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Actionable news in TPX: TEMPUR SEALY INTERNATIONAL Inc,

Tempur-pedic International: – Adjusted Ebitda Increases

The following excerpt is from the company's SEC filing.

$104.0 million

; Adjusted EPS Increases

- Reaffirms Financial Guidance for 2016

LEXINGTON, KY,

April 28, 2016

- Tempur Sealy International, Inc. (NYSE: TPX) today announced financial results for the

quarter ended

March 31, 2016

. The Company also reaffirmed financial guidance for the full year 2016.

QUARTER

FINANCIAL SUMMARY

Total net sales decreased

$721.0 million

from

$739.5 million

in the

quarter of 2015. On a constant currency basis

, total net sales were flat, with a decrease o f 1.6% in the North America business segment and an increase of 5.9% in the International business segment.

Gross margin under U.S. generally accepted accounting principles ("GAAP") was

as compared to

quarter of 2015. Adjusted gross margin

GAAP operating income increased

$76.7 million

$54.4 million

. Operating income included $3.0 million of additional costs related to executive management transition and $0.9 million of integration costs. Operating income in the

quarter of 2015 included $11.7 million of integration costs and $2.1 million of additional costs related to the Company's 2015 Annual Meeting. Adjusted operating income

$80.6 million

of net sales, as compared to

$68.2 million

of net sales, in the

Earnings before interest, tax, depreciation and amortization ("EBITDA")

increased

$102.0 million

as compared to

$75.9 million

for the

. Adjusted EBITDA

$90.5 million

in the

Adjustments to EBITDA totaled $2 million, as compared to $15 million in the first quarter of 2015.

GAAP net income increased

$39.6 million

$23.4 million

. Adjusted net income

$42.3 million

$34.1 million

GAAP earnings per diluted share ("EPS") was

as compared to

. Adjusted EPS

as compared to adjusted EPS of

. On a constant currency basis, adjusted EPS increased

The Company ended the

quarter of 2016 with consolidated funded debt less qualified cash

$1.5 billion

. Leverage based on the ratio of consolidated funded debt less qualified cash to Adjusted EBITDA

3.18 times

for the trailing twelve months ended March 31, 2016 as compared to

3.93 times

for the trailing twelve months ended March 31, 2015.

During the first quarter of 2016, the Company purchased 1.7 million shares of its common stock for a total cost of $100 million. As of

, the Company had $100 million available under its existing share repurchase authorization.

Tempur Sealy International, Inc. Chairman and CEO Scott Thompson commented, "We are very pleased with our results as we grew adjusted EBITDA 15% and adjusted EPS 24% while increasing direct advertising and marketing investments, and launching new industry leading products worldwide. Overall, plant operations improved and adjusted operating margin expanded 200 basis points. The Team is focused on continuing to improve operations, and we are all striving to achieve our targets."

FIRST QUARTER KEY HIGHLIGHTS

(in millions, except percentages and per common share amounts)

Three Months Ended

% Change

% Change Constant Currency

Net sales

(1) This is a non-GAAP financial measure. Please refer to "Non-GAAP Financial Measures and Constant Currency Information" below.

Business Segment Highlights

The Company’s business segments include North America and International. Corporate operating expenses are not included in either of the business segments and are presented separately as a reconciling item to consolidated results.

net sales

$580.0 million

$594.1 million

quarter of 2015. On a constant currency basis, North America net sales decreased 1.6%. GAAP gross margin was

quarter of 2015. GAAP operating margin was

quarter of 2015. In the first quarter, net sales declined as the North American bedding market performed below expectations and the scope of our product launch transitions impacted sales.

North America adjusted gross margin

improved 190 basis points to

quarter of 2015, primarily driven by improved operations, pricing actions, and a decrease in commodity costs, partially offset by product mix and new product launches. The increase in North America adjusted gross margin

as well as an improvement in the Company's selling and marketing leverage drove a 220 basis point increase in the Company's North America adjusted operating margin

$141.0 million

$145.4 million

quarter of 2015. On a constant currency basis, International net sales increased 5.9%. GAAP gross margin was

quarter 2015. In the first quarter, net sales declined due to the negative effects of foreign exchange on a year over year basis.

International adjusted gross margin

quarter of 2015, primarily driven by channel mix, improvements in plant efficiency and a decrease in commodity costs, partially offset by an increase in sales of Sealy products relative to sales of Tempur products. The increase in International adjusted gross margin

drove a 110 basis point increase in the Company's International adjusted operating margin

GAAP operating expense

$27.9 million

$28.8 million

quarter of 2015. The decrease in operating expense was primarily driven by a $3.0 million reduction in Corporate legal and professional fees in the first quarter of 2016 as compared to the same period in 2015 (which included $2.1 million of additional 2015 Annual Meeting expenses), as well as a reduction in Corporate overhead expenses in the first quarter of 2016. These decreases were partially offset by $3.0 million of executive transition costs incurred in the first quarter of 2016, and increases in employee-related compensation.

Corporate adjusted operating expense

$24.3 million

$24.8 million

quarter of 2015. The decrease in Corporate adjusted operating expense was primarily related to a reduction in Corporate overhead expenses, partially offset by increases in employee-related compensation.

Balance Sheet

As of

, the Company reported

$37.1 million

in cash and cash equivalents and $1.5 billion in total debt, as compared to

$153.9 million

in cash and cash equivalents and $1.5 billion in total debt as of December 31, 2015.

The Company also today reaffirmed its financial guidance for 2016. For the full year 2016, the Company currently expects Adjusted EBITDA to range from $500 million to $550 million. The Company noted its expectations are based on information available at the time of this release, and are subject to changing conditions, many of which are outside the Company's control.

Conference Call Information

Tempur Sealy International, Inc. will host a live conference call to discuss financial results today,

at 8:00 a.m. Eastern Time. The dial-in number for the conference call is 800-850-2903. The dial-in number for international callers is 224-357-2399. The call is also being webcast and can be accessed on the investor relations section of the Company's website, http://www.tempursealy.com. After the conference call, a webcast replay will remain available on the investor relations section of the Company’s website for 30 days.

Non-GAAP Financial Measures and Constant Currency Information.

(1) This is a non-GAAP financial measure. Please refer to "Non-GAAP Financial Measures and Constant Currency Information" below.

For additional information regarding adjusted net income, adjusted EPS, adjusted gross profit, adjusted gross margin, adjusted operating income (expense), adjusted operating margin, EBITDA, adjusted EBITDA, consolidated funded debt, and consolidated funded debt less qualified cash (all of which are non-GAAP financial measures), please refer to the reconciliations and other information included in the attached schedules. For information on the methodology used to present information on a constant currency basis, please refer to “Constant Currency Information” included in the attached schedules.

Forward-looking Statements

This press release 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 release, the words "estimates," "expects," "guidance," "anticipates," "projects," "plans," "proposed," "intends," "believes," and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to the Company’s expectations regarding adjusted EBITDA for 2016 and performance generally for 2016. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct.

Numerous factors, many of which are beyond the Company's control, could cause actual results to differ materially from those expressed as forward-looking statements. These risk factors include risks associated with the Company’s capital structure and debt level; general economic, financial and industry conditions, particularly in the retail sector, as well as consumer confidence and the availability of consumer financing; changes in product and channel mix and the impact on the Company's gross margin; changes in interest rates; the impact of the macroeconomic environment in both the U.S. and internationally on the Company's business segments; uncertainties arising from global events; the effects of changes in foreign exchange rates on the Company’s reported earnings; consumer acceptance of the Company’s products; industry competition; the efficiency and effectiveness of the Company’s advertising campaigns and other marketing programs; the Company’s ability to increase sales productivity within existing retail accounts and to further penetrate the Company’s retail channel, including the timing of opening or expanding within large retail accounts and the timing and success of product launches; the effects of consolidation of retailers on revenues and costs; the Company’s ability to expand brand awareness, distribution and new products; the Company’s ability to continuously improve and expand its product line, maintain efficient, timely and cost-effective production and delivery of its products, and manage its growth; the effects of strategic investments on the Company’s operations; changes in foreign tax rates and changes in tax laws generally, including the ability to utilize tax loss carry forwards; the outcome of various pending tax audits or other tax, regulatory or investigation proceedings; changing commodity costs; the effect of future legislative or regulatory changes; and disruptions to the implementation of the Company's strategic priorities and business plan caused by abrupt changes in the Company's senior management team and Board of Directors.

There are a number of risks, uncertainties and other important factors, many of which are beyond the Company’s control, that could cause its actual results to differ materially from those expressed as forward-looking statements in this press release, including the risk factors discussed under the heading "Risk Factors" under ITEM 1A of Part 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2015. There may be other factors that may cause the Company's actual results to differ materially from the forward-looking statements. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

About Tempur Sealy International, Inc.

Tempur Sealy International, Inc. (NYSE: TPX) is the world’s largest bedding provider. Tempur Sealy International, Inc. develops, manufactures and markets mattresses, foundations, pillows and other products. The Company’s brand portfolio includes many highly recognized brands, including TEMPUR®, Tempur-Pedic®, Sealy®, Sealy Posturepedic® and Stearns & Foster®. World headquarters for Tempur Sealy International, Inc. is in Lexington, KY. For more information, visit http://www.tempursealy.com or call 800-805-3635.

Investor Relations Contact:

Barry Hytinen

Executive Vice President, Chief Financial Officer

Investor.relations@tempursealy.com

TEMPUR SEALY INTERNATIONAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in millions, except per common share amounts)

(unaudited)

(2.5)%

Cost of sales

Gross profit

Selling and marketing expenses

General, administrative and other expenses

Equity income in earnings of unconsolidated affiliates

Royalty income, net of royalty expense

Other expense, net:

Interest expense, net

Other income, net

Total other expense

Income before income taxes

Income tax provision

Net income before non-controlling interest

Less: Net (loss) income attributable to non-controlling interest

Net income attributable to Tempur Sealy International, Inc.

Earnings per common share:

Diluted

Weighted average common shares outstanding:

(Loss) income attributable to the Company's redeemable non-controlling interest in Comfort Revolution, LLC for the three months ended March 31, 2016 and 2015 represented $(0.6) million and $0.6 million, respectively. As of March 31, 2015, the redemption value exceeded the accumulated earnings of the Company's redeemable non-controlling interest in Comfort Revolution, LLC. Accordingly, for the three months ended March 31, 2015, the Company recorded a $1.0 million adjustment, net of tax, to adjust the carrying value of redeemable non-controlling interest to its redemption value. As of March 31, 2016, the accumulated earnings exceeded the redemption value and, accordingly, a redemption value adjustment was not necessary for the three months ended March 31, 2016.

Condensed Consolidated Balance Sheet

(in millions)

December 31, 2015

ASSETS

Current Assets:

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

Total Current Assets

Property, plant and equipment, net

Goodwill

Other intangible assets, net

Deferred income taxes

Other non-current assets

Total Assets

2,576.8

2,655.5

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

Accrued expenses and other current liabilities

Income taxes payable

Current portion of long-term debt

Total Current Liabilities

Long-term debt, net

1,293.7

1,273.3

Other non-current liabilities

Total Liabilities

2,312.6

2,352.9

Redeemable Non-Controlling Interest

Total Stockholders' Equity

Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity

Condensed Consolidated Statements of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

Amortization of stock-based compensation

Amortization of deferred financing costs

Bad debt expense

Dividends received from unconsolidated affiliates

Non-cash interest expense on 8.0% Sealy Notes

Loss on sale of assets

Foreign currency adjustments and other

Changes in operating assets and liabilities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from borrowings under long-term debt obligations

Repayments of borrowings under long-term debt obligations

Proceeds from exercise of stock options

Excess tax benefit from stock-based compensation

Treasury stock repurchased

(102.0

Net cash used in financing activities

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

Decrease in cash and cash equivalents

(116.8

CASH AND CASH EQUIVALENTS, beginning of period

CASH AND CASH EQUIVALENTS, end of period

Summary of Channel Sales

The following table highlights net sales information, by channel and by segment, for the three months ended

2016 and 2015:

Three Months Ended March 31,

Retail

The Retail channel includes furniture and bedding retailers, department stores, specialty retailers and warehouse clubs.

The Other channel includes direct-to-consumer, third party distributors, hospitality and healthcare customers.

Summary of Product Sales

The following table highlights net sales information, by product and by segment, for the three months ended

Bedding

Bedding products include mattresses, foundations, and adjustable foundations.

Other products include pillows and various other comfort products.

Reconciliation of Non-GAAP Measures

(in millions, except percentages, ratios and per common share amounts)

The Company provides information regarding adjusted net income, adjusted EPS, adjusted gross profit, adjusted gross margin, adjusted operating income (expense), adjusted operating margin, EBITDA, adjusted EBITDA, consolidated funded debt and consolidated funded debt less qualified cash, which are not recognized terms under GAAP and do not purport to be alternatives to net income and earnings per share as a measure of operating performance or total debt. The Company 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 2013 acquisition of Sealy Corporation and its subsidiaries and the exclusion of other costs. The Company believes that exclusion of these items assists in providing a more complete understanding of the Company’s underlying results from continuing operations and trends, and management uses these measures along with the corresponding GAAP financial measures to manage the Company’s business, to evaluate its performance compared to prior periods and the marketplace, and to establish operational goals. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. For more information about these non-GAAP measures and a reconciliation to the nearest GAAP measure, please refer to the reconciliations on the following pages.

In this press release 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”, which is a non-GAAP financial measure. These references to constant currency basis do not include operational impacts that could result from fluctuations in foreign currency rates. To provide information on a constant currency basis, the applicable financial results are adjusted based on a simple mathematical model that translates current period results in local currency using the comparable prior 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.

Adjusted Net Income and Adjusted EPS

A reconciliation of GAAP net income to adjusted net income and GAAP EPS to adjusted EPS is provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of various adjustments as described in the footnotes at the end of this release.

The following table sets forth the reconciliation of the Company’s GAAP net income and EPS for the three months ended

2016 and 2015 to the calculation of adjusted net income and adjusted EPS for the three months ended

2016 and 2015:

(in millions, except per share amounts)

March 31, 2015

Integration costs, net of tax

Executive management transition, net of tax

2015 Annual Meeting costs, net of tax

Redemption value adjustment on redeemable non-controlling interest, net of tax

Tax adjustment

GAAP earnings per share, diluted

Adjusted earnings per share, diluted

Diluted shares outstanding

Please refer to Footnotes at the end of this release.

Adjusted Gross Profit and Gross Margin and Adjusted Operating Income (Expense) and Operating Margin

A reconciliation of GAAP gross profit and gross margin to adjusted gross profit and gross margin, respectively, and GAAP operating income (expense) and operating margin to adjusted operating income (expense) and operating margin, respectively, is provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of various adjustments as described in the footnotes at the end of this release.

The following table sets forth the reconciliation of the Company's reported GAAP gross profit and operating income (expense) to the calculation of adjusted gross profit and operating income (expense) for the three months ended

1Q 2016

(in millions, except percentages)

Consolidated

Margin

North America

International

Corporate

Adjusted gross profit

Operating income (expense)

Adjusted operating income (expense)

1Q 2015

EBITDA, Adjusted EBITDA and Consolidated funded debt less qualified cash

The following reconciliations are provided below:

GAAP net income to EBITDA and adjusted EBITDA

Total debt to consolidated funded debt less qualified cash

Ratio of consolidated funded debt less qualified cash to adjusted EBITDA

Management believes that presenting these non-GAAP measures provides investors with useful information with respect to the Company’s operating performance and comparisons from period to period, as well as general information about the Company's progress in reducing its leverage.

The following table sets forth the reconciliation of the Company’s reported GAAP net income to the calculation of adjusted EBITDA for the three months ended

Adjustments:

Integration costs

Executive management transition

2015 Annual Meeting costs

Redeemable non-controlling interest

The following table sets forth the reconciliation of the Company's net income to the calculations of EBITDA and adjusted EBITDA for the trailing twelve months ended

and 2015:

Trailing Twelve Months Ended

German legal settlement

Restructuring costs

Executive management transition and retention compensation

Other income

Pension settlement

Loss on disposal of business

Financing costs

Redemption value adjustment on redeemable non-controlling interest, net of tax

1,490.2

1,586.6

Ratio of consolidated funded debt less qualified cash to Adjusted EBITDA

On April 6, 2016, the Company entered into a senior secured credit agreement ("2016 Credit Agreement") with a syndicate of banks, replacing the Company's previous senior secured credit agreement dated December 12, 2012 ("2012 Credit Agreement"). Under the Company's 2016 Credit Agreement, adjusted EBITDA contains certain restrictions that limit adjustments to GAAP net income when calculating adjusted EBITDA. The calculation of adjusted EBITDA for the twelve months ended March 31, 2016 in the table above does not reflect any such restrictions to the adjustments to GAAP net income. However, the ratio of adjusted EBITDA under the Company's 2016 Credit Agreement to consolidated funded debt less qualified cash is also 3.18 times for the twelve months ending March 31, 2016. The Company's 2016 Credit Agreement requires the Company to maintain a ratio of consolidated funded debt less qualified cash to Adjusted EBITDA of less than 5.00:1.00 times. Information for the twelve months ended March 31, 2015 is presented in accordance with the Company's 2012 Credit Agreement.

The following table sets forth the reconciliation of the Company's reported total debt to the calculation funded debt less qualified cash as of

and 2015. "Consolidated funded debt" and "qualified cash" are terms used in the Company's 2016 Credit Agreement and 2012 Credit Agreement for purposes of certain financial covenants.

Total debt, net

1,472.6

1,573.3

Plus: Deferred financing costs

1,496.2

1,602.6

Plus: Letters of credit outstanding

1,515.0

1,619.9

Domestic qualified cash

Foreign qualified cash

Footnotes:

Integration costs represents costs, including legal fees, professional fees, compensation costs and other charges related to the transition of manufacturing facilities, and other costs related to the continued alignment of the North America business segment related to the Sealy acquisition. Excluding the tax effect, total integration costs are $1.0 million and $11.7 million for the first quarter of 2016 and 2015, respectively.

Executive management transition represents certain costs associated with the transition of certain of the Company's executive officers. Excluding the tax effect, total executive management transition costs are $3.0 million for the first quarter of 2016.

2015 Annual Meeting costs represent additional costs related to the Company's 2015 Annual Meeting and related issues. Excluding the tax effect, total 2015 Annual Meeting costs are $2.1 million for the first quarter of 2015.

Redemption value adjustment on redeemable non-controlling interest represents a $1.0 million adjustment, net of tax, to increase the carrying value of the redeemable non-controlling interest as of March 31, 2015.

Adjustment of income taxes to normalized rate represents adjustments associated with the aforementioned items and other discrete income tax events.

Adjustments for the North America business segment represent integration costs, which include compensation costs, professional fees and other charges related to the transition of manufacturing facilities, and other costs to support the continued alignment of the North America business segment related to the Sealy acquisition.

Adjustments for Corporate represent executive management transition costs and integration costs which include professional fees and other charges to align the business related to the Sealy acquisition.

Adjustments for the International business segment represent integration costs incurred in connection with the introduction of Sealy products in certain international markets.

Adjustments for Corporate represent integration costs which include legal fees, professional fees and other charges to align the business related to the Sealy acquisition, as well as 2015 Annual Meeting costs.

German legal settlement represents the previously announced €15.5 million ($17.6 million) settlement the Company reached in 2015 with the German Foreign Cartel Office ("FCO") to fully resolve the FCO's antitrust investigation, and related legal fees.

Restructuring costs represents costs associated with headcount reduction and store closures.

Executive management transition and retention compensation represents certain costs associated with the transition of certain of the Company's executive officers.

Other income includes income from a partial settlement of a legal dispute.

Pension settlement represents pension expense recorded in conjunction with a settlement offered to terminated, vested participants in a defined benefit pension plan.

Loss on disposal of business represents costs associated with the disposition of the three Sealy U.S. innerspring component production facilities and related equipment.

Financing costs represent costs incurred in connection with the amendment of the 2012 Credit Facility.

Redemption value adjustment on redeemable non-controlling interest represents a $(1.0) million and $1.0 million adjustment, net of tax, to adjust the carrying value of the redeemable non-controlling interest for the trailing twelve month period ended March 31, 2016 and 2015, respectively, to its redemption value.

The Company presents deferred financing costs as a direct reduction from the carrying amount of the related debt in the Condensed Consolidated Balance Sheets. For purposes of determining total debt for financial covenants, the Company has added these costs back to total debt, net as calculated per the Condensed Consolidated Balance Sheets.

Qualified cash as defined in the 2016 Credit Agreement and 2012 Credit Agreement 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.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Tempur-pedic International: Form, Schedule Or Registration Statement No - April 25, 2016
Tempur-pedic International: Tempur Sealy Announces Completion Of New Credit Facilities Comments On First Quarter Share Repurchase Plan Activity LEXINGTON, KY, APRIL 7, 2016 - April 7, 2016
Pursuant to the requirements of the Securities Exchange Act of - April 5, 2016