Tempur Sealy International 8K Regulation FD Disclosure | TPX 18 Nov 05

Investor Presentation

November 2005

Forward-Looking

Statements

This

presentation

may

contain

“forward-looking

statements”

which

include

information

concerning

the

Company’s

plans,

objectives,

goals,

strategies,

future

revenues

performance,

capital

expenditures,

financing

needs

and

other

information

that

not

historical

information.

When

used

this

presentation,

the

words

“estimates,”

“expects,”

“anticipates,”

“projects,”

“plans,”

“intends,”

“believes,”

and

variations

such

words

similar

expressions

are

intended

identify

forward-looking

statements.

All

forward-looking

statements

are

based

upon

current

expectations

and

beliefs

and

various

assumptions.

There

can

assurance

that

the

Company

will

realize

these

expectations

that

these

beliefs

will

prove

correct.

There

are

number

risks

and

uncertainties

that

could

cause

actual

results

differ

materially

from

the

forward-

looking

statements

contained

this

presentation.

Numerous

factors,

many

which

are

beyond

the

Company’s

control,

could

cause

actual

results

differ

materially

from

those

expressed

forward-looking

statements.

These

risk

factors

include

general

economic

and

industry

conditions

and

consumer

confidence;

uncertainties

arising

from

global

events;

consumer

acceptance

the

Company’s

products;

industry

competition;

the

efficiency

and

effectiveness

the

Company’s

advertising

campaign

and

other

marketing

programs;

the

Company’s

ability

further

penetrate

the

U.S.

retail

furniture

channel,

continuously

improve

its

product

line,

maintain

efficient,

timely

and

cost-effective

production

and

delivery

its

products,

and

manage

its

growth;

rising

commodity

costs;

the

market

price

for

the

Company’s

common

stock

prevailing

from

time

time;

the

nature

other

investment

opportunities

presented

the

Company

from

time

time;

and

the

inability

obtain

foreign

tax

rulings

required

complete

additional

repatriation

foreign

earnings.

Additional

information

concerning

these

and

other

risks

and

uncertainties

are

discussed

the

Company’s

filings

with

the

Securities

and

Exchange

Commission

including

without

limitation

the

Company’s

Annual

Report

Form

10-K

under

the

headings

“Special

Note

Regarding

Forward

Looking

Statements”

and

“Business-Risk

Factors.”

Any

forward-looking

statement

speaks

only

the

date

which

made,

and

except

required

law,

the

Company

undertakes

obligation

update

any

forward-looking

statement

reflect

events

circumstances

after

the

date

which

made

reflect

the

occurrence

unanticipated

events

circumstances.

Non-GAAP

Financial

Information

This

presentation

includes

certain

“non-GAAP

financial

measures”,

including

pro

forma

net

income

per

share.

Information

relating

these

non-GAAP

financial

measures,

including

presentation

the

most

directly

comparable

financial

measure

calculated

and

presented

accordance

with

GAAP

and

reconciliation

the

differences

between

the

non-GAAP

financial

measures

and

the

most

directly

comparable

financial

measures

calculated

and

presented

accordance

with

GAAP,

are

included

the

end

this

presentation.

Bob Trussell

Chief Executive Officer

Business Review

Leading producer of premium mattresses and pillows

–

Proprietary formula and manufacturing process

–

#1 visco-elastic market share

Global sales under the “TEMPUR™”

and “Tempur-Pedic™”

trademarks

–

43.4% CAGR in the four years ending December 31, 2004

–

Sales in 60 countries through 4 diverse channels

Premium segment (>$1,000) of ~$10.6 billion global wholesale mattress market

–

Fastest-growing segment of U.S. market

–

Represented ~24% of U.S. mattress sales in 2004

TEMPUR

TEMPUR™

products provide greater overall comfort and better quality sleep

–

Temperature-sensitive and contours more naturally to the body

–

Recommended by more than 25,000 healthcare professionals

Drive new store growth of the U.S. and International Furniture &

Bedding

channels

Continue to increase slots per door

Continue penetration of the healthcare channel

Drive

awareness

Tempur

and

Tempur-Pedic

brands

through

targeted

marketing and advertising campaigns

Direct response advertising generates over 4.3 billion consumer “impressions ”

per month in the U.S.

Expand manufacturing production capacity –

Albuquerque facility on schedule

to open 2Q06

Continued R&D investments to maintain innovation and market leadership

Augment management and employee base as growth dictates

Focus on premium mattress and pillow franchise

Leverage vertically-integrated, proprietary manufacturing process

Continue to improve and expand product line (e.g., Euro & Original)

Focus on Core

Products

Further Penetrate

Existing Channels

Investment to

Support Growth

Continue to Build

Global Brand

Business Strategy

Diversity Across Products

3Q05 YTD Sales: $104.2 million (16.8% of Total)

Retail Price:

–

Adjustable Beds: $1,300 –

$2,800

–

Other: $35 –

$150

3Q05 YTD Sales: $92.9 million (15.0% of Total)

Retail Price: $70 –

$165

3Q05 YTD Sales: $424.0 million (68.3% of Total)

Queen Retail Price Point: $1,199 –

$2,999

Pillows

Adjustable

Beds / Other

Mattresses

U.S. Mattresses and Foundations

Attractive Industry Growth Dynamics

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1982

1985

1988

1991

1994

1997

2000

2003

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Units Shipped

Dollar Value

Dollar Value (mm’s)

Units Shipped (000’s)

___________________________

Source: International Sleep Products Association, 2004Annual Report

Consumer demand for premium

mattresses driven by:

–

Increased housing purchases,

especially by the baby-boomer

generation

–

Aging population with greater

disposable income seeking health and

sleep benefits

–

Increased awareness of the health

benefits of a better quality mattress

–

Replacement cycles

Trajectory continued in 2004

–

Units increased 3.7%

–

Dollars increased 11.3%

Tempur-Pedic Addresses Fastest

Growing Segment

U.S. market segments:

–

Over $1,000

24%

–

$500 –

$1,000

41%

–

Under $500

35%

Tempur-Pedic’s addressable

market: $3.6 billion

The premium market grew 36% in

2004

$5.6 Billion U.S. 2004 Market by Segment

Over $1,000

$500 - $1,000

Under $500

Tempur-Pedic’s Addressable

Market

Other

___________________________

Source: International Sleep Products Association, 2004 Annual Report

Robust Retail Channel Growth

U.S. Furniture Retail Net Sales & Store Count

($ in millions)

Sales to established

accounts: expect 20-25%

growth in 2005

Average floor slots per

store increased from 1.7 to

2.2 in 2004, up to 2.8 in

3Q05

Total doors targeted in

U.S.: 10,000

Overall U.S. mattress

market:

~$5.6 billion in 2004

$24

$32

$35

$48

$52

$71

$93

$79

$85

4,100

3,900

4,830

5,100

4,400

2,018

2,713

2,515

3,111

3,606

1,000

2,000

3,000

4,000

5,000

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

Store

Count

$20

$40

$60

$80

$100

$120

Net Sales

Recent U.S. Mattress Introductions

The OriginalBed by Tempur-Pedic™

Significantly expands addressable market

–

Fills important price gap in premium category

Queen SRP: $1,199

Shipping as of September ’05

28% Account Penetration as of 9/30/05

The EuroBed by Tempur-Pedic™

Brought to U.S. following great

performance in Europe

Queen SRP: $2,600

Shipping as of July ’05

24% Account Penetration as of 9/30/05

The Scandinavian Bed Collection by

Tempur-Pedic™

Unique bed system: Tempur-Pedic mattress, foundation and adjustable frame

Designed for the Nordic region; very successful launch

–

Began broader European rollout mid ’05; exceeding expectations

Demonstrates our continued investment in product innovation

–

Leveraging

our

R&D

centers

develop

product

for

the

U.S.

and

International

markets

New Pillow Introductions

Domestic

Travel-size ComfortPillow

by Tempur-Pedic™

–

Fills need as airlines eliminate pillows

–

Shipping November ’05 -

Holiday shopping

–

SRP: $80

International

September 2005 re-launch in Japan

–

New Japan-specific packaging and

formulation

–

Follows successful futon roll-out

Dale Williams

SVP and Chief Financial Officer

$79.3

$116.8

$156.0

$268.2

$433.3

$424.0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2004

2000

Mattresses Key Growth Driver

Mattress Revenues

2001

2002

2003

New stores

Increasing slots per store

Growing brand awareness

39% Growth 3Q05 YTD

($ in millions)

9M05

> 80 million “impressions”

per month

> 600 million “impressions”

per month

Includes national spots on such shows as: The Radio Factor with Bill

O’Reilly, Westwood One, Dr. Laura, Dr. Joy Browne and WOR with

John Gambling

> 900 million “impressions”

per month

> 2.8 billion “impressions”

per month

High profile events: The Apprentice, Oscar’s, Emmy’s, Grammy’ s

Newspapers

Television

Radio

Magazines

Cost Effective Advertising to Build

Global Brand

Tempur-Pedic’s national advertising campaign drives over 4.3 billion

consumer “impressions”

per month

Continue to Build Global Brand

Clear, product-oriented advertising and credible consumer industry

endorsement communicate the Tempur-Pedic proposition

Source: Independent survey commissioned by Tempur-Pedic

Almost all of our customers have recommended Tempur-Pedic, with about

two-thirds reporting that they recommended Tempur-Pedic one to five times.

42% of retail customers report that someone purchased a Tempur-Pedic

mattress as a result of their recommendation.

Recommending Tempur-Pedic

95%

65%

18%

17%

42%

20%

40%

60%

80%

100%

Recommended

Tempur-Pedic

1-5 times

6-10 times

11+ times

Purchase resulted

from

recommendation

Historical Net Sales

Historical Operating Income

(1)

Growing Net Sales and Profitability

$162.0

$221.5

$298.0

$479.1

$684.9

$621.1

$100

$200

$300

$400

$500

$600

$700

Net Sales

($ in millions)

$22.4

$30.4

$39.4

$97.1

$151.0

$136.8

$20

$40

$60

$80

$100

$120

$140

$160

Operating

Income

___________________________

Includes

$9.8

million

non-cash

charges

for

the

two

months

ended

December

31,

2002

relating

the

step-up

inventory

November

2002

relating

the

Tempur

acquisition.

The

year

ended December 31, 2003 includes $4.1 million in compensation expense relating to stock option grants and acceleration. 2004 includes $5.4 million in compensation expense relating to stock

option grants and acceleration and $0.9 million in fees related to secondary offering. 9M05 includes $1.9 million in compensation expense relating to stock option grants.

($ in millions)

2000

2001

2002

2003

2000

2001

2002

2003

2004

9M05

___________________________

GAAP EPS of $0.50 for 9M04 and $0.67 for 9M05 for a 34% GAAP 9M YTD growth

42% Growth

Pro-Forma EPS

Operating Cash Flows

Growing Earnings and Cash Flows

$55.7

$79.1

$10

$20

$30

$40

$50

$60

$70

$80

$90

($ in millions)

9M04

9M05

32% Growth

$0.57

$0.75

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

9M04

9M05

Recent Financial Accomplishments

$80M Share Repurchase Plan

–

Announced our first repurchase plan effective October 20, 2005

New Global Senior Credit Facility

–

$340M comprised of $200M U.S. revolver, $30M European revolver and $110M

European 5-year term loan

–

Approximately 100 basis point reduction in interest margin on outstanding borrowings

and improved terms and conditions

–

Letter of credit under new facility supporting $75M of Industrial Revenue Bonds to

finance Albuquerque construction

Repatriated $115M in Foreign Earnings under the American Jobs Creation Act

–

We expect to repatriate $30-35M more by year end

–

Reinvesting

proceeds

Albuquerque

facility,

advertising,

other

capital

needs

Investment Highlights

Global brand recognition

Superior product offering

Favorable secular demand trends

Diversified business model

Track record of profitable growth

Supplemental Information

To further provide investors useful information, pro forma net income per share is presented and

represents the Company's GAAP net income per share before income

tax expense on repatriation

of foreign dividend of $6.5 million for the nine months ended September 30, 2005. In addition,

non-cash

stock-based compensation expense of $0.02 and $0.04 for the nine months ended

September 30, 2005 and 2004, respectively, and $0.05 and $0.05 for the year ended December 31,

2004 and 2003, respectively. The Company has unearned non-cash

stock-based

compensation of

$0.04 as of December 31, 2004 that will be recognized as expense

in future periods. In addition to

these

pro

forma

adjustments,

GAAP

net

income

per

includes,

and

pro

forma

net

income

per

share excludes, a loss on debt extinguishment totaling $0.03, net of tax, for the nine months ended

September 30, 2004 and the year ended December 31, 2004 relating

to the Company's redemption

in January 2004 of $52.5 million aggregate principal amount of the outstanding

10-1/4%

Senior

Subordinated Notes due 2010 issued by its subsidiaries

Tempur-Pedic,

Inc. and Tempur Production

USA, Inc. For the year ended December 31, 2003, GAAP net income per share includes, and pro

forma net income per share excludes, transaction related expenses totaling $0.11, net of tax, relating

to the

write-off

of deferred financing fees, original issue discount and prepayment penalties relating to

the Company's

re-capitalization in August 2003, and these amounts are included in

loss on debt

extinguishment, net of tax.

The Company believes that excluding the income tax provision on repatriation dividend, non-cash

stock-based compensation expense and loss on debt extinguishment provides a

measure

that

more representative of ongoing costs and therefore more comparable to the Company's historical

operations.

Reconciliation of Net Income per Share to Pro

forma Net Income per Share

___________________________

Amounts presented represent the Company's GAAP net income per share before income tax provision on repatriation dividend of $0.06 for the nine months ended

September

30,

2005

and

non-cash

stock-based

compensation

expense

$0.02

and

$0.04

for

the

nine

months

ended

September

30,

2005

and

2004,

respectively.

Pro forma net income also excludes loss on debt extinguishment, net of tax.

The Company believes that excluding income tax provision for repatriation dividend, non-cash stock-based compensation expenses and loss on debt extinguishment

provides a measure that is more representative of ongoing costs and therefore more comparable to the Company’s historical operations.

(Amounts are per Share)

Sept. 30,

2005

2004

GAAP Net Income per Share, Diluted

0.67

0.50

Income Tax provision on Repatriation

0.06

Stock-based compensation expense

0.02

0.04

Loss on debt extinguishment and

transaction expenses, net of tax

0.03

Proforma Net Income per Share, Diluted

0.75

0.57

Year to Date

Investor Presentation

November 2005

Tempur Sealy International (TPX) 8-KRegulation FD Disclosure