Tempur Sealy ties incentive pay to 3.25 times delevering goal by year-end 2014, 1.5-2 times by 2016

By Lisa Kerner

Charlotte, N.C., June 11 - Tempur Sealy International, Inc. executive vice president and chief financial officer Dale Williams said the company's current leverage, post acquisition, is not a concern.

In March, Tempur-Pedic acquired Sealy Corp., and the company's name was changed to Tempur Sealy International, Inc. in May.

"As of March 31, with the completion of the acquisition, our leverage ratio is 4.4 times on a debt to EBITDA basis," said Williams during a presentation Wednesday at the 33rd Annual Piper Jaffray Consumer Conference in New York.

"We anticipate that we will be able to delever fairly quickly as a business."

The company had a similar ratio 10 years ago and delevered quickly, according to the CFO.

"We have substantial cash flow capabilities with our tax structure that we were able to put in place, (and) we're able to utilize global cash to delever the business very cost effectively," said Williams.

Management's long-term incentive payments are now tied to a targeted delevering goal of 3.25 times by the end of 2014.

"Over the course of seven quarters the expectation is that we will be able to take more than a full turn of leverage out of the business," Williams said.

"Delevering is an incentive that we think aligns management's activities and focus along with shareholders' to be able to take the leverage down quickly to be able to use our strong cash flow for more shareholder-friendly activities."

By the end of 2015 or into early 2016, the Lexington, Ky.-based bedding provider would like to approach what it believes is an optimal leverage level for the business of between 1.5 and two times.

Leverage would have to get to "less than three and in the direction of two" before other uses of capital would be considered, said Williams.

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