Tempur Sealy Board Backs CEO

February 18, 2015  by in Bedding, Product   

The company issued a statement Tuesday afternoon in response to H Partners very public and very lengthy statement questioning CEO Mark Sarvary’s abilities, the board and the company’s performance. H Partners owns about 10 percent of Tempur Sealy’s outstanding shares. 

In its statement, the company said it is committed to communicating with shareholders and values constructive input. Tempur Sealy is hosting its 2015 investor day today. 

“While it is the Company's policy not to comment on discussions with individual shareholders, we are disappointed to see that H Partners has chosen a public forum to advance an agenda that appears to be nothing more than baseless personal attacks and self-promotion,” said the company statement. “Despite its two years as a Tempur Sealy shareholder and numerous meetings with members of the Board and management team, the first time H Partners raised concerns regarding Mark Sarvary's role as CEO or the Board's oversight was within the last 10 days. Should H Partners decide to set aside its public campaign and engage in a constructive dialogue regarding the Company and its prospects towards the goal of enhancing value for all shareholders, we would welcome that opportunity, just as our Board and management team have always done in the past.”

Tempur Sealy went on to note its achievements under the board’s oversight and since Sarvary’s Aug. 4, 2008, appointment. The company pointed out the increase in stock prices, increased equity value for shareholders and the 2013 acquisition of Sealy.

Below is the company’s full statement:

Tempur Sealy is dedicated to communicating with its shareholders and values constructive input toward the goal of enhancing shareholder value. While it is the Company's policy not to comment on discussions with individual shareholders, we are disappointed to see that H Partners has chosen a public forum to advance an agenda that appears to be nothing more than baseless personal attacks and self-promotion. Despite its two years as a Tempur Sealy shareholder and numerous meetings with members of the Board and management team, the first time H Partners raised concerns regarding Mark Sarvary's role as CEO or the Board's oversight was within the last 10 days. Should H Partners decide to set aside its public campaign and engage in a constructive dialogue regarding the Company and its prospects towards the goal of enhancing value for all shareholders, we would welcome that opportunity, just as our Board and management team have always done in the past.

The Company's record of achievements under the Board's oversight and since Mr. Sarvary's appointment as CEO on August 4, 2008, has supported more than a 450% increase in Tempur Sealy stock, compared to 68% for the S&P 500 during the same period. Tempur Sealy stock has also increased 17% in the last year, 40% in the last two years and 105% over the past five years. In addition, since the announcement of the acquisition of Sealy, the Company has created an additional approximately $1.8 billion in equity value for its shareholders.

The acquisition of Sealy in 2013 has positioned Tempur Sealy as the global bedding leader with the platform, strategy and resources to maintain its competitive advantage and drive enhanced shareholder value creation. Today, Tempur Sealy benefits from industry-leading scale and footprint, a broad portfolio of iconic brands, deep sales and distribution expertise, and high-quality customer relationship management capabilities. We are confident that the Company is uniquely positioned for continued global growth.

Solid 2014 Results 

The Tempur Sealy Board of Directors and management team are confident that the execution of its strategic initiatives will continue to generate value for all shareholders. As evidenced by our recently reported 2014 results, Tempur Sealy is successfully leveraging its strengths to drive growth and generate improved returns in each of its three segments, including:

 

• Growing total net sales by 9.9% to $745.5 million in the fourth quarter 2014, and by 21.3% to $2.990 billion for the full year 2014;

• Achieving EPS growth of 70% to $0.75 in the fourth quarter of 2014, and 37% to $1.75 for the full year 2014, with adjusted EPS growth of 30% to $0.86 in the fourth quarter of 2014, and 11% to $2.65 for the full year 2014;

• Increasing net sales of Tempur North America by 16.0% to $262.3 million in the fourth quarter of 2014, and 9% for the full year 2014;

• Increasing net sales of Tempur International by 3.3% to $122.3 million in the fourth quarter of 2014. On a constant currency basis, Tempur International net sales grew by 11.4% and 8.3% for the fourth quarter and full year 2014, respectively;

• Increasing net sales of Sealy by 8.2% to $360.9 million in the fourth quarter of 2014. On a constant currency basis, Sealy sales grew by 11.0% and 39.8% for the fourth quarter and full year 2014, respectively; and

• Generating $225 million of operating cash flow and lowering total debt by $234 million.

Management Executing on Strategic Priorities 

The Company's management team, led by Chief Executive Officer Mark Sarvary, is making significant progress on its execution of the Company's strategic priorities, including strengthening its comprehensive portfolio of brands and products, expanding distribution and seeking the highest dealer advocacy, driving margin expansion with a focus on significant cost improvement, leveraging its global scale for competitive advantage, accelerating returns to shareholders and, where appropriate, making and integrating strategic acquisitions. With this strategic foundation, Tempur Sealy is proud of the many accomplishments made over the past several years, including:

• Successfully completing the acquisition of Sealy, doubling the size of the Company and creating the only bedding provider with global scale;

• Introducing a record number of new products in 2014, including successful launches in its core Tempur-Pedic mattress offering in North America, as well as Stearns & Foster, Optimum and Sealy products, collectively resulted in substantial U.S. market share gains;

• Achieving $45 million in cost synergies through 2014, with an incremental $25 million expected by 2016 through the completed acquisition of Sealy;

• Increasing marketing investments, leading to 62% increase in retail locator visits and 24% increase in website visits in 2014;

• Gaining significant presence in key growth markets with distribution channel synergies and the acquisition of additional international Sealy brand and Tempur distribution rights;

• Supporting margin improvement by enhancing focus on core initiatives with the divestiture of our U.S. innerspring component manufacturing facilities, while improving the efficiency of remaining innerspring manufacturing plants; bolstering the new U.S. distribution network; and implementing additional productivity and expense initiatives; and

• Establishing constant currency annual goals of 6% sales growth, operating margin expansion of 50 basis points, and adjusted EPS growth of 15%, all while striving to reduce debt and return value to shareholders.

Strong Board Leadership 

The Tempur Sealy Board is actively engaged in overseeing the Company's operations and performance, along with its strong track record of financial achievement and creating value for shareholders. The Board is comprised of 11 highly-qualified and experienced directors, all of whom are independent, other than Mr. Sarvary and Lawrence Rogers, Sealy's former CEO. Tempur Sealy's directors are proven business leaders with a broad range of expertise leading public companies with premier global brands in the consumer and retail industries, as well as in operations, accounting, finance, strategic development and other areas important to Tempur Sealy's business.

The diversity and experience of the Board is integral to Tempur Sealy's success. Of note, Independent Chairman P. Andrews McLane brings more than 40 years of business and leadership experience to the Tempur Sealy Board. Additionally, Director Christopher Masto is a veteran investment manager with more than 20 years of strategy, finance and investing experience. Messrs. McLane and Masto each provide the optimal balance of independence, continuity of experience and insight into Tempur Sealy's current operations and industry trends overtime.

Furthermore, Tempur Sealy's CEO and executive leadership has the full support of the Board and includes numerous talented and experienced leaders with proven business acumen who bring the necessary vision, insights and experience to lead Tempur Sealy's continued growth and success. Tempur Sealy continues to believe that, with the expertise of its outstanding management team and the oversight of its engaged and knowledgeable Board, the Company is well positioned to continue to drive enhanced returns for all shareholders. We look forward to continuing our dialogue with all Tempur Sealy shareholders as we execute on our plans.