.9
Operating Margin (GAAP)
8.9%
12.1%
Corporate expenses included in Tempur North America segment
32.7
40.2
Adjusted Operating Income less corporate expenses
$74.2
$105.7
Tempur North America Net Sales
468.6
542.9
Adjusted Operating Margin
15.8%
19.5% |
 Adjusted
Operating Expenses 2014 Adjusted Operating Expenses
164
Tempur Sealy International, Inc.
Year Ended
(in millions, except percentage amounts)
December 31,
2014
Consolidated net sales
$2,989.8
Selling and marketing expenses
619.9
General, administrative and other expenses
280.6
Operating Expenses
900.5
Operating Expenses as a % of Consolidated Net Sales
30%
Operating Expenses
$900.5
Less: Integration and financing costs
43.8
Operating Expenses less Integration and financing costs
$856.7
Adjusted Operating Expenses as a % of Consolidated Net Sales
29%
Note 1: Integration costs represents costs, including legal fees, professional
fees and other charges to align the businesses related to the Sealy acquisition.
Note 2: Financing costs represent costs incurred in connection with the
amendment of our senior secured credit facility. |
 Adjusted
Operating Margin 2014 Adjusted Operating Income and Margin
165
Tempur Sealy International, Inc.
Year Ended
(in millions, except percentage amounts)
December 31,
2014
Operating Income, Tempur Sealy International, Inc.
$276.3
Consolidated net sales
2,989.8
Operating Margin (GAAP)
9.2%
Operating Income, Tempur Sealy International, Inc.
$276.3
Plus: Integration and financing costs
43.8
Adjusted Operating Income
$320.1
Consolidated net sales
2,989.8
Adjusted Operating Margin (Non-GAAP)
10.7%
Note 1: Integration costs represents costs, including legal fees, professional
fees and other charges to align the businesses related to the Sealy acquisition.
Note 2: Financing costs represent costs incurred in connection with the
amendment of our senior secured credit facility. |
 Free
Cash Flow 2014 Free Cash Flow
166
Tempur Sealy International, Inc.
Year Ended
Year Ended
(in millions)
December 31,
December 31,
2013
2014
Net cash provided by operating activities
$98.5
$225.2
Less: Purchases of property, plant and equipment
40.0
47.5
Free Cash Flow
$58.5
$177.7 |
 Constant Currency Information
In this investor presentation the Company refers to, and in other press releases and
other communications with investors the Company may
refer
to,
net
sales
or
earnings
or
other
historical
financial
information
on
a
“constant
currency
basis”
or
“excluding
FX”,
which
is
a
non-GAAP
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
year
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. The information
presented on a constant currency basis is not recognized under U.S. GAAP,
and this information is not intended as a substitute for reviewing information presented on a GAAP basis.
167 |