Good day, ladies and gentlemen. And welcome to the Tempur Sealy Third Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions). I would now like to turn the call over to Mr. Mark Rupe. You may begin.

Thanks, Michelle. Thank you for participating in today’s call. Joining me in our Lexington headquarters are Mark Sarvary, President and CEO; and Dale Williams, EVP and CFO. After our prepared remarks, we will open the call for Q&A. Forward-looking statements that we make during this call are made pursuant to the Safe Harbor’s provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements, including the company’s expectations regarding sales, adjusted EBITDA, earnings or adjusted net income, or the integration with Sealy, involve uncertainties. Actual results differ due to a variety of factors that could adversely affect the company’s business. The factors that could cause our actual results to differ materially from those identified include economic, regulatory, competitive, operating and other factors discussed in the press release issued today. These factors are also discussed in the company’s SEC filings, including but not limited to annual reports on Form 10-K and the company’s quarterly reports on Form 10-Q under the heading Special Note Regarding Forward-Looking Statements and/or Risk Factors, as well as the company’s press releases. 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. The press release, which contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures is posted on the company’s website at tempursealy.com and also filed with the SEC. With that introduction, I will turn the call over to Mark Sarvary.

Thanks, Mark. Good evening, everyone, and thanks for joining us. Today, I will provide an overview of our performance in the third quarter, and then discuss the progress we’re making on our key strategic growth initiatives in 2014. I will then turn the call over to Dale, who will provide details on the third quarter financial results and our updated 2014 guidance. Our performance during the third quarter was strong. We executed well on our strategic initiatives which led to better than expected sales and a solid increase in earnings. In total, our third quarter sales increased 12.5% with double-digit growth across each of our three business segments and adjusted EPS increased 21%. So far in 2014, we’ve generated a $181 million of operating cash flow and have lowered our total debt by a $190 million. Tempur North America performed very well and we’re encouraged by the growth and share gains we have seen. Sales were an all-time quarterly record, up 16% in Q3 and after starting the year in negative territory are now up 7% year-to-date. The new products are doing very well and our focus on adjustable basis over the past year is paying off. The new TEMPUR-Cloud and Contour beds have reignited growth of Tempur-Pedic. It’s been the fastest growing new products in our history. The innovative easy refresh top cover and the integrated smart climate system have been clear differentiators and received well by consumers and retailers. Another important development has been the growth in adjustable bases. Our adjustable base sales have been growing for Tempur-Pedic in each of the past 10 years, where we’ve seen a major acceleration in 2014. We attribute this to our newly expanded offering and a greater selling focus by retailers and RSAs. During Q3 orders for adjustable bases were unprecedented…

Thanks, Mark. I’ll focus my commentary on the third quarter 2014 financial results, and then discuss our updated 2014 guidance. I will address the performance on a consolidated basis, then speak to the performance of each segment and provide commentary on the key areas or items where there’s a notable variance from the prior year. Consolidated net sales for the third quarter grew $827.4 million, up 12.5% versus last year. As Mark stated, we’re very pleased to report double-digit growth in each of our three business segments and are particularly encouraged by Tempur and Sealy’s U.S. performance. Tempur North America net sales increased 15.8% and were driven by strong demand for our new Cloud and Contour products and adjustable bases. Bedding net sales increased 19.5% on a unit increase of approximately 14%. Within Bedding, sales of adjustable bases were up over 50%. Sales of other products declined 22%. By channel, Tempur North America retail sales were up 18% and direct sales declined 16%. Tempur International net sales were up 10.9%, and on a constant-currency basis, up 10.7%. Growth was driven by a combination of higher Tempur sales and initial sales from Sealy Japan and Europe. Bedding net sales increased 11% on a unit increase of 11%. By channel, Tempur International retail sales increased 10% and direct sales increased 35%. Sealy sales increased 10.9%, driven by strong growth in the U.S. Bedding product sales were up 11% and retail channel sales increased 15%. Third quarter consolidated GAAP gross margin was 38.5% as compared to 40.6% in the prior year. Gross margin declines in Tempur International in Sealy were partially offset by an increase in Tempur North America. By segment, the primary drivers were as follows: In Tempur North America gross margin increased primarily due to operational efficiencies offset partially by a…

Michelle?

(Operator Instructions). Our first question comes from Keith Hughes of SunTrust. Your line is open.

Thank you. You’ve talked a lot about gross margins and some of the things that happened in the quarter. Are these problems going to persist into next year? Do you think you can solve most them towards the end of this year? Any kind of view on that would be helpful.

Yes, Keith. If we look at three pieces; so in Tempur North America, fundamentally there is a mixed change. We had very good performance in Tempur North America both on the top-line and on the margins. The mix of adjustable bases was significantly higher than what we had anticipated. As you know, adjustable bases have a little bit lower margin, so that just muted that. I would say we hope that one continues because bottom-line, it’s a good thing to sell more adjustable bases. On the Sealy side where again we had very good growth, but we had a surge in demand that exacerbated some manufacturing inefficiencies that’s something that we absolutely are focused on that we’re actually absolutely going to be working hard on. We want to improve the performance there. It will take some time to get it completely to where we want to be, but it’s underway and we should see some gradual improvements. Certainly there are couple of one-time items in the quarter that we would not expect to repeat. FX also, particularly the Canadian dollar to U.S. dollar relationship continues to give us some gas there that doesn’t look like it’s getting better anytime soon. So we do expect improvement in Sealy. And from a Tempur international standpoint key thing there is that was different than what we expected was just the timing and the rollout of the new Sealy product lines in Europe. And the thing that caused some delay and some issue there was getting our contract manufacturers up to the speed, getting them efficient. We’ve made some progress there; we think that we’re on the right track; it’s not completely where we needed to be from a throughput and the volume and the cost standpoint but it’s making good progress. We would expect that to be much better as we get into next year.

The adjustable base sales surging numbers, is that both in Tempur-Pedic as well Sealy?

Yes, it was up in both but predominantly Tempur was where we saw a huge increase in adjustable bases.

And you’re reporting that as in Tempur North America segment, is that correct?

Correct.

And then final question on advertising, is that something you’re looking to provide some up or down over the next quarter or two?

Over the next quarter, we’re going to continue on the cadence that we’ve been on which is a function of both. We’re seeing the benefit of three things, one is that we are investing and we’re doing it on what we call an always on basis where the ads, we always have ads on, we had tried spiking it, but it’s much more efficient to keep it always on. Secondly, the new ads are working really quite well, we’re very pleased with them. And third is that we have been affected when we combined the buying with Sealy and getting an improved GRPs per dollar and we’re seeing the benefit of that. So, we expect that to continue for the fourth quarter. The next year, we will continue it at the same ratio. And as we grow our sales, we anticipate the growth of the advertising at a commensurate rate.

Okay. Thank you.

Our next question comes from Brad Thomas of KeyBanc Capital Markets. Your line is open.

Thanks, good afternoon. Just a couple of follow ups on sales, I guess first with respect to the fourth quarter Dale or Mark, could you give us little more color around what you’re seeing in terms of the run rate or the outlook by segment?

As Dale said, we obviously had a very strong growth in the third quarter; we’re seeing good growth in the fourth quarter; it shifted at a lower rate than it was. And we anticipate good growth for the fourth quarter in Tempur and Sealy and most of International as we’ve said. There is some weakness in Central Europe and frankly that continues. But in general, we are expecting growth across the board.

Great. And then what was the revenue benefit from the licensee acquisitions in the third quarter and what’s the expectation for the fourth quarter?

Yes. This is something on a regular basis, we’re not going to comment on, but because it’s new, we will continue to provide some color. We said at the second quarter call that we expected 20 million to 25 million in revenue and we thought that would be kind of in the 10ish million in third quarter and 15ish in fourth quarter; we did about 5 in the third quarter. In fourth quarter right now based on where we’re at, we would expect that to be closer to 10. So it is starting to ramp, we are starting to get a better flow of product, but we still have some issues around getting product produced in the contract manufactured, getting us to the right quality et cetera. So we’re being very picky, very exact about our needs. And if that means a little bit slower rollout that’s what it is, but that also means that you’re doing -- we’ve made some investment in infrastructure et cetera that is not getting revenue against it. So that’s why it’s causing us a little bit of a gas here in the second half, but going into next year, we see there is a big opportunity.

Great. And is that for both Japan and Europe or was that just Europe specifically you’re talking about?

Yes. I mean we had some start-up issues in both Japan and Europe, but predominantly where we are having some contract manufacturing start-up concerns is in Europe.

Okay. And just one more for me if you don’t mind. With oil prices having pulled back, could you just comment on what you’re seeing out of your chemical suppliers and any potential relief on raw material costs that you might realize in coming quarters?

Yes, that’s a great question, kind of interesting. Certainly with oil pulling back things like diesel are a little bit better. But interestingly enough as we’ve talked over the years, the chemicals that go into polyurethane form do not always trend exactly with where oil is and what oil is doing. We’ve actually seen some price pressure in the chemicals that we buy or the foam both on Tempur and Sealy foams and that’s partly because of some global supply constraints on those chemicals right now. So even though oils pulled back a little bit, we are seeing some commodity price pressure on the chemicals.

Our next question comes from Peter Keith of Piper Jaffray. Your line is open.

Hi, thanks. Good afternoon. I guess to follow-up on Keith’s question regarding the manufacturing issues related to Sealy, clearly it sounds like there is going to be some gross margin pressure in the fourth quarter. Is this a type of issue that could extend with gross margin pressure into 2015 as well?

It’s likely to have, as Dale said that the initial start-up is going to continue into the fourth quarter. And it will carry on into the beginning of next year. But what we do believe is that the projections that we have had for this, there is nothing that we’ve seen that’s systemic. The changes what we thought was going to happen. It’s just going to take a little longer. Having said that, the margins of the new Sealy products are all going to be identical to the Tempur margins just by for reasons of their construction where they sold and so on. So we haven’t broken that out fully. But they’re consistent with our -- there is nothing we’ve seen that’s changing our expectations in the long journey; it’s just a question of roll out right now.

I think I’ll Mark here. I was asking about the Sealy U.S. business is I think where you’re just talking about the international business there?

Forgive me. I was talking about international. What -- sorry repeat your question, forgive me?

Yes, I’m sorry. The gross margins were pressured with Sealy U.S. because of some of the constraints in manufacturing with the surge in demand. Is that issue is really going to continue in Q4, is that going to continue into 2015?

No, I mean I think that the -- as Dale said, it’s an area of focus, it’s an area that we -- it’s something that we really are focusing on. It will continue to some extent in Q4, which is what we said. And what we anticipate though is that this is something that’s going to -- the specific issues that are all going to continue. But the continuous improvement of the productivity and flexibility is something that we see over the period of 2015 and something that we actually hope to be a benefit is something we see to be a good opportunity. Right now though, we’re just trying to deal with what has been an issue that was caused by a variety of -- to some extent one-off issues, but that doesn’t really matter. We want to get this as more predictable and more flexible going forward and ultimately we believe that there is opportunity there.

Okay. Thank you. And then so clearly sales are very strong, so we’re happy to see that. I guess you did mention some production issues with the adjustables and Sealy because of the strong demand. Does that have an impact, a negative impact on revenue at all with Q3?

I mean possibly a bit, but not a lot. I mean to be honest, as I said our operations team were very hard on both the Sealy and the Tempur side. There were some shortages -- frankly we did have shortages of adjustable bases. And as I said, the demand was really very, very good, much ahead of what we expected. And we were able to meet the vast majority of the requirements. And we have built up our inventory now in anticipation that that fundamental trend is going to continue. So, we may have lost a little, but not much.

Okay. And then last for me; just circle back with you on the Sealy Europe a little out. I understand you want to keep it slow, could you give us maybe a qualitative view on the initial retailer interest and maybe how the demand for slots is coming relative to your expectations?

It is really early. So, what I’m going to give you is really anecdotal. I mean in fact it is very early. Retailer reaction has been quite positive. The retailers like it, they like the positioning, they like the products, they like the positioning and they like the fact that they are quite unique. And the positioning is being they always been and best known American brand is working well. In the stores where we have had the product long enough to kind of really tested over a period, we’re getting sell through very consistently what we expected. But quite frankly, I don’t expect you and I’m not even projecting from that because it’s too little of a test and too short of a time. But on the other hand, nothing we’ve seen is in consistent with what we expected.

Our next question comes from Sam Reid of Barclays. Your line is open.

Thank you so much for taking my questions. I actually have two U.S. specific questions here. First, would you be able to comment specifically on the performance of Optimum adjustable basis during the quarter. I know there was something you called out last year and I’m just kind of looking for more follow-up there. And then secondly, would you be able to provide some color with respect to how much incremental Stearns & Foster placement impacted your business during the quarter? Thanks so much.

On the Optimum front, Optimum overall with the re-launch Optimum is doing well. Optimum adjustable bases are growing, but frankly they’re growing of the small base. So it’s a small part of the overall, it’s still -- to be honest, it’s still an opportunity that we foresee. It’s something that we believe there is a great opportunity there, we know that it’s customers who have it, value it, but it’s something that still we’re growing, but it’s still a small number. As far as the Stearns & Foster placement is getting, the placement is growing, we’re growing -- one of the reasons it’s driving our growth is we are getting more distribution for Stearns & Foster and so that has worked well.

Thank you so much.

Thanks.

(Operator Instructions). Our next question comes from Josh Borstein of Longbow Research. Your line is open.

Good afternoon and thanks for taking my questions. On the supply issue with the bases, you talked about, you said you didn’t think it had that much impact on the top-line. Did it have any impact on margins or was there any issues with expedited shipping or other things that led you to evident a negative impact on the margin?

Sure. Josh, this Dale. The surge in demand on the adjustable is absolutely, we had some expediting costs; we had some extra shipping costs; we had some moving product around the country costs. There was some extra costs there and that’s all part of the -- when we talk about simply North America, we saw a very, very good improvement in the profitability in Tempur North America; we saw good margin improvement. That mix shift, part of that mix shift relationship of adjustables being a much higher percent of the business, an element there was also we had quite a bit of expediting costs in the third quarter to meet the demand. So that will ease as we move into the fourth quarter and we expect Tempur North America margins to continue to improve.

Okay. Thanks for that. And so switching to Europe, you talked about some continued weakness in Central Europe which you pointed out last quarter. Could you maybe just walk around some of the major geographies including Asia and tell us what you saw in the quarter?

Asia is obviously a very big place. And there are different pockets within it. But bottom line is Asia is doing well. Korea for example is doing very well. Japan is doing well. So the bottom-line is Asia is doing well. There are pockets in Europe that are doing quite well. Spain for example is doing well. And the UK is doing well. But it’s the same ones that we said last time, Germany and Benelux, the German speaking countries are slower.

Okay. And just a final one for me, just looking ahead into 2015 a little bit. I realize we can expect some investments in the first half of the year as that’s ongoing and one of the four key strategic growth initiatives but should we expect the same level of investment as we did -- in the first half of ‘15 as we saw in the first half of ‘14?

And by investments, do you mean the new products?

Yes.

You have to differentiate a little bit between the two lines here for the U.S. because the Sealy, Stearns & Foster have a more regular cadence. This year we had a big growth in Stearns & Foster and we won’t repeat that next year. On the other hand, there are other products that we will -- I don’t want to go into details on this, but there are other products that we will be launching on sort of two year cycle that will affect Sealy going forward. Tempur on the other hand had a very major introduction this year in 2014. And as I said in my comments, we have some very -- some new products that we’re very excited about starting in 2015. However, in terms of scale it’s going to be smaller than it was this year. In terms of scale of new product launch investment.

Great. Thank you very much.

Yes.

Our next question comes from Jessica Mace of Nomura. Your line is open.

Hi, good afternoon.

Hi.

Hi Jessica.

My first question is on the international business, I was wondering if you could talk about how the margin performed in the quarter excluding the impact of the rollout for Sealy in Europe and Japan.

Yes. Basically our international business excluding the rollout and start-up of Sealy in both Japan and Europe, international business met our expectations from a margin standpoint. The top-line is a little bit less than what we would have expected, but if you strip out those, profitability was still down in our international business and that was predominantly related to FX as we’ve talked about before. So, the cross currency et cetera, but was built into our revised outlook and expectation and it came in where we thought it was. The thing that was different was the cost and the timing of the Sealy rollout was what came in different than what we expected.

Understood. And then just to clarify that I understand what I heard before, it sounds like those Sealy businesses in Japan and Europe are longer term, the margin outlook is a little bit lower than existing Tempur International business. Is there anything you can quantify for us on that differential?

Yes. The gross margins on the International Sealy business for Japan and Europe would be a little bit lower than the Tempur margins. However, from an operating margin standpoint, we would expect them to be EBIT contributive; we would expect them to almost the similar end margin rate to our current International Tempur business because they’re being built on top of an existing infrastructure. So, we’re not having to add all the infrastructure that’s in place. So, the gross margin can be a little bit lower, but you are not having as much a lot of incremental operating cost. So, you get, you end up with very good EBIT numbers.

Make sense. And then just finally on the commentary on October so far. Is there anything you can point to that’s going in the category or that might be short-term in nature that could give you any visibility into these churns picking up?

Not really. I don’t think there is anything fundamental happening in the industry. I think that was just -- we had and the industry had a very good Labor Day and that maybe having something of an effect in the short-term. But I’m not hearing anything; I have not seen anything that makes me think there is some systemic change.

I think maybe one thing is over the last several years, there has been a kind of shift in emphasis in the fourth quarter towards Black Friday. So, the whole industry -- we’ve seen some change in the seasonality where more of the quarters occurring in the November, late November early December time period. So I mean that could be it.

Our next question comes from Budd Bugatch of Raymond James. Your line is open.

Good afternoon, guys. This is actually [Bobby] filling in for Budd; I appreciate you guys taking my questions.

Hey Bobby.

Dale, can you give us the margins, gross margin and operating margin by segment as you typically do?

Absolutely and keep in mind these are GAAP. So Tempur North America in the third quarter gross margin, 42.8% and Tempur International 56.6%; Sealy 30.9%. So Tempur North America was up year-over-year about 80 basis points; Tempur International was down a little over 300 basis points; Sealy was down about 370 basis points. From an operating margin standpoint, Tempur North America and this includes corporate expense 11.3%, which is up 390 basis points year-over-year; Tempur International 17.2%, which is down about 500 basis points and Sealy 8.3%, which is down about 200 basis points.

All right. Thank you. And then based on kind of your earlier comments on about the adjustable basis. Is it roughly a 125 basis point drag, my quick math is going to get to me to in the Tempur North America margin?

Well, we said it was about a 100 basis points on the company. So, on the Tempur North America it’s more than that. So, I mean, so the business versus what we expected, we were down about a couple of 100 basis points and about half of that was because of the adjustable. So it’s the big impact on Tempur North America.

Can you quantify that or can you help me out get a number wrapped around that from that to try to get to maybe a number on that?

Based on the size of Tempur North America relative to the whole business, you’re looking at a diluted Tempur North America’s gross margins about 250 basis points or more.

Okay, I appreciate that. And then just one additional one on the margins, can you maybe walk from last year’s 60% gross margin International to this year’s 56.6% and kind of bucket out what impact currency had in some of the other moving parts in that?

Yes. I mean basically the big moving parts are the Sealy launch and that -- the Sealy launch was actually in the neighborhood of including the floor models and some of the startup costs et cetera that was almost 280 basis points of the year-over-year decline in Tempur International and then FX. The cross currency impact was in the 40 basis-point range; a little bit of country mix in there. On the year-over-year basis, the biggest impact was the cost associated with starting up Sealy.

I appreciate that. Thank you and that’s it for my questions. And best of luck going forward.

Thank you.

(Operator Instructions). Our quarter comes from Karru Martinson of Deutsche Bank. Your line is open.

Good afternoon. I was wondering if you can provide a little color in terms of sell-through at the price points. Are you seeing consumers continuing to trade up or is there resistance at their additional levels?

We’re seeing good response to Tempur products. And the Tempur average unit selling prices are doing very well, in fact they’re going up. So we’re not seeing resistance per se. I mean what I don’t think one can deduce is that the whole market is moving up. I don’t think one can say that the entire market is moving up. But if you look at our portfolio, our portfolio is. And obviously some of the Stearns & Foster products are doing very well and the high-end Hybrid Posturepedic for example are doing well. So -- but I think frankly that’s because we’re gaining share. I don’t think that’s a fundamental thing that the industry or the consumer as a whole are moving up.

Okay. And when you look at the capacity constraints that you experienced here, will see a little bit going forward here. I mean are you seeing any force pace or spots being taken away from your or how are the retailers handling those constraints?

No, I mean we haven’t been, if anything we’re gaining, we’re gaining. So I think one of the things that we’re very focused on kind of the core component of the strategy of the combination of Tempur and Sealy is to have a line of products that are complementary, so that they don’t duplicate each other. And so I think so far as we have a range of products, we take pride in the fact that everyone has a role in it; it satisfies the need of a different consumer. And if we can do that as well as take the average unit selling price up, and we’re moving in the right direction. And you combine that with an increased proportion of products being sold with adjustable base that takes it higher, the average ticket price.

Thank you very much guys, appreciate it.

Yes.

Our next question comes from Kathryn Lynn of Bank of America. Your line is open.

Hi, this is Kathryn, I’m on for Denise Chai. I was wondering just on Germany and Benelux, I know it’s been soft in for a while, but has there been any improvement? And just why do think the market is still so soft there?

It’s quite -- it’s obviously a big country and a variety of reasons. There is a degree, which is macroeconomic and then there are other issues where there is some new product introductions of very different to the Tempur type of product which are at the lower end, which are growing in Germany. There is some -- traditionally Germany doesn’t have very many small proportion of spring mattresses. And there are spring mattresses that are being imported and sold in Germany which is affecting the overall market. So, there is -- it’s sort of an anomaly within Europe, but that is what’s happening.

Okay, got it. Thanks. And just on some of the products you introduced in Las Vegas in July, I was wondering how those have been performing and what are you expecting from them in 4Q and 2015?

Obviously the big focus from a Tempur point of view has been the products that were announced in January. We did roll out some new pillows that are just rolling out. The big launch from a Sealy front was the Sealy entry level product range, the Sealy brand. And we’re quite excited about those. They are doing really quite well; we’re very proud of them; they are great products. And it’s a product range that is a very good value for the money and a very good looking product and it’s getting a very positive response from retailers and we’re quite excited about it.

Thanks.

Our next question comes from Carla Casella of JPMorgan. Your line is open.

Hi. This is Paul Simenauer on the line for Carla Casella. You mentioned that you’ve managed your credit agreement earlier this month, what are your priorities there for your licensees in JVs and do you expect to have opportunity to buying licensees and what your comfort with leverage is there?

Yes. Well, we’re not going to run down a priority list. But from a strategy standpoint, we want to unify the brand and we’re taking to Sealy brand here to the extent possible globally. So, there are opportunities out there that was the reason why we amended the agreement to have more flexibility to be able to go after some of those opportunities. We did just quarter ago at Japan and Europe. We’ve got some start-up that’s there in terms of getting those going in, but we’ll get through that relatively quickly. And then we’ll focus on other opportunities. But there are a number of different opportunities in different parts of the world. But from a strategy standpoint, we want to unify the brand and the business. Anything you want to add Mark?

No, I mean I think one of the things that is important as we’ve said before, there are going to be acquisitions that we’ll make strategic acquisitions. And what we were able to do with this new structure is that it just gives us an increased amount of flexibility. So, as things become available, we can move very quickly. But obviously we’re not going to list all the things, we work on all go to say. So this is an ongoing thing and it's something that we're always looking on in the background in a variety of different areas.

Got it. And then how high do you think you'd take leverage if you found the right deal.

Well, we're still limited. We have a leverage covenant. The leverage covenant is right now under the new agreement, 4.75, which is what it was under the old agreement. Under the old agreement, the covenant stepped down pretty dramatically over the next year where under the new agreement, it still steps down, but it steps down over a multiyear period as opposed to over the next year. So, what would we do at max will be what we could do under the agreement. But we don't have a per se this is where we want to be. We're going to keep reducing our leverage. Unless there is a deal that makes sense that changes the trajectory a little bit. But our current credit agreement requires us to meet certain leverage levels overtime.

Perfect. Thank you so much.

Our next question comes from Josh Borstein of Longbow Research. Your line is open.

Hi. And just a follow-up on that last question on the balance sheet, you de-levered a little bit it, it's kinds of like ahead of expectations. What are your plans going forward for further deleveraging the balance sheet and paying down debt?

Well, I think as I just said, our expectations are we will short of coming to conclusion that we transact on acquisition opportunity, the focus is to continue to de-lever. And as we didn’t buy something; licensees, a joint venture or something then we would continue to de-lever and we’d continue to de-lever in the direction that we had previously anticipated, which was each year cash flow is going to go to reducing debt. If what the adjustment in the credit agreement does those it gives us the opportunity to take advantage of some of the global opportunities that may come our way.

Okay, thanks. And then just last on the TEMPUR-Breeze you talked last quarter about launching the Breeze in Asia, where -- what countries is the Breeze currently in, I know it’s in Germany, but any other countries in Europe any countries in Asia right now?

It’s all over the place, it’s all over now. And it’s doing well, it’s very well received product, people like it.

I know you had mentioned Mark that it was a little more cannibalistic of existing Tempur mattresses than originally anticipated. Is that still the case?

Yes. That continues to be the case. I mean it’s a very popular product it is to larger extent that we had anticipated cannibalistic. But it’s a good product because it expands -- it’s not only that it’s well like, it sort of new; it keeps us front of mind not only for the consumer, but also for the RSAs and for the retailers around the world. So it’s a good product. It is more cannibalistic for example than the Breeze is in America.

Great. Thanks guys.

Yes.

At this time, I am showing no further questions. I’d like to turn the call over to Mark Sarvary for any further remarks.

Thank you. We look forward to talking with you all again early next year when we host our fourth quarter earnings conference call. Thanks for joining us this evening.