TPX - Earnings call transcript Q4 2018 | Tempur Sealy International, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Tempur Sealy Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] And as a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Aubrey Moore, Investor Relations. ahead. go Please

Aubrey Moore

Good in operator. and you thank Thank call. morning, participating today's for you, everyone,

Joining headquarters President in open and Officer. me Lexington prepared the Bhaskar and Chairman, After Rao, CEO; call President for Executive we Vice remarks, and Q&A. Financial are Chief will Scott Thompson,

the filings, and/or but presentations. well The regarding forward-looking press speaks as the press reconciliations in methodology under obligation SEC forward-looking any as which as contains on most will involve except GAAP reports made uncertainties. also statements. include in The forward-looking only Investors undertakes the performance Special expectations constant statements to update Litigation Private in release comparable of our EBITDA, made. XX-Q the from Company and These those Company's Forward-looking the of are Reform the in affect Company's discussed variety we otherwise information, This statements, Actual Reports are Forward-Looking Safe net the Act business. regulatory, the information. today. adjusted factors subsequent Company's during morning's make including other this to that XX-K, are no XXXX. identified cautioned information for The periods the currency used financial Any information Securities to factors these Company's include directly not quarterly differ on that a Harbor materially economic, non-GAAP Annual including call could results competitive, non-GAAP of limited release, results differ earnings, headings of Regarding to and discussed factors the sales, date financial this operating, to Note pursuant provisions on press commentary Risk that the and Factors. actual adversely Form Statements regarding due XXXX to, factors of and as issued income, could that anticipated discussed release statement may cause it and is

investor.tempursealy.com release have also posted press We it filed the at the on Company's with investor and have website the SEC.

detailed will with Our my Scott. turn the over that call to is the the supplement pleasure press comments And provided to information introduction, now, release. it in

Scott Thompson

morning in quarter Good our Bhaskar resetting our the full call. joining I year Aubrey. for in start of our us for quarterly comments you progress growth. with you, and on thank detail. Then, and XXXX and regarding full-year you Company review long-term earnings financial and Thank will positioning with some fourth our foundation will earnings performance

of wrap long-term I'll up initiatives. review our corporate with Finally,

on But, is we which reflect year challenges we faced XXXX, Company it along our we As see a the long-term towards as were XXXX in progress made follows. The challenges many goals. for we the presented year, showcases the way. also transitional primary have the

rollout U.S. we stagger First, to a Company's the need in we so history, multi-quarter the largest the over initiated which that period. was Tempur-Pedic large launch

XXXX customers. Our that with May entry-level in and popular were retailers both of were products wildly launched

$X,XXX. our half The the However, as $X,XXX will cannibalization products in above above own our higher-than-expected the experienced XXXX. we first success of were products priced of refreshed be we victims of

retail the channels Second, alternative with but of also enormous footprint bankruptcies, retail change, in expansion weaknesses bedding including store U.S. closing, distribution brick-and-mortar dealing underwent traffic.

products. entry-level of Third, down consider low which we U.S., mattress profits. low-priced Mattress be aggressive imports, were Fourth, our largest of influx employed Firm, to the activities, what Sealy for promotional in XXXX retail Chinese drove headwind early industry-wide discounting in bedding an ASP, strategy uneconomic

year. course Finally, commodity escalate every price linked experienced inputs to one our the of which was inflation that above expectations, continued of our the during

these price between was the took cost increases price, time we increases and Although, significant. lag

us, XXXX behind about be to XXXX. many reasons that optimistic have we is Now,

tool faced and average that the Luxe Stearns selling fully were The confident Breeze retailers we they line-ups. expect products we price new met The Tempur-Pedic anticipate to we elevate negative completing & out Tempur-Pedic will at mix hitting a forward products Memorial to products We Vegas line-up among look as and showcased are these recently we reviews. the First, customers. & floor Tempur launch And on Stearns rave by Day. in the need mitigating retail retailers, see hit rolled the are they are in Once speak. fully the innerspring XXXX. Tempur-Pedic to merchandising Foster products floor we and models all refreshed with floors we the new Foster our market of as

help to We Second, business. edge North cutting-edge our insights consumer partners in retail brick-and-mortar and web program. XXXX and their share our further performance edge American their to enable them improve strategies. retailers is a to retail marketing will bolster to hope program fair to both and we relationship enhanced take number online their of in leverage with our our Retail This stay with network. in-store design distribution we’ve improved of key them

Additionally, to buy additional plus want from and XX stores XXXX. in Tempur-Pedic in opened have manufacturer, we stores open XX who we an directly another serve XXXX, currently consumers to the plans to

currently foundation a International with Trade including Department a much of is industry’s mattress bedding specialty is the U.S. under industry. being and we mattress number recently bedding the stores, U.S. review Third, stores believe material closed of healthier set department stores by petition Commission. Commerce and antidumping Fourth, the for U.S.

ruling date. in now the quarter second shutdown While We delayed receive feedback XXXX. February, we of hoped a government initially preliminary anticipate to in the this

we expect back on will accelerate that believe do commodity headwinds We inflation growth that and put cost growth years in earnings have further of XXXX. in will the Finally, XXXX. After Company currently XXXX cost a two earnings trajectory of abated. even commodity commodity material not headwinds,

I forward. to are into to recent our that would Before trends highlight detailed to turn like a further over dive optimism results, we the Bhaskar do financial call for I a few reasons think moving

wholesale increased which X%, improvement by growth wholesale is the over X%, declined underpinned America, In quarter X% fourth growth growth we of America. the significant flat North in to from past sales quarters. worldwide experienced few in First, saw we’ve the North

of grew gap now and showing total Clearly, enhance business fill XX% efforts represents to XX% our direct progress. our are relationships and worldwide Our retail our distribution third-party in sales.

Next, the our & Tempur-Pedic is which and fourth quarter Tempur North trends Sealy sequentially Foster, Stearns sales improved product XX% with up transition. America excluding in and up Sealy is slightly, in

trends slightly We’re the seeing these increase current quarter. during

to fourth EBITDA. with return that, which between we financials. times strong our to the review turn cash X and us I'll to debt adjusted over debt of the in X flow repay Finally, the And quarter, leverage to target range to to generated allowed net Bhaskar call

Bhaskar Rao

Scott. you, Thank

sales grew Scott a a prior a significant And Adjusted of strong, into web start quarter. America margin from from The XX%. the Adjusted the one previously and were I were Global excluding to sales quarters. like Sealy Before increase details, in slightly channel increased Tempur direct few the Foster. in would an brand sales as were level, At going highlights XX%. of & hurt solid X%. net with million, was our X%, the gross $XXX fourth $X.XX. XX% month a operating for points up, wholesale earnings Stearns increased by basis soft and was the the adjusted improved X%. quarter basis, and North per of a call increased margin Direct sales XX.X% mentioned, net to sales. quarter XX million, decline acceleration channel in sales, share sales $XXX segment EBITDA sales. Adjusted although to On increased center

relaunched launched were expected, the -- As a products process sales those Foster being in Stearns year and in of as are in & headwind the third XXXX.

that by During Tempur charge gross mix. adjusted brand the gross margin and and GAAP in within with and year. other this commodity Tempur items. LuxeAdapt million launch floors. retailer because included retail primarily America a The to Tailwinds margin associated would gross that pricing improved I have been quarter, results and one-time impacted the ASP recently following North income expenses. pressure, operating Headwinds America our iMS, U.S. margin in highlight unfavorable to $XX prior to the favorable of were taken remaining profit was filed flat included third-party hit and XX.X%, continued for margin profit pricing mix adjusted brand due merchandising bankruptcy. like mattress sequentially charge North actions to -related gross and quarter to gross

Tempur the fourth the the of with expected, retailer and to headwind unfavorable products launch further this impact expect lessened in of mitigate additional we XXXX and quarter, As mix back half within Breeze the in training.

a fourth As a quarter we did have product reminder, XXXX. not in introduction

XX year, did were primarily internal our this basis points America operating incremental. costs of not improved fourth to as from This as targets. was reduced our improved quarter incentive margin XX.X% the leverage to expense compensation operating driven compared North So, by XXXX. adjusted we hit entirely launch

constant in a with Net international. channel robust channel reported and well. on was increased increased to currency The international and direct to X% line expectations On sales wholesale X%. stabilizing flat International XX%. increased basis, basis. performance Asia Europe was perform continuing with the a a our Turning

Net Asian about the for led our well EBITDA XX% and for If their our last team. X% has grown many a you sales sales by consolidate JV quarter have a constant joint The management for and currency venture, basis. sales of years. JV on the international from increased performed net high-quality CAGR the at Asian five partner years,

our a we an are have relationship continuing years, to We growth extended for report Sealy that in of the Asia. for brand XX thrilled additional foundation solid

was scheduled agreement expire XXXX. to a the in As existing reminder,

the been to market. we necessary and these restructuring global which operations, within competitive During bedding We for XX nimble fourth our we payback results that our activities, adjusted in months. organization international $X Europe. a believe keeping primarily with have to remain related million lean in of reductions streamlined quarter, expect see following charges headcount to The the is

operating by XX basis operational by XX standard XX.X%. partially operating and International decrease prior This adjusted Our venture was was as expense royalty performance. Asia principally international well new income, driven offset points margin improvements. This primarily points favorable improvement the which as improved gross as margin XX.X% the was year. improved joint declined driven margin adjusted to to by gross revenue basis leverage, improved to compared recognition

Latin Lastly, regarding our America. simplification initiative in

derisking with December America. we initiative announced in the we largest have made that sale with We our the sense. of subsidiary markets. to returns the completes resources business Latin our in and This pleased completed where in We align risk progress are these make that the

not returns. exposed is This have payments receive will simpler we and assets we result and in in forward, manage it a to region. the structure expect royalty to Going higher

Adjusted back EBITDA commodities, operating million. income launch up volume, the performance. last from expenses This Company's of year. by and benefits million, incentive Adjusted was to primarily higher increase was was turning Now and driven by $XX merchandising mix. to unfavorable compensation. EBITDA was pricing The $XXX reductions offset global million partially $X Tempur

rates Foreign slightly EBITDA in were XXXX. exchange to unfavorable

stronger primarily relative currencies, which headwind, all and getting $X and primarily be rate dollar approximately was Going to EBITDA and estimate the tax and $X.XX. We EBITDA. forward, U.S. million, $XX consolidated for EPS adjusted to major the we to to million The in interest sales XXXX. anticipate sales first the in this $XX will result international was of half headwind million, was quarter expense international XX% adjusted

impacts. on cash to and flow moving in was North Cash base items. tariff operations from well launch continuing of new unfavorable cash This the was inventory, products operating to inventory the sheet balance generated purchased of higher the levels adjustable principally X Now, XXXX. which in as the in fourth increase cycle Tempur-Pedic we support million We days flow to quarter driven fourth $XX of required by by as ahead quarter. the America, of our

of fourth decreased the debt $XXX quarter, fourth from billion, $X.X was of which quarter end net the the of XXXX. As million

of X.X X year ending times. was the ratio target to times, range just within leverage Our X our

sales million $XX our an a and around Tempur-Pedic to our in includes sales; merchandising million; of develop $XXX opportunities. investments guidance. from normalized million about expects single-digit from it EBITDA America Now, in America; compensation earned world, of improved strong range of offset resulting from and direct of benefit to channel in be the by for individuals; of decline Company and North to X,XXX financial the XXXX, new tailwinds of continued as incentive North products; turning The for was in $XX test new $XXX mix, pricing XXXX adjusted million incremental expansion actions of million launch the Sealy $XX product currently to approximately which growth the

million and to For million $XXX CapEx be which the back amortization and million. $XX includes million; expense to With million; counts the that, depreciation, be expect full-year to turn between interest tax of $XX we $XX million, XXXX, over of XX.X million; CapEx to Scott. a call total $XXX million XX% rate between the I'll currently $XX $XX to XX%; and diluted be of to share maintenance and

Scott Thompson

Bhaskar, great you, job. Thank

initiatives. corporate long-term our to Turning

First, all convincing markets of key product North we rollout Tempur-Pedic developing our plan the largest bedding A in innovative the serve. products ever in was pillar our most product America.

was to shopping and We improve understand to productivity SKU experience feel create easy our our customers Our product goal actions for share to portfolio on in these simplified enhance would a result floors. gains. retailer's to and market the

in our products The launch bedding gain innovative represented. we Tempur in XXXX band. under where share significant first is a phase in new to pool of to market $X,XXX focused were was the it's U.S. $X,XXX price This profit market and on

second product on it Tempur-Pedic mix as improved American price to The drive North rollout phase of position points. is focuses higher

of we’ll Breeze the first rolling forgotten, also Stearns started end & launching for years. in earlier, of line-up, new replacing Foster out quarter began been XXXX. this our be the quarter LuxeAdapt quarter, the the rollout in to Not models As Tempur XXXX, fourth the line the at I of the that the market and be has we mentioned three

wow quality, Our customer brands all with I’m higher are esthetics you with which cutting-edge pleased and and retail their share spectacular to designed products known are rollouts while to strong for. on the showcasing we’re time with ASP. these to looking on innovation. driving and new, these are having partners These budget, are feel forward

the products. floor time We’re anticipate North portfolio flagship years, Tempur-Pedic selling forward on three Foster to summer entire & excited the line for Stearns the new products serving the American We as and product new important to stay have next for in the these season. for

explore for of our Tempur-Pedic Going will be continue number Foster these innovative pipeline, Stearns forward, build But, for products volume years. consumer and our address to we to preferences. out a new & will opportunities drivers current

to second promote is to worldwide brands. marketing long-term significant dollars initiative The invest our

had we both information than in fact, to fingertips, past. and have having and brands in with and products. products dollars their at engaging have XXXX, online percentage a in more investments, new of Consumers advertising to anticipate never the In sales increase the as support are they access more they

to behavior We speaking are changing responding customers this they where engaged. to be and to want

believe with to our efforts with keep We’re of or to top whether consumer and can we are browsing process researching in customers so We they brick-and-mortar world-class casually driving they brands online. the hand. marketing products drive online television, social mind our media our watching actively engage of first bedding stores, can

than they initiative long-term was to optimize third-party and always third distribution stores our the properly digitally is products though brick-and-mortar research preference vast feel want before represented retail shows It The Even sure make consumers to to are purchase partners. with are visit worldwide our our majority products savvy still to to in all channels. ever, touch bedding work more customers them.

product, serve established These on in our sales opportunities the for to have consumers non-commission third-party high-end we further provide order customers in well. fleet in local experience. consultants having continue at We XX Tempur showrooms perform a retailers low-pressure company-owned stores high-end, in to sales the with by knowledgeable, stores U.S. low-pressure educate future looking retail of generate America least XXXX. And market. opened These and the stores North XX awareness anticipate end brand for

last is initiative drive Our in to increases EBITDA.

long-term initiatives will to look internal efficiency new products, improve the increased combination we we and focus innovative value. create premium our productivity believe marketing shareholder forward to As help of to our us XXXX, on our profitability

update call Mattress litigation me Lastly, before Firm. you for with opening a let the give questions, brief on

unproductive Mattress Firm, issues. these separate out risk board separation Firm's of suits. most the expensive in lawsuits multiple and we've requested reached been relating certain and new we Mattress know, As settle and engaged you to with trade

release, have press both appreciate the to companies call in the resolved litigation. am members described Firm's Mattress please all I will new board pleased for you Operator, truly situation. report handling questions? I this open As of

Operator

And UBS. Instructions] first Michael of Lasser from [Operator our comes question

Your line is open. now

Michael Lasser

are Mattress litigation them? the morning. subject reunifying taking segue Firm, Good potentially of with settling is my what into now for Thanks lot question. the Scott, on a chances that a

Scott Thompson

thank for Good your you morning question. and

be Communications comes continue trending would think, I relationship, it's say to I it to well. constructive. when Firm Mattress

have world, companies. the between the in probably Sealy fact, been the Tempur largest relationship. Obviously, it States. that manufacturer In communications in of and Firm United Mattress is report the better, we're retailer normal relationship two specialty the is makes have Today, the I largest the And bedding have and normalizing bedding sense settlement the a anything to just than companies litigation. don't never other

Operator

Griffin of James. question Thank comes next Bobby from you the Raymond and

line now Your is open.

Bobby Griffin

understand outlook us just I to Foster launch, driving decline connection to moving about & is low-single-digit pretty the that which Scott, and commentary. in XXXX the with exactly Sealy and want of a bit impressive help Stearns around parts that what into of dive in little Vegas, kind was the try for

Scott Thompson

little set a bit of me let foundation. First,

prepared As exclude Foster fourth was we you the Sealy said up in in remarks, the quarter, if slightly. Stearns &

guidance. So, Sealy remarks, in actually in quarter. And saw as And in trend is Sealy the America, had bit you I of that a brand a there's as as pretty good headwind prepared better in from quarter. we fourth quarter-to-date, fourth slightly is the the the little then, a in the said sit in quarter expected guidance, North

I hybrid we had year. we ‘XX, a got successful and think tough we’ve performance comp look forward very that when a last into

very $X,XXX this Foster -- We and continue we've we positive did the in reception in to right, and see which you're weakness a above & see Stearns $X,XXX, launch, Vegas. below the strength got get

the different, of through Bhaskar, Sealy. that slight the Maybe best here them maybe you but together guess, our conservative, in sit blended we're in as put a in we up and say all today. it's fairway it anything that? it's explaining middle when Would was not, guidance, So, working headwind we we've got

Bhaskar Rao

No.

well I think, it was said.

Scott Thompson

Okay.

Operator

from of SunTrust. comes question Hughes next our And Keith you. Thank

now open. line Your is

Keith Hughes

Thank you.

the ago develops retailer, situation of characterize as to retailer? this other buy couple days independent looking of one-off? a Are do a news to did the for that when do With more you the these you right

Scott Thompson

Thanks for your question. Yes.

this just we primary strategy that far, worldwide. said channel, that we that Our And where the worldwide, that And particular different which we we're at is the in us we've not we the retailers distribution. different always distribution to if preferred In and a need, retailers. think are been in bid we've we is important, don't open -- the distribution U.S. we change a around not by the strategic in made world, our supportive think give executed different at came But, we situations a focus that and execute we situation, marketplace, that our third-party fairly is that third-party is it, looked has have that way have options. keep us distribution to It is that and quickly, options. is it. option, for in about always

to think, just times a first, strategies, something own over Asia. at I third-party we've U.S. different always the the in across methods. in times stores, lean we’ll used at the look in we've joint of this going times time world we've probably our done got in like we few It's we're ventured, lots we've but stores store distribution at When the first

Operator

Peter Thank Piper next comes question And our Jaffray. Keith you. of from

open. Your is line now

Peter Keith

accelerating bit around that how of to a little acceleration? some And intrigued that with was while the drivers you I growth you look you're of a out, insight could thinking about your on earnings give maybe us XXXX. just and out ways it's comments of as

Scott Thompson

Sure.

those Tempur had are glad to able the it, off, get XXXX; get bases. Look, we I'm it We to to that entire in at I all, were the of intrigue driver line And volume said adjustable We are you first look those floored, be you. line. going the as are we get the all all products, in disruptive, of expensive, trained. Tempur First Tempur. remarks, redo gets Those prepared deal if people the with launched to for had often. don't

tailwind think, would compare ‘XX you -- to when going be a it would to certainly that's So, ‘XX. be we

Tempur Additionally, direct to growth the have we see growth. you store in some And, to expect accelerate. can continue our

direct. were we growth in XX% think, I

on And we will that that hope continue. below to to $X,XXX some got Sealy kind that we've special at initiatives expect of hold. take We work

you to So, get that strong get looks you commodity we like that good economy reasonable assuming it environment a and us ‘XX. worldwide, have pretty continue a have -- a to

rate, us Now, incentive to we're our you far growth between the did we over comp so for wouldn't comp in our and having as growth comp that's ‘XX, in incentive have step hit that comp you the -- hit ‘XX ‘XX to then look the headwind incentive desire getting other earn when and hope we've incentive and it not that and some the as compared ‘XX, rate, our budgeted at in we ‘XX, thing that's affected plan two years. ‘XX to and

Operator

question Wedbush Thank Seth Securities. you. next And of our comes from Basham

is open. line Your now

Seth Basham

a question Thanks and around lot My is mix. good morning.

Tempur-Pedic some mix to leading in the as quarter end incremental guided your you look fall do how million that or is the range? contemplated to your in expectations, that for than spoke bottom spend look previously? And in in You you headwinds a Tempur-Pedic. much fourth related to And the or in line that, guidance mix your something of be? of end to $XX then, Was secondly, to you headwind R&D XXXX, greater low to

Scott Thompson

Okay.

fourth quarter It of of have by be getting expected, may product hit it's the than for to; quicker was quarter, have first cannibalization was we would clean quarter and we the the Luxe in up. as that to fourth we Breeze It's got the me people was, and that fourth side And it we Let than wanted expected expected? Bhaskar have question actually what all realized expected we what we and ready to doing the the in out. deteriorated equation what little We what may new what me to part is quarter launched kind expect. Luxe coming gotten product in ASP. we compared Breeze do In the Luxe. do would more a product the obviously those, the did fourth which try raising cannibalization the of interesting,

it's in schedule. kind talk coming say, Breeze about mixed you would quarter. fourth of it launch, a got issue I the the about When you when talk you've So, that's on

the You're to till not get what, through back, issue, cannibalization about the third quarter? till Bhaskar, totally the going

Bhaskar Rao

That's exactly correct.

So, as we in Breeze. Also quarter, exactly about as is little than been the you’ve more the Stearns very Scott as the think well, I merchandising Foster, well. mentioned It's Vegas. fourth & from been as said bit in mix received anticipated -- mentioned,

We expect to that improve XXXX. in

And relates as the the into to year, Specifically, it we Presidents’ Day. after mixes, go as merchandising out expect will around. we'd the get to Breeze back turn half of the mix merchandising

Scott Thompson

I the in to one products. it's three new the $XX think of this year's in -- say, I very get on, were million part which question then, -- And incremental talented, incremental. you was last That spend was it guidance. on able would your not is questions is

Bhaskar Rao

Correct.

Scott Thompson

product. don't about that And really that talk to point, in doing area. at want that we much year, in But, detail this more talk be we'll able see that throughout about what to particular too so the you can we're about

Operator

comes And our of next Brad Thomas question Markets. from KeyBanc Capital

Your line open. now is

Brad Thomas

landscape, picked you occur? was the today addressing share potential and Firm I antidumping talk store with from landscape competitive could Mattress hoping specifically a the ownership perhaps competitive under Scott, bit Firm closures, to about how more new stands gains little up Mattress may you for the have

Scott Thompson

think fourth that and quarter, market far -- are strongest, America, primarily Tempur you assume by up North makes brand Clearly, in I the I in are North America? under sales talking any North about America. with major So, address share. you XX% I'll significant computation, gained the Tempur Sure.

write So I'll on just out Tempur.

some to has think, pick thinking. some, tell very business relative than I relative got a been up manufacturers in that were Firm ex we to innerspring that probably stronger go Foster, probably tell; Sealy was it If the Hard fourth I the to a innerspring beds, performance Mattress tell. which but to share perception Stearns said is & is you before, you or little my we up as other closing? the slightly that Did will hard and strong to that's store Sealy quarter. little I

to it's some And maybe I store that very so, of from tell. like said, closings. difficult is But,

If looks guys. you on go like profits. me probably they the have bed-in-the-box been industry, way you the demonstrate haven't market to the touch to all able to across That

unit overinvesting with customer may they're run growth. to unit their trying Although cost. coming me trouble growth, it acquisition they're some still have like and retail to because it's -- looks growth they having from And to

industry I haven't threat. a the still as bed-in-the-box -- much general So, competitive being in seen I of

Although, think I anybody business. size mentioned. other a is large a maybe you one niche I I imports, But, it's doing was it America in think don't China think profit. any North the at

little that. through work remarks. to continue we the as It's We in a delayed bit said prepared

We expect to we're waiting But, get some from not help just around sitting for help there. Washington.

be go that And processes on and being to below have quarters, worked the performance. We some over to report here on are we'll task that after able force $X,XXX. we expect, the few next

Operator

from comes America. of Bank question William next our And of you. Reuter Thank

now is open. line Your

William Reuter

Hi. just questions. I two have

don't share in with you secondarily, see leverage within the to you your you know, three or to allocation, now and where wholesale are initiatives? maybe that in is, are regard you capital range Thanks. stores. terms first targeted four or Can guys you would retail compared The mix then, of about being talk repurchases retail of two years And thinking on or your increase about from debt either growth that guys I -- reduction else anything how -- now? the

Scott Thompson

capital allocation, turns, On Sure. X.X are Bhaskar? we

Bhaskar Rao

X -- Yes. X.X.

Scott Thompson

under slipped X turns; target midpoint X.X. we’ll to just the end high X We of call of Yes. our the

The -- cash of first in going to we're to to use the flow. back the said, term. little business for the we'll the business business a of in flow then, to some form. at a debt X.X, we look the it the question? that paying have down to be think, part I the to always mode high near on bit in give we've of what's cash more But, this you call we'd probably down shareholders think, more going a probably I really generates doesn't a probably, the a extent of little lot return. have for debt, little And the cash think, pay we're while. think gets second rate as the But, at Then, I

Bhaskar Rao

see where can stores, in Retail you the that future?

Scott Thompson

stores, Yes. about America. North talking we're again, Retail

-- to have I do I guess, at We are direct-to-wholesale. XX% we mean, it worldwide. we're

its If see up number being maybe I from I that standpoint. strategy years, it can't you're a much XX% few XX%. see a to talking over inching way could

Operator

question next John Thank Baugh, Stifel. you. And our comes from

now line Your is open.

John Baugh

one? into the call, the of increase new whatever I the two incremental change. or the over, guess, One, or not is $XX types And that with is are a put normal But, of of in percentage that of R&D is, two testing, these you way, is Scott, then, the first brick-and-mortar ones. a months we'll I the second to quick deals? million struggling product, more that testing see iMS there context a appreciate XX one chances next what strategic

Scott Thompson

off think products. more The testing so, some I'm of normal wait them to projects. way is But, the is I norm; it -- on we a that there so I’d are and the can detail. would don't stuff. out look about at the it's bit this or $XX little I those few And, there going to be and you specifically ask just a million, identified be consider a to in beg special wouldn't quarter talk

EBITDA; incremental have probably will XXXX. us they think will benefit I they in

more those to those can about we pleased beg going But, on think with I little detail. bit that one. you’ll when I'm in be So, investments talk off a

far iMS, iMS don't the time, any as of never. at say same can't you I As But, situations. other know

America. bit the situations of But, retailers been have some that like And I'm a stress. any not of anticipating little in more North under

Operator

from you. of Curtis And comes question Merrill Lynch. America Thank Nagle of our Bank next

Your open. now is line

Curtis Nagle

morning. Good

just guys low-end contextualize least technically could imply which a of any, if at dollar EBIT So, little the doesn't more, I maybe you I guidance think wonder growth.

headwinds of is leverage, from perspective, better business looking as getting Just of handful should all kind mix, indicative theoretically a and sales like advertising at be of and got things like pricing, growing Sealy comp revenue mentioned, the you'd like profitability. incentive some kind stuff; you called a of that good the margin you've drivers, out perhaps of accelerating,

have trends would think quick can in say of kind to comments new question, happen Sealy Tempur since what we in for last yes, and about October how did What And I about January? should you call, EBITDA So, just growth? guys on one in that? you slipping just mean,

Scott Thompson

talk Let Bhaskar to do and a going little that. me that I'm let bit about of

way First after what's I we stress of on the usually some of our range guess, and put work the I it, about is around best a guess, guidance think all, middle testing. the fairway,

midpoint is So, would growth XXX, as middle for much guess, is liked. as range I We pushing the think, we admittedly are XXX. I certainly But, more. of the have not the

comments Bhaskar? any about got guidance, You

Bhaskar Rao

No.

Scott Thompson

is slightly Then, January reported improved as the said here that Sealy, as the from about both Tempur in prepared far for we quarter. fourth the quarter-to-date as in the the U.S. in remarks and trends, talking the we're revenues trends

been terms pretty quarter. look, layman be we the it but a in to also to it's start it's can the -- good be bit been So, pretty volatile, cautious; start good try to a quarter. But, a little

Operator

Laura Champine from our And question next comes of Capital. you. Loop Thank

Your line open. is now

Laura Champine

the sell-in, a then, if floor that you products launch Breeze the and retailers just disruption then you the timing is Tempur in be and stores, just to what the of first through where samples? sell the period floor their of sort floors half? the And can impact the on as business see quantify samples you in of will set there sell-out As

Scott Thompson

way The thought the will happen the is, it is we how happen, launch is question. Good it Day. of all that Breeze within that thinking about Sure. Presidents' first we’re after And currently, quarter. right about will majority the

first what quarter. primarily the sorry, second first last unlike quarter, of impact be in or the saw where and year phasing So, half Breeze would sell-in the -- what I the and anticipate second first is between had we we

more about on is is that basis. I a think would floor we've total models As in what broadly expect be flat indicated floor models to is, I year-over-year

I this anticipate thing rest phasing, seeing impact the majority for we're whether one it'd QX; one the year, biggest Stearns impact our or is the year. However, favorability in it'd is the all be would Foster be would of it's the of since Breeze, within about launch whether & quarter negative -- be

Operator

our next Casella And you. JPMorgan. of comes Thank question Carla from

is line Your open. now

Carla Casella

question. on ‘XX much a Hi. would bit Chinese to in little say industry imports? was the wanted just the dig Chinese How I you with in more import

Scott Thompson

How it impacted? much was

Carla Casella

much those mean, the did I how of much Yes or share how -- market get? imports

Scott Thompson

points offline, on back below increase estimate. be to But, that We'll significant period stats I top three-year the as cost. have. you to have as I of price percentage. over the as last get have would the a Yes. exact of far would that don't some have to we specific don't my say head at I

Operator

question with And Keith Instructions] [Operator Hughes next Thank you. comes from SunTrust. our

is line open. now Your

Keith Hughes

Yes.

Just a follow-up.

year-over-year an like sort the I third unit the like is in XX%, more Tempur-Pedic. comments Can units any you that, prepared than discussed the I what quarter, feel of up it’s You quarter? in which growth the were at units looked us result. give assume, believe outstanding

Scott Thompson

Yes. up XX%? The units were

Bhaskar Rao

That's the quarter. in fourth correct,

Scott Thompson

Yes, growth. very robust unit

Operator

I'd that back Thank the over you. closing for conference our concludes question-and-answer Thompson And like to Scott session today. for remarks. to turn

Scott Thompson

over our outstanding X,XXX make for you the successful. you To thank thank your Sealy of Directors. of Company worldwide, in representation Board to what and do the Tempur you partners, To for the thank To leadership you. lenders, for brands. Thank every your retail you and its confidence our employees team day shareholders our

Operator

thank program. and This conference. today's you in Ladies the conclude does gentlemen, participating for

a have all may You great Everyone, day. disconnect.

Tempur Sealy International (TPX) 14 Feb 192018 Q4 Earnings call transcript