 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 |