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) May 11, 2017
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):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 7.01 Regulation FD Disclosure
On May 11, 2017, the Company released an updated presentation, which includes an update on current market trends, to be used from time to time in meetings with investors (the "Investor Presentation"). A copy of the investor presentation is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference.
The information in this Item 7.01 (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. May 2017 Investor 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: May 11, 2017
Tempur Sealy International, Inc. | ||
By: | /s/ Barry A. Hytinen | |
Name: | Barry A. Hytinen | |
Title: | Executive Vice President & Chief Financial Officer | |
EXHIBIT INDEX
Exhibit | Description | |
99.1 | Tempur Sealy International, Inc. May 2017 Investor Presentation | |
1
May 2017
“Success is strengthening our Iconic Brands while driving higher
ROIC through focused execution”
Tempur Sealy International, Inc. (TPX)
2
Global Bedding Products Company
Investment Merits
Tempur Sealy is the premium market leader…
• Strong brands across a complete portfolio of
products
• Global manufacturing foot print
• Structural growth industry, with high ROIC and free
cash flow
• Industry is relatively concentrated in US and
fragmented globally
…in a growth industry
Forward-Looking Statements: This investor presentation contains “forward-looking statements” within the meaning of federal securities laws. Please review carefully the cautionary statements and other information included
in the appendix under “Forward looking Statements”. This presentation includes non-GAAP financial measures. Please refer to the footnotes and the explanations about such non-GAAP financial measures, including
reconciliations to the corresponding GAAP financial measures, in the appendix at the end of this presentation. Footnotes: Please refer to the footnotes at the end of this presentation.
3
Bedding Industry Market Opportunity
4
Growing Global Mattress Industry
$ in billions
Non-US world consumption data is impacted by exchange rate fluctuations, please see footnote 6 for source.
US mattress sales growing at a 6% CAGR over last twenty years driven by consumer shift to higher priced mattresses
Non-US mattress sales grew 5% CAGR over the last decade, also driven by average price and units
Tempur Sealy is at the center of global trend toward higher quality, higher priced mattresses
$2.1 $2.3
$2.6 $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
$6.2
$6.7
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US Industry: Wholesale Mattresses(4)
6% CAGR
$10.7
$12.5
$13.8 $13.2
$14.6
$16.5 $16.7
$17.4 $18.2 $17.1
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Non-US Industry: Wholesale Mattresses(5)
5% CAGR
5
Tempur Sealy Has Well Established Global Brands
Tempur-Pedic
• Nothing precisely adapts, supports and
aligns like Tempur-Pedic for life-changing
sleep
Stearns & Foster
• Finest beds made with exceptional
materials and unparalleled craftsmanship
Sealy
• Featuring Posturepedic Technology
providing support that’s right for you
Percentage of
Revenue(2)
50%
10%
N/A
40%
Brands are complementary and fully cover the market
Tempur Sealy is the premium market leader
COCOON by Sealy (bed in a box)
• Your bed, your way
6
Complete Portfolio Of Products
Sealy Conform Adjustable bases
Cocoon by Sealy
Pillows
TEMPUR-Cloud Stearns & Foster TEMPUR-Flex
Sealy Hybrid
Innerspring Hybrid Tempur Material
Other Specialty
Sealy Response TEMPUR-Contour
Stearns & Foster
7
New Products for 2017
The new Sealy featuring Posturepedic
Technology™ provides targeted support where
you need it most.
Celebrating 25 years in sleep innovation with
the limited-edition Tempur-Legacy mattress.
Launching internationally, the new Tempur-Pedic
Flagship line features improved aesthetic design
that reflects the innovation inside.
8
Worldwide Direct Business
Company Owned Stores
Web
Call Center
9
Global Manufacturing Foot Print
North American and International operating models support domestic demand and global growth
Driving for operational improvements on key metrics like product quality and on-time delivery
10
First Quarter Highlights
Excluding Mattress Firm, sales in North America grew over 13% in the first quarter
Direct Sales in North America Increased 130%, Driven by Web Sales Increase of 200%
1Q
2017
1Q
2016
%Change
%Change
Constant
Currency(1)
Net Sales $722.1 $721.0 0.2% 0.7%
Net Income 33.9 39.6 -14.4% -9.6%
EPS 0.62 0.63 -1.6% 3.2%
Adjusted EPS(1)(7) 0.96 0.68 41.2% 45.6%
EBITDA(1)(8) 86.8 102.0 -14.9% -12.2%
Adjusted EBITDA(1)(8) 121.1 104.0 16.4% 19.1%
Three Months Ended March 31
1Q
2017
Debt Leverage(7) 3.46x
Capital Expenditures $13 M
Depreciation &
Amortization(1)
$24.5 M*
Tax Rate(1) 30.2%
Share Count 54.6 M
* Depreciation and Amortization excludes $8.4 million of net adjustments related to performance-based stock compensation
(in millions, except percentages and per common share amounts)
11
2017 Plan and Near Term Priorities
Adjusted EBITDA(6)(8):
$400 - 450 million
International Expansion
Channel Expansion
Growth Opportunities
2017 Financial Targets(6) and Assumptions
Recapture Market Share in North America
Expand Market Share Internationally
Sealy Margin Expansion
Successful New Product Launches
Key Success Factors
Capital Expenditures(6):
Depreciation & Amortization(1)*:
Tax Rate:
Share Count:
$60 – 70 million
$105 million
31%
55 million
New Products
Operational Efficiencies
* Depreciation and Amortization excludes $8.4 million of net adjustments related to
performance-based stock compensation recognized in the first quarter of 2017
Note that the depreciation & amortization and tax rate amounts shown represent
management's current estimates. In addition there may be other items that would be
expected to impact GAAP net income in 2017 but would not impact adjusted EBITDA. Please
refer to footnote 8.
12
Recapturing Revenues in North America
What gives us confidence to recapture:
Premier portfolio of branded beds
Over 94% of Tempur-Pedic owners would recommend the product(9)
Sealy has one of the highest brand awareness of any US mattress brand(9)
Stearns & Foster had strong growth in 2016
Strong network of retail partners throughout North America
Innovative, high quality product offerings
Key Recapture Methods:
• Expand with current retailers, which represent 70% of our North America sales
• Significantly increase dollar and rate of direct advertising
• Innovative new product offerings to drive interest with retailers and consumers
• Explore new channels
Leading Brands
Recapture Strategy
Confidence for Recapture
Mattress Firm represented 21% of our consolidated net sales in 2016, of which 60% was Tempur-Pedic product
and 40% was Sealy products.
13
Tempur Sealy’s Variable Cost Structure(2)
Current plan is to maintain cost structure to support recapturing the majority of lost sales with
the expectation of lower operating efficiencies in the short term
Tempur Sealy’s total cost structure is highly variable; approximately 75% in total
Tempur Sealy cost structure can be quickly aligned with sales
[CELLRAN
GE]
~[VALUE]
[CELLRAN
GE]
~[VALUE]
Cost of Goods Sold
[CELLRAN
GE]
~[VALUE]
[CELLRAN
GE]
~[VALUE]
Operating Expenses
~55% of total costs
~10% of total costs
~20% of total costs
~15% of total costs
14
Debt Structure
15
Thank you for your interest in
Tempur Sealy International
Improving the Sleep of More People Every Night, All Around the World
For more information please email: investor.relations@tempursealy.com
16
Appendix
17
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 are not historical information. When used in this presentation, the words "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 adjusted EBITDA, capital expenditures, depreciation, and amortization, interest expense, tax rate and share count
for 2017 and performance generally for 2017 and subsequent periods, expectations regarding the Company’s strategy to recapture market share in the U.S. including expected levels of
advertising spending, and expectations regarding the Company’s target leverage ratio, share repurchase program and the capital allocation strategy and expectations regarding the ability to
reduce costs in a reduced sales or recession scenario. 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. These risk factors
include risks associated with the termination of the Company's relationship with Mattress Firm; risks associated with the Company's capital structure and debt level; 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 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; changes in demand for the Company's products by significant retailer customers; 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 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, regulatory or investigation proceedings and outstanding litigation; changing commodity costs; the effect of future legislative or regulatory
changes; and disruptions to the implementation of the Company's strategic priorities and business plan caused by abrupt changes in the Company's senior management team and Board of
Directors.
There are a number of risks, uncertainties and other important factors, many of which are beyond the Company’s control, that could cause its actual results to differ materially from those
expressed as forward-looking statements in this investor presentation, including the risk factors discussed under the heading "Risk Factors" under ITEM 1A of Part 1 of our Annual Report on Form
10-K for the year ended December 31, 2016. There may be other factors that may cause the Company's actual results to differ materially from the forward-looking statements. The Company
undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
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, the Reclining Figure Design mark, 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, COCOON by Sealy
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.
Limitations on Guidance. The guidance included herein is from the Company’s press release dated May 4, 2017 and related earnings call on May 4, 2017. The Company is neither reconfirming
this guidance as of the date of this investor presentation nor assuming any obligation to update or revise such guidance. See Forward Looking Statements.
18
Footnotes
1. This is a non-GAAP financial measure. Please refer to “Use of Non-GAAP Financial Measures and Constant Currency Information”
2. Management estimates.
3. Based on the Company's results for fiscal 2015 or 2016, as applicable. For more information please refer to the Annual Report on Form 10-K for the year ended
December 31, 2016 or the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017.
4. According to 2015 Mattress Industry Report of Sales & Trends provided by the International Sleep Products Association (“ISPA”).
5. CSIL World Mattress Report, 2015 (Top 40 Markets Mattress Consumption).
6. Based on the Company’s 2017 financial targets provided in the press release dated May 4, 2017 and the related earnings call on May 4, 2017. Please refer to
“Forward-Looking Statements” and “Limitations on Guidance”.
7. Adjusted net income, adjusted EPS, leverage, and leverage ratio are non-GAAP financial measures. Please refer to the “Use of Non-GAAP Financial Measures and
Constant Currency” beginning on slide 19 for more information regarding the definition of these non-GAAP financial measures, including the adjustments from the
corresponding GAAP information.
8. EBITDA and adjusted EBITDA are a non-GAAP financial measures. Please refer to the "Use of Non-GAAP Financial Measures and Constant Currency Information"
beginning on slide 19 for more information regarding the definitions of EBITDA and adjusted EBITDA, including the adjustments from the corresponding GAAP
information. Amount shown for 2017 represents management estimates of adjusted EBITDA performance based on the Company’s guidance provided on May 4,
2017. Please refer to “Forward-Looking Statements” and “Limitations on Guidance”. The Company further noted that it is unable to reconcile this forward-looking
non-GAAP financial measure to GAAP net income, its most directly comparable forward-looking GAAP financial measure, without unreasonable efforts, because the
Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP net income
in 2017 but would not impact adjusted EBITDA. These items that impact comparability may include restructuring activities, the impact of the recent termination of
contracts with Mattress Firm, foreign currency exchange rates, income taxes, and other items. The unavailable information could have a significant impact on the
Company's full year 2017 GAAP financial results.
9. Based on the Company’s own research with North American consumers.
10. Stock repurchases under this program may be made through open market transactions, negotiated purchases or otherwise, at times and in such amounts as
management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing and regulatory
requirements and other market conditions. The program does not require the purchase of any minimum number of shares and may be suspended, modified or
discontinued at any time without prior notice. Repurchases may be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the
Company might otherwise be precluded from doing so under federal securities laws.
11. Based on debt outstanding March 31st, 2017. For more information, please refer to the Company’s annual report on Form 10-K for the year ended December 31,
2016.
19
Use of Non-GAAP Financial Measures and Constant Currency Information
In this investor presentation and certain of its press releases and SEC filings, the Company provides information regarding adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, and
consolidated funded debt less qualified cash and leverage ratio which are not recognized terms under U.S. GAAP and do not purport to be alternatives to net income and earnings per share
as a measure of operating performance or an alternative to total debt. The Company believes these non-GAAP measures provide investors with performance measures that better reflect the
Company's underlying operations and trends, including trends in changes in margin and operating expenses, providing a perspective not immediately apparent from net income and
operating income. The adjustments management makes to derive the non-GAAP measures include adjustments to exclude items that may cause short-term fluctuations in the nearest GAAP
measure, but which management does not consider to be the fundamental attributes or primary drivers of the Company's business, including costs associated with its 2013 acquisition of
Sealy Corporation and its subsidiaries, the exclusion of other costs associated with the 2015 Annual Meeting (including executive management transition and retention compensation), legal
settlements, costs associated with the completion of the new credit facility ("2016 Credit Agreement") and senior notes offering in the second quarter of 2016, the exclusion of charges
associated with the Mattress Firm termination in the first quarter of 2017 and other costs.
The Company believes that exclusion of these items assists in providing a more complete understanding of the Company's underlying results from continuing operations and trends, and
management uses these measures along with the corresponding GAAP financial measures to manage the Company's business, to evaluate its consolidated and business segment
performance compared to prior periods and the marketplace, to establish operational goals and management incentive goals, and to provide continuity to investors for comparability
purposes. Limitations associated with the use of these non-GAAP measures include that these measures do not present all of the amounts associated with our results as determined in
accordance with GAAP and these non-GAAP measures should be considered supplemental in nature and should not be construed as more significant than comparable measures defined by
GAAP. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. For more information
regarding the use of these non-GAAP financial measures, please refer to the Company’s SEC filings.
Constant Currency Information
In this presentation the Company refers to, and in other communications with investors the Company may refer to, net sales or earnings or other historical financial information on a
"constant currency basis," which is a non-GAAP financial measure. These references to constant currency basis do not include operational impacts that could result from fluctuations in
foreign currency rates. To provide information on a constant currency basis, the applicable financial results are adjusted based on a simple mathematical model that translates current period
results in local currency using the comparable prior corresponding period's currency conversion rate. This approach is used for countries where the functional currency is the local country
currency. This information is provided so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby facilitating period-to-period
comparisons of business performance.
EBITDA and Adjusted EBITDA
A reconciliation of the Company's GAAP net income to EBITDA and adjusted EBITDA are provided on slide 20. Management believes that the use of EBITDA and adjusted EBITDA also provides
investors with useful information with respect to the Company’s operating performance and comparisons from period to period.
Leverage
Consolidated funded debt less qualified cash to adjusted EBITDA, which the Company may refer to as leverage, is provided on slides 21 and is calculated by dividing consolidated funded debt
less qualified cash, as defined by the Company’s senior secured credit facilities, by adjusted EBITDA. Although not relevant for purposes of assessing compliance with the Company's current
financial covenants, the Company provides this as supplemental information to investors regarding the Company’s operating performance and comparisons from period to period, as well as
general information about the Company's progress in reducing its leverage.
Adjusted Net Income and Adjusted EPS
A reconciliation of the Company's GAAP net income to adjusted net income and a calculation of adjusted EPS are provided on slides 22. Management believes that the use of adjusted net
income and adjusted EPS also provides investors with useful information with respect to the Company’s operating performance and comparisons from period to period.
20
Adjusted EBITDA Reconciliation
(in millions) March 31, 2017 March 31, 2016 March 31, 2017 March 31, 2016
Net income 33.9$ 39.6$ 196.4$ 89.7$
Interest expense 22.1 21.4 85.9 97.1
Loss on extinguishment of debt - - 47.2 -
Income taxes 14.6 17.3 84.1 132.4
Depreciation and amortization 16.2 23.7 82.0 95.8
EBITDA 86.8 102.0 495.6 415.0
Adjustments
Customer termination charges (1) 34.3 - 34.3 -
Integration Costs (2) - 1.0 1.0 18.1
Executive management transition (3) - 1.0 - 11.7
German legal settlement (4) - - - 17.6
Other income (5) - - - (9.5)
Restructuring costs (6) - - 7.8 11.9
Pension settlement (7) - - - 1.3
2015 Annual Meeting Costs (8) - - - 4.2
Redemption value adjustment on redeemable non-controlling interest, net of tax (9) - - - (1.0)
Adjusted EBITDA 121.1$ 104.0$ 538.7$ 469.3$
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
For additional information regarding the calculations above please refer to the Company's SEC filings.
Trailing Twelve Months Ended
The Company recorded $25.9 mill ion of net charges related to the termination of the relationship with Mattress Firm. Cost of sales included $11.5 mill ion of charges related to the write-off of customer-unique
inventory and product obligations. Operating expenses included $14.4 mill ion of net charges, which included a write-off of $17.2 mill ion for customer incentives and marketing assets, $5.8 mill ion of employee-
related costs and $0.7 mill ion of professional fees. The Company recorded $9.3 mill ion of benefit related to the change in estimate associated with performance-based stock compensation that is no longer
probable of payout and $0.9 mill ion of accelerated stock-based compensation expense. Adjusted EBITDA excludes $34.3 mill ion of charges related to the termination of the relationship with Mattress Firm. This
amount represents the $25.9 mill ion of net charges and adds the net amortization impact of $8.4 mill ion of stock-based compensation benefit. Payments received pursuant to the transition agreements with
Mattress Firm are included in Other Income and not adjusted out of EBITDA.
Integration costs represents costs, including legal fees, professional fees, compensation costs and other charges related to the transition of manufacturing facil ities, and other costs related to the continued
alignment of the North America business segment related to the Sealy acquisition.
Executive management transition represents certain costs associated with the transition of certain of the Company's executive officers.
Redemption value adjustment on redeemable non-controlling interest represents a $(1.0) mill ion adjustment, net of tax, to adjust the carrying value of the redeemable non-controlling interest for the trail ing
twelve month period ended March 31, 2016 to its redemption value.
Notes
German legal settlement represents the €15.5 mill ion ($17.6 mill ion) settlement the Company reached in 2015 with the German Foreign Cartel Office ("FCO") to fully resolve the FCO's antitrust investigation, and
related legal fees.
Other income includes income from a partial settlement of a legal dispute.
Restructuring costs represents costs associated with headcount reduction and store closures.
Pension settlement represents pension expense recorded in conjunction with a settlement offered to terminated, vested participants in a defined benefit pension plan.
2015 Annual Meeting costs represent additional costs related to the Company's 2015 Annual Meeting and related issues.
Three Months Ended
21
Leverage Reconciliation
(in millions, except ratio) 1Q 15 1Q 16 1Q 17
Total debt(1) 1,602.6$ 1,496.2$ 1,869.1$
Plus: Letters of credit outstanding 17.3 18.8 22.9
Consolidated funded debt 1,619.9 1,515.0 1,892.0
Less: Domestic qualified cash(2) 15.7 6.3 11.5
Less: Foreign qualified cash(2) 17.6 18.5 18.6
Consoldiated funded debt less qualified cash 1,586.6$ 1,490.2$ 1,861.9$
Adjusted EBITDA(3) 403.7$ 469.3$ 538.7$
Leverage 3.9x 3.2x 3.5x
(1)
(2)
(3)
($ in millions) 1Q 15 1Q 16 1Q 17
GAAP net income $ 104.9 $ 89.7 $ 196.4
Interest expense 90.1 97.1 85.9
Loss on extinguishment of debt - - 47.2
Income tax provision 63.7 132.4 84.1
Depreciation and amortization 87.5 95.8 82.0
EBITDA $ 346.2 $ 415.0 $ 495.6
Adjustments 57.5 54.3 43.1
Adjusted EBITDA $ 403.7 $ 469.3 $ 538.7
For additional information regarding the calculations above please refer to the Company's SEC filings.
Represents adjusted EBITDA for the trailing twelve-month period ended with the referenced quarter. A reconciliation of GAAP
net income to Adjusted EBITDA with respect to the twelve-month period ended with the referenced quarter is set forth below.
Notes
Balance sheet amounts are as of the end of the referenced quarter.
Qualified cash as defined in the senior secured credit facil ities 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 $150.0 mill ion.
22
Adjusted Net Income and Adjusted EPS
(in millions, except per share amounts) March 31, 2017 March 31, 2016
GAAP net income 33.9 39.6
Customer termination charges, net (1) 25.9 -
Integration costs (2) - 1.0
Executive management transition (3) - 3.0
Tax adjustments (4) (7.6) (1.3)
Adjusted net income 52.2 42.3
Adjusted earnings per common share, diluted 0.96$ 0.68$
Diluted shares outstanding 54.6 62.6
(1)
(2)
(3)
(4)
Notes
Three Months Ended
For additional information regarding the calculations above please refer to the Company's SEC filings.
The Company recorded $25.9 mill ion of net charges related to the termination of the relationship with Mattress Firm. Cost of sales included
$11.5 mill ion of charges related to the write-off of customer-unique inventory and product obligations. Operating expenses included $14.4
mill ion of net charges, which included a write-off of $17.2 mill ion for customer incentives and marketing assets, $5.8 mill ion of employee-
related costs and $0.7 mill ion of professional fees. These charges were offset by $9.3 mill ion of benefit related to the change in estimate
associated with performance-based stock compensation that is no longer probable of payout following the Mattress Firm termination.
Integration costs represents costs, including legal fees, professional fees, compensation costs and other charges related to the transition of
manufacturing facil ities, and other costs related to the continued alignment of the North America business segment related to the Sealy
acquisition.
Executive management transition represents certain costs associated with the transition of certain of the Company's executive officers.
Tax adjustments represents adjustments associated with the aforementioned items and other discrete income tax events.