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
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 9, 2023
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
(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:
| 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)) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||
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 ☐
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. ☐
Item 7.01. Regulation FD Disclosure.
On February 9, 2023, Tempur Sealy International, Inc. released an updated investor presentation (the "Investor Presentation"). The Investor Presentation will be used from time to time in meetings with investors. A copy of the Investor Presentation is furnished herewith as Exhibit 99.1 and is incorporated into this Item 7.01 by reference.
The information disclosed pursuant to 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 any such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover page interactive data file (embedded within the Inline XBRL document). | |||||||
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 9, 2023
| Tempur Sealy International, Inc. | ||||||||
| By: | /s/ Bhaskar Rao | |||||||
| Name: | Bhaskar Rao | |||||||
| Title: | Executive Vice President & Chief Financial Officer | |||||||
© 2023 Tempur Sealy International, Inc. All rights reserved. We continue to demonstrate the resilience of our business model as we generate profits, invest in our business, return capital to shareholders, and outperform the global bedding market. TEMPUR SEALY INTERNATIONAL, INC., TPX “ “
To Improve the Sleep of More People, Every Night, All Around the World Who We Are Tempur Sealy is committed to improving the sleep of more people, every night, all around the world. As a leading designer, manufacturer, distributor and retailer of bedding products worldwide, we know how crucial a good night of sleep is to overall health and wellness. Utilizing over a century of knowledge and industry-leading innovation, we deliver award-winning products that provide breakthrough sleep solutions to consumers in over 100 countries. Our highly recognized brands include Tempur-Pedic®, Sealy® and Stearns & Foster® and our popular non-branded offerings consist of value-focused private label and OEM products. At Tempur Sealy we understand the importance of meeting our customers wherever and however they want to shop and have developed a strong omni-channel retail strategy. Our products allow for complementary merchandising strategies and are sold through third-party retailers, our 650+ Company-owned stores worldwide and our e-commerce channels. With the range of our offerings and variety of purchasing options, we are dedicated to continuing to turn our mission to improve the sleep of more people, every night, all around the world into a reality. Importantly, we are committed to carrying out our global responsibility to protect the environment and the communities in which we operate. As part of that commitment, we have established the goal of achieving carbon neutrality for our global wholly owned operations by 2040. Global Bedding Industry1 P U R P O S E Estimated global bedding market includes mattresses, foundations, pillows and other bedding products 2 North America TPX Share TPX Share International Retail Value $120 Billion Estimated Tempur Sealy Share
69% 10% 8% 13% TTM 4Q’22 Sales North America Wholesale North America Direct-to- Consumer International Wholesale International Direct-to- Consumer • Headquartered in Lexington, KY, Tempur Sealy International, Inc is the leading global bedding products company, with a portfolio of iconic brands including Tempur-Pedic, Sealy and Stearns & Foster • TPX manufacturers mattresses, pillows and related accessories across a variety of price points and distributes its products through multiple channels, including third-party brick & mortar retailers, its owned website and third-party online platforms, as well as its company-owned stores • TPX focuses on premium bedding with its Tempur-Pedic and Stearns & Foster brands A Premium Leader in a Growing Bedding Industry VALUE PREMIUM $1,800 – $6,450 $2,200 – $9,000 $230 – $3,500 Private Label 3
Industry • The global bedding industry of ~$120 billion1 has historically experienced consistent growth. • The U.S. bedding averages mid- single digit growth annually, driven by units and dollars.1 • The international bedding is highly fragmented and about 40% larger than the size of the U.S. market.1 Consumer • Consumers continue to make the connection between a good night’s sleep and health & wellness. • Enhanced focus on health over the past year has strengthened the health & wellness trend. • Consumer confidence, consumer spending, the housing market, and the wealth effect correlate to the bedding industry. Tempur Sealy • Global omni-channel distribution strategy to be where the consumer wants to shop. • Track record of developing and marketing differentiated products through consumer-centric innovation for the total global bedding market. • Robust free cash flow2 and fortified balance sheet that provide flexibility to take advantage of industry and market opportunities and return capital to shareholders. TPX at a Glance 4
Investment Thesis 5 The leading vertically integrated global bedding company with iconic brands and extensive manufacturing capabilities History of market share gains across global omnichannel distribution Seasoned, well-aligned management with proven track record Legacy of strong value creation via capital allocation including share buybacks and acquisitions Over the long term, the bedding industry has consistently grown through ASP and unit expansion
6 U.S. Market International Markets >185 YEARS COMBINED TPX EXPERIENCE 14 YEARS AVERAGE TPX TENURE Shared Services Scott Thompson Chairman, President & CEO Bhaskar Rao EVP, CFO Cliff Buster CEO, North America Diana Strickland SVP, Human Resources Kindra Bellis SVP, CIO David Montgomery EVP, Global Bus. Dev. Scott Vollet EVP, Global Operations Jonathan Hirst CEO, Dreams Hansbart Wijnand EVP, Intl. Simon Walsh President - Asia Steve Rusing EVP, President, U.S. Sales Brent Pfister SVP, Brands & Product Dev Tom Murray EVP, CMO, U.S. Tenured Leadership Team
7 Current TPX Management Track Record Since 2015 (in millions, except percentages, multiples, and per common share amounts) Tailing Twelve Months Ended December 31, 2015 Trailing Twelve Months Ended December 31, 2022 CAGR Total Growth Net Sales $3,151 $4,921 7% 56% Adjusted EBITDA2 $456 $892 10% 96% Net Income $65 $456 32% 607% Adjusted Net Income2 $200 $468 13% 134% GAAP EPS $0.26 $2.53 39% 883% Adjusted EPS2 $0.80 $2.60 18% 225% Experienced Team’s Value Creation o Since management change in 2015, sales have increased more than 55%, adjusted EBITDA2 has nearly doubled, and GAAP EPS has increased more than 8.5x under current leadership
• Worldwide omni-channel presence • Iconic brand and product portfolio • World-class manufacturing capabilities • Industry-leading balance sheet and free cash flow2 Adjusted earnings per share2 is expected to grow at a CAGR of 30% between 2018-2023 Competitive Advantages 8 *2023 EPS based on the midpoint of Tempur Sealy's full year guidance $0.74 $1.00 $1.94 $3.19 $2.57 $2.70 $- $1.00 $2.00 $3.00 $4.00 2018 2019 2020 2021 2022 *2023 Full Year Adjusted EPS2
Product, Retail, and E-Comm Brands 9 E-Commerce Retail Brands SOVA Product Brands Brick & Mortar Retail Brands SOVA * *Through our international Sealy joint venture operations
10 U.S. Bedding Industry Premiumization1 U.S. Mattress Market Segmentation (Units) U.S. Mattress Market Segmentation (Dollars) • The $1,000+ ASP segment of the market has grown unit share by 8% and dollar share by 6% since 2015 • $2,000+ premium segment has grown more rapidly than $1,000 – 2,000 segment, with 29% dollar share, up from 24% in 2015 36% 38% 37% 41% 34% 34% 33% 41% 35% 36% 32% 36% 35% 35% 17% 19% 20% 19% 22% 22% 23% 7% 7% 7% 8% 8% 9% 9% 2015 2016 2017 2018 2019 2020 2021 18% 17% 16% 16% 14% 14% 14% 30% 28% 29% 28% 27% 27% 27% 29% 28% 30% 31% 29% 30% 30% 24% 27% 25% 25% 29% 29% 29% 2015 2016 2017 2018 2019 2020 2021 $2k+ $1k - $2k $500 - $1k <$500 *Source: ISPA data, management estimates
Strategic Advantages 11
Tempur-Pedic®: leading worldwide premium bedding brand • Tempur-Pedic® uniquely adapts, supports, and aligns to you to deliver truly life-changing sleep. $2,200-$9,000* Stearns & Foster®: high-end-targeted brand • The world’s finest beds that are made with exceptional materials, time-honored craftsmanship, and impeccable design. $1,800-$6,450* Sealy®: #1 bedding brand in the U.S.3 • Combines innovation, engineering, and industry- leading testing to ensure quality and durability. $230-$3,500* Private Label Offerings: customized product • Offers products for the value-oriented consumer. Portfolio of Global Brands 12 • From its founding, Tempur-Pedic pursued a direct advertising strategy that touted the clear benefits of its proprietary Tempur material, creating a luxury aura – generating strong same sales velocity in premium products. • Over the last 15 years, Tempur-Pedic spent ~$2B on direct advertising, significantly more than other top brands in the category. The premium brand that was built through direct advertising and R&D allows for sustainable ROICs well above traditional mattress peers. *Retail prices for a standard queen mattress
Leading Manufacturing Capabilities • 71 manufacturing facilities • 16 million square feet of manufacturing & distribution operations R&D Innovation • 75,000 square feet of research & development • 4 state-of-the art product-testing locations Wholly owned (32) Joint Venture (8) Licensee (27)Tempur-Pedic® Facility (4) World-Class Manufacturing Capabilities 34 NORTH AMERICAN FACILITIES | 37 INTERNATIONAL FACILITIES Albuquerque, NM 13
• Significant worldwide sales growth • Highly profitable and expanding rapidly • Direct customer relationships Ecommerce • Luxury Tempur-Pedic®, Dreams, and multi-branded showroom experiences • Operate over 700 stores worldwide and expanding direct customer relationships • Highly profitable Company- Owned Stores • Third-party retailers are our largest distribution channel • Significant private label opportunity • Valued supplier, win-win relationships Wholesale Successful Omni-Distribution Platform 14
15 Tempur-Pedic manufacturing Sealy / S&F manufacturing Private label manufacturing Dreams manufacturing Portfolio of Owned Brands Brick & Mortar & E-Commerce RetailOwned Manufacturing Vertical Integration Multi-brand retail Mono-brand retail E-commerce
Growth Potential 16
Increase total addressable market internationally through new product launches in Europe & APAC. Expand into OEM market to drive further sales growth. Grow wholesale through existing and new retail relationships. Invest in innovation to meet customer demand. Execute on capital allocation strategy. Expand direct-to-consumer through ecommerce and company-owned stores. Building Blocks to Future Growth 17 Invest in Stearns & Foster product and marketing to more than double the brand’s global sales.
Natural Comfort Snoring Support Climate Sleep-Health Metrics Innovative Technologies 18
19 • Expanded into OEM market through the acquisition of Sherwood Bedding in 2020; a 3rd generation American manufacturer of private label innerspring mattresses, and subsequently began exploring opportunities to leverage foam-pouring capabilities to manufacture private label foam mattresses • Our OEM business leverages global manufacturing expertise, diversifies sales streams and realizes the manufacturing profits of the bedding brands it produces • Opportunity to serve as a provider for third-party bedding brands (including retailers’ private label brands) at value-end price points • Expected to drive down overall cost per unit • We see an opportunity to grow our OEM operations to $600 million1 of annualized sales Wholesale Third-Party Retailers • Largest pillar of our omni-channel distribution strategy, grounded in win- win relationships • Broad-based worldwide distribution and broadly diversified • Over 5,400 retail partners around the world selling through over 26,000 doors and e-commerce platforms • Global sales force of over 500 people supporting our portfolio of brands • While we are well-represented today, we are pursuing opportunities to further expand our third-party retail presence OEM Expansion
20 Stearns & Foster Opportunity Product Investments • Launched new, innovative Stearns & Foster products in 4Q’22 Marketing Investments • Supported Stearns & Foster with record advertising in 2022 and continued investments in 2023 Opportunity to grow Stearns & Foster to be our next $1 BILLION BRAND, more than doubling its size today Channel Investments • Expanding Stearns & Foster presence through new e-commerce platform launched in 2Q’22
<$500 M $1,000 M 21 • With more than 175 years of history, Stearns & Foster is a meaningful brand and can become the luxury leader in innerspring beds and grow to be our next billion-dollar brand • After years of no direct advertising, Stearns & Foster began spending in 2021 and accelerated in 2022 – designed to increase consumer’s awareness and desire to purchase a premium innerspring mattress • S&F can target the $2,000 - $6,499 ASP range in innerspring, a historically underserved opportunity Stearns & Foster Opportunity Dual-Approach to Luxury Bedding Leading Luxury Specialty Foam Brand Portfolio Midpoint $3,650* Leading Luxury Innerspring Brand Portfolio Midpoint $3,300* 2022 Opportunity1 *Retail prices for a standard queen mattress
$- $50 $100 $150 $200 $250 $300 $350 $400 Q4 2018 Q4 2019 Q4 2020 Q4 2021 Q4 2022 Global Direct Sales Intl NA • Strong, long-term growth of high-margin sales from web, call center, and company-owned stores. • Ability to own customer relationship allows for market insights that we leverage for innovation process and growth strategy Direct to Consumer 22 10% 13% 14% 23% 24% 5% 10% 15% 20% 25% Q4 2018 Q4 2019 Q4 2020 Q4 2021 Q4 2022 Direct Channel Sales as a Percentage of Total Sales
TEMPUR® EuropeSealy® Gallery Asia SOVA® SwedenSleep Outfitters® U.S. Tempur-Pedic® U.S. Tempur-Pedic® MexicoDreams UK We see a potential opportunity to organically increase our store count through opening an average of 60+ new stores per year. Company-Owned Store Strategy O P E R A T I N G O V E R 7 0 0 R E T A I L S T O R E S G L O B A L L Y 23
• Highly fragmented with broad geographic diversity across Europe and Asia • TEMPUR sold in 90+ countries, 22 countries served through wholly owned subsidiaries, rest by distributors • Acquired Dreams, the leading bedding retailer in the UK in 2021 • Launching new TEMPUR® line of mattresses to expand addressable market in 2023 • Tempur Sealy customizes approach by country • Europe: success with high-quality products, targeting growth through distribution, and new Sealy®-UK joint venture and Dreams acquisition • Asia: opportunity in emerging area through distribution and organic sales growth initiatives International Markets 24 Wholly-owned Third-party distributors
Rapidly Growing International Joint Ventures • Founded in 2000 • Operates in 21 countries and territories • Top 3 internationally branded bedding manufacturer in China • Full-time employees: 1,100+ Asia • Acquired in 2020 • Full-time employees: 250+ United Kingdom ~$320 MILLION OF JOINT VENTURE SALES IN 2022 DOUBLE-DIGIT 5-YEAR CAGR 25
Expanding Global Licensing Sales Sealy Manufacturing Licensees: • Our 27 licensee manufacturing facilities generate high return on investment • They represent a low-risk opportunity to introduce our brands and products in regions in which we do not currently operate, primarily across EMEA, APAC, and Latin America Brand Extension Licensees: • We license our Tempur-Pedic, Sealy and Stearns & Foster brands across North America, Europe and Asia, to drive incremental profits and expand brand awareness • Licensed products are complementary to our core operations and include sleep-adjacent categories such as bedding, pajamas, and pet sleep 26 Significantly increases global brand awareness and drives incremental profits
Recent Performance 27
Three Months Ended Trailing Twelve Months Ended (in millions, except percentages and per common share amounts) December 30, 2022 December 30, 2021 % Change December 30, 2022 December 30, 2021 % Change Net Sales $1,187.5 $1,359.6 -12.7% $4,921.2 $4,930.8 -0.2% Net Income $101.7 $175.8 -42.2% $455.7 $624.5 -27.0% Adjusted Net Income2 $96.2 $175.9 -45.3% $467.9 $651.7 -28.2% EPS $0.57 $0.88 -35.2% $2.53 $3.06 -17.3% Adjusted EPS2 $0.54 $0.88 -38.6% $2.60 $3.19 -18.5% Fourth Quarter and Full Year Performance 28 Q4’22 Sales by Channel 24% 76% Direct Wholesale
Expect full-year adjusted EPS 2 between $2.60 and $2.80 Other Modeling Assumptions Depreciation & Amortization $200M - $210M Capital Expenditures ~$200M Interest Expense $135M - $140M U.S. Federal Tax Rate 24% - 25% Diluted Share Count 178M shares 2023 Outlook4 29 Our 2023 expectations include: • Sales growth of mid-single digits • Primarily driven by the execution or our initiatives • Also benefited by discounted floor models related to new product launches and the wraparound impact of pricing • Sales and marketing investments of approximately $20 million related to new product launches • Record advertising spend of over $500M • Resulting in adjusted EBITDA2 of approximately $980M at the midpoint $0.74 $1.00 $1.94 $3.19 $2.57 $2.70 $- $1.00 $2.00 $3.00 $4.00 2018 2019 2020 2021 2022 *2023 Projected Adjusted EPS2 CAGR of 30% 2018-2023 *2023 EPS based on the midpoint of Tempur Sealy's full year guidance
Flexible Cost Structure 1 30 • The business model is highly-variable, with 85% of COGS and 45% of operating expenses flexing with sales • In total, the variability of our operating cost structure is approximately 70% • Our business model also provides opportunity for costs to further flex with sales Variable 85% Fixed 15% Cost of Goods Sold Variability Variable 45% Fixed 55% Operating Expense Variability *Including discretionary cost cuts, we estimate a total of 80% of expenses could flex with sales
Leading Balance Sheet & Cash Flow 31
Credit ratings: Fitch: BB+ (January 2023) Moody’s: Ba1 (September 2021) S&P: BB+ (September 2021) Strong Balance Sheet & Cash Flow 32 $0 $200 $400 $600 $800 $1,000 $1,200 2018 2019 2020 2021 2022 Full-Year Adjusted EBITDA2 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x 4Q21 1Q22 2Q22 3Q22 4Q22 Leverage2 Target Range Leverage
33 Capital Structure • Favorable borrowing rates, over $450 million of liquidity and no meaningful maturities until 2024 $337 $639 $139 $800 $800 2023 2024 2025 2026 2027 2028 2029 2030 2031 Revolving Credit Facility Term Loan Securitized Debt 2029 Senior Notes 2031 Senior Notes
• Long-term target leverage ratio of 2.0 – 3.0x2, we anticipate returning to the midpoint of the range in 2023 • Continue to invest in the business, including a new domestic foam-pouring plant to be operational in 2023 • Disciplined approach to shareholder returns includes a quarterly dividend and opportunistic share repurchases • Maintain capacity for strategic acquisitions Balanced Capital Allocation Strategy 34 $- $400 $800 $1,200 $1,600 2018 2019 2020 2021 2022 Capital Allocation $703 $1,926 $134 $538 Allocated $3.3B Since 2018 $0.06 $0.08 $0.10 $0.12 2021- Initiation 2022 2023 Consistent Dividend Growth Since Initiation
Environmental, Social, & Corporate Governance 35
Environmental, Social, & Governance Tempur Sealy is committed to protecting and improving our communities and environment. 36
Environmental • Improved the percent of waste diverted from landfills from our U.S. wholly owned manufacturing operations to 100% as of September 30, 2022, compared to 96% as of September 30, 2021 • Expanded our commitment to achieving zero landfill waste to include our corporate offices and our research and development facilities by 2025 • Achieved a 3% reduction in greenhouse gas emissions per unit produced at our wholly owned manufacturing and logistics operations compared to the prior year, furthering our progress towards our goal of achieving carbon neutrality by 2040 • Substantially aligned our sustainability reporting to the Task Force on Climate-Related Financial Disclosures (TCFD) framework • Formalized our ESG processes and stances in a new Environmental Policy Purpose • Launched our new Sealy® NaturalsTM mattress collection made with sustainable and responsibly sourced materials, including organic covers made with long-lasting hemp, organic cotton, lightweight modal, and 100% natural latex • Continued to bring industry-leading innovation to market that provides consumers with higher quality sleep at a variety of price points, including the new U.S. product launches of Sealy Posturepedic® Plus, Stearns & Foster®, and Sealy® FlexGrid™ • Contributed over $1 million through the Tempur Sealy Foundation and donated more than 8,300 mattresses worth approximately $13.7 million • People • Completed the implementation of a new global ERP system, which is expected to fortify our cybersecurity and drive long-term efficiencies across our global operations • Increased the percentage of our U.S. employee base that self identifies as a minority from 47% to 49%, and increased the percentage of our U.S. employee base that identifies as female from 30% to 32% • Increased the percentage of women on our Board of Directors from 33% to 43% • Embedded ESG performance as a metric in executive leadership’s 2022 compensation program Environmental, Social, & Governance Tempur Sealy is committed to protecting and improving our communities and environment. 37
Thank You for Your Interest in Tempur Sealy International For more information, please email: investor.relations@tempursealy.com 38 SOVA
Appendix 39
This investor presentation contains statements relating to the Company’s quarterly cash dividend, the Company’s share repurchase targets, the Company’s expectations regarding net sales for 2022 and adjusted EPS for 2023 and subsequent periods and the Company’s expectations for increasing sales growth, product launches, channel growth, acquisitions and commodities outlook, and expectations regarding supply chain disruptions, the macroeconomic environment and COVID-related disruptions. Any forward-looking statements contained herein are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations, meet its guidance, 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 any that may be expressed herein as forward-looking statements. These potential risks include the factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022. 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 Tempur-Pedic & Reclining Figure Design®, TEMPUR-Adapt®, TEMPUR-ProAdapt®, TEMPUR-LuxeAdapt®, TEMPUR-PRObreeze°™, TEMPUR-LUXEbreeze°™, TEMPUR-Cloud®, TEMPUR-Contour™, TEMPUR-Rhapsody™, TEMPUR-Flex®, THE GRANDBED BY Tempur-Pedic®, TEMPUR-Ergo®, TEMPUR-UP™, TEMPUR-Neck™, TEMPUR-Symphony™, TEMPUR-Comfort™, TEMPUR-Traditional™, TEMPUR-Home™, Sealy®, Sealy Posturepedic®, Stearns & Foster®, COCOON by Sealy™, SealyChill™, and Clean Shop Promise® 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 and related earnings call on February 9, 2023. 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 above. Forward-Looking Statements 40
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, free cash flow, consolidated indebtedness less netted cash, and leverage, which are not recognized terms under U.S. Generally Accepted Accounting Principles (“GAAP”) and do not purport to be alternatives to net income and earnings per share as a measure of operating performance, an alternative to cash provided by operating activities as a measure of liquidity, 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. 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 the amounts associated with the Company’s results as determined in accordance with GAAP. 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 reconciliations on the following pages and the Company’s SEC filings. EBITDA and Adjusted EBITDA A reconciliation of the Company’s GAAP net income to EBITDA and adjusted EBITDA per credit facility (which we refer to in this investor presentation as adjusted EBITDA) is provided on the subsequent slides. Management believes that the use of EBITDA and adjusted EBITDA per credit facility provides investors with useful information with respect to the Company’s operating performance and comparisons from period to period as well as the Company’s compliance with requirements under its credit agreement. 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 subsequent slides. 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. Forward-looking Adjusted EPS is a non-GAAP financial measure. The Company is unable to reconcile this forward-looking non-GAAP measure to EPS, 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 EPS in 2023. Leverage Consolidated indebtedness less netted cash to adjusted EBITDA per credit facility, which the Company may refer to as leverage, is provided on a subsequent slide and is calculated by dividing consolidated indebtedness less netted cash, as defined by the Company’s senior secured credit facility, by adjusted EBITDA per credit facility. 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. Use of Non-GAAP Financial Measures Information 41
42 QTD Adjusted Net Income(2) and Adjusted EPS(2) *For a reconciliation net income to adjusted net income and adjusted EPS in prior reporting periods, please refer to the Company’s SEC filings.
43 TTM Adjusted Net Income(2) and Adjusted EPS(2) *For a reconciliation net income to adjusted net income and adjusted EPS in prior reporting periods, please refer to the Company’s SEC filings.
44 TTM Adjusted EBITDA(2) *For a reconciliation net income to EBITDA and Adjusted EBITDA in prior reporting periods, please refer to the Company’s SEC filings.
45 Leverage(2) Reconciliation *For a reconciliation of leverage to consolidated indebtedness less netted cash in prior reporting periods, please refer to the Company’s SEC filings.
© 2023 Tempur Sealy International, Inc. All rights reserved. 1 Management estimates 2 Adjusted net income, EBITDA, adjusted EBITDA, adjusted EPS, leverage, and free cash flow are non-GAAP financial measures. Please refer to the “Use of Non-GAAP Financial Measures Information” on a previous slide for more information regarding the definitions of adjusted net income, EBITDA, adjusted EBITDA, adjusted EPS, leverage, and free cash flow, including the adjustments (as applicable) from the corresponding GAAP information. Please refer to “Forward-Looking Statements” and “Limitations on Guidance” on a previous slide. 3 Sealy® was ranked number one on Furniture Today’s list of the Top 20 U.S. Bedding Producers in June 2021. See Furniture Today’s Top 20 U.S. Bedding Producers methodology that includes Sealy® and Stearns & Foster® products in Sealy ranking. Tempur-Pedic® was ranked number two on Furniture Today’s list of the Top 20 U.S. Bedding Producers in June 2021. Tempur- Pedic® brand was awarded #1 in Customer Satisfaction for both the Retail Mattress and Online Mattress categories in the U.S. in the J.D. Power 2022 Mattress Satisfaction Report. 4 Based on the Company’s 2023 financial targets provided in the press release dated February 9, 2023, and the related earnings call on February 9, 2023. Please refer to “Forward-Looking Statements” and “Limitations on Guidance.” The Company is unable to reconcile forward-looking adjusted EPS, a non-GAAP financial measure, to EPS, 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 EPS in 2023. Footnotes
Thank You 47