Good day, ladies and gentlemen, and welcome to the Tempur Sealy Second Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. We will have a question-and-answer session later on and the instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. Now I would like to welcome our host for today's conference, Mr. Mark Rupe. Please begin.

Thanks, Carmen. Good evening and thank you for participating in today's call. Joining me at our Lexington headquarters are Tim Yaggi, Interim President and CEO, Dale Williams, EVP and CFO and Barry Hytinen EVP Financing Corporate Development. 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 provisions of the Private Securities Litigation Reform Act of 1995. Investor are cautioned that forward-looking statements including the company's expectations regarding sales, earnings or adjusted net income or the integration with Sealy involve uncertainties. Actual results may differ due to a variety of factors that could adversely affect the company's business. The factors that could cause 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, 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, and information regarding the methodology used for constant currency presentation is posted on the company's website at tempursealy.com and filed with the SEC. In connection with the conference call the company has prepared an investor presentation which has been filed with the SEC and is also available on the Investor Relations section of the company's website. Management comments today will supplement the detailed information provided in both the press release and the investor presentation. With that introduction I'll turn the call over to Tim Yaggi.

Thanks Mark and good evening everyone. Tonight we will review our second quarter results, give you an update on the progress we're making on our key strategic initiatives and view our updated full year 2015 financial outlook. We had a solid second quarter with sales and earnings coming in ahead of plan. Net sales were up approximately 7%. Adjusted EBITDA was up 16% and adjusted EPS was up 36%. And in constant currency, sales were up 11%, adjusted EBITDA was up 21% and adjusted EPS up 46%. Margins showed significant improvement. Adjusted operating margin increased 140 basis points and our adjusted contribution margin was 29%. Our North America adjusted contribution margin was 36% offset by international which was driven by higher sales of Sealy products. In terms of our outlook, our key strategic focus areas are to strengthen our industry-leading brand, our ultimate goal to consistently increase our earnings quarter-after-quarter as we make progress against these initiatives. And we are building our brand. In the second quarter, we spent more in advertising, we had a compelling message and we achieved better media buying efficiency. The benefits were clear, site traffic and searches for retail locations to buy our products increased significantly and led to strong sales strong sales growth in Tempur-Pedic share gains. We're also pleased with the level quality and participation in our joint advertising initiatives as we work with our customers to improve effectiveness. Our product innovation continues to deliver success. We identified an opportunity to broaden the reach of our Tempur-Pedic brand with a third field. Most consumers sleep on and innerspring mattress. The new TEMPUR-Flex products combined the more familiar feel of an innerspring product with the benefits of temper Tempur material. We had good launch execution and FLEX is off to a very strong start…

Thanks Tim. I have thoroughly enjoyed my time here. We have achieved a great deal over the last 12 years and it wouldn't have been possible without having great products and a team of passionate and dedicated employees focused on growing the business throughout the world. TemperSealy's opportunity is substantial and I'm confident that Barry's leadership as CFO will drive additional value for TemperSealy stockholders in the years to come. I am very pleased to make this transition as the business performance has improved and is on the right track. I would now focus my commentary on the second quarter results I'm going to turn it over to Barry to discuss our updated full year guidance. Consolidated net sales for the second quarter were $764.4 million up 6.9% versus the second quarter last year and on a constant currency basis up 10.9%. Adjusted gross margin improved 180 basis points to 39.4%. Adjusted operating margin improved 140 basis points to 9.2%. Margin improvement was driven principally by the North America business segment. A discussion of adjusted operating income and margin excludes $6.7 million of integration costs, as well as $11.7 million of additional costs related to the company's 2015 Annual Meeting, the CEO transition, and related retention expense. As disclosed in the release the majority of the integration costs occurred North America and included costs related to the transition of manufacturing facilities and distribution networks. In North America net sales increased 9.1% and on a constant currency basis were up 10.2%. Strong growth of 11% in the U.S. was driven by high teen’s growth for Tempur-Pedic's brand and mid-single-digit growth for the Sealy brands. Our growth in the U.S. was offset slightly by a foreign exchange driven decline in Canada. Canada sales were down 7.8% but up 3.9% on a constant…

Thanks Dale and thank you both for your very supportive comments and Dale sincere thanks for your leadership over so many years. I am very pleased and excited to lead our global financial organization and look forward to interacting with the investment community in the coming weeks ahead. Today the company updated financial guidance for 2015. The company currently expects net sales to be in a range of 3.125 billion to 3.175 billion which reflects growth of 4.5% to 6% compared to 2014 and approximately a 3.5% headwind from foreign exchange, and adjusted EPS to be in a range of $3.00 to $3.20 which reflects growth of 13% to 21% compared to 2014 and approximately a $0.30 impact from unfavorable foreign exchange. The increase in our 2015 guidance is based on the better-than-expected results in the second quarter in our current outlook for the remainder of the year. In the second half we expect continued solid growth in sales, margins and earnings. Similar to the last year we are expecting margins in earnings to increase in the second half relative to the first as seasonality strengthens and product heavy investments that occur early in the year dissipate. It is important to note that our guidance is based on adjusted figures in dependent on the factors that Mark discussed at the beginning of tonight call. In closing we had a solid second-quarter with results ahead of plan. The key pillars of our strategy are working our advertising messages compelling and has been effective in our new product innovation has been successful. Our enhanced focus on cost is beginning to pay off as evidenced by the increased flow-through of our revenue to profit. We have significant opportunities ahead of us and we are focused on delivering on our commitments. And with that Carmen would you please open the line for questions.

Thank you. [Operator Instructions] And our first question comes from the line of Seth Basham from Wedbush Securities. Please go ahead.

Good afternoon.

Hi, Seth, good afternoon.

My first question is on the TEMPUR-Flex it seems like you've had a good launch of that new product. You quantified some of the expected opportunities in various places and parts around the world, could you help us think about what the long-term product outlook is there? How many millions of dollars of sales you think that can do annually?

Well set we're very pleased with the launch of Flex. We think it has done exactly what we had hoped it would do and plan for to do which is to expand the reach of the Tempur brand. We have many people who aspired to buy the Tempur brand but didn't really like the field of Cloud or Contour and we had the opportunity to deliver a feel that was more responsive. But still have that Tempur benefit and so it has been appealing and the strategy was to try to bring as many people as possible from below $2000 to about $2000. Previously, if you wanted Tempur but you didn't like that feel you would tend to drop down to a lower price point product. Now our trade customers and ourselves have the opportunity to sell a more premium bed. So that strategy is working with like I said it's off to a great start. I think it's fairly early to try to quantify what kind of upside we have and how much of the lift is going to be incremental versus some amount of cannibalism. And also internationally, I think there are long-term opportunities, but we have yet to quantify that.

Okay. That's helpful perspective. One follow-up related to the Flex. You probably spent a lot of advertising launching it, as you think that your advertising plans for the year are you still staying the same rate of percentage of sales?

Yeah. The rate was actually a bit higher in the second quarter for two reasons. One it was our belief that it was really good product news. We wanted to get behind it and shout about it and make sure that Flex got off to a great start which it has. So that was one driver. And the second driver is you'll see a little bit more of spending in the bucket that we call integrated advertising which is the advertising we do jointly with our customers. And our philosophy is we want to make those dollars work harder and move more of the price based kind of spends to grand building kind of spend. So as we do that we can then track it as advertising measure it and make sure we're getting the spending rate and performance that we expect to get out of it. So it's back to our strategy of making our trade spending work harder so that's a little bit why you saw the greater spending Q2 as well. For the second half, it will be not as high as what's in the second quarter but a little bit elevated compared to what we've guided earlier.

Got it. Very helpful. Thank you. And good luck and good luck to you Dale.

Thank you.

Thank you.

And our next question is from the line of Budd Bugatch from Raymond James.

Good afternoon. I guess I became Italian quickly. First of all, Dale good luck to you. Barry congratulations to you on your new role. I guess my question - my first question is on the Sealy progress inside the plant I know you said you - Tim I think you said you started the new Hagerstown plant can you talk a little bit about where we are in getting the same equipment footprint in the remaining plants and getting to a level where you can actually measure and maybe implement best practices.

Sure. The two new plants and they were built from the ground up. It's important that they're both reflective of improved equipment and layout but they are also importantly mega facility so we get the benefit of combining shipments as well. And every time we take learning's from the new facility, we decide what we can do differently in terms of both layout and equipment investments in the other plants. But it's not just about equipment investments there are a number in my view good lean best practices that we can identify defined and then bring to the other plants. I think there was a fair amount of lean disciplined in the past that perhaps we got away from as the great recession occurred in times got a little tough and we squeezed some personnel out. And I think we with a little bit of reinvestment and commitment to lean we can deploy best practices. So - but we're in the process of defining those and starting to roll those out. And in fact, I can tell you, we have 15 plants, and I would say 12 to 13 of them showed progress in the recent period. We have a couple that are laggards that we've intensely gone after. We sent some of our most seasoned veterans down to a plant in Texas, for example. And in the last few weeks, we've seen a lot of progress there. So I'm encouraged that we're seeing good progress and while it is a process, we're very confident that we're going to get to the U.S. Sealy margins that we had previously communicated.

Okay. And my follow-up really has to do with the balance of the leadership transition that you're in progress and I realize it's a little bit maybe uncomfortable to ask or answer this question given your interim status in the retention bonuses retention payments that were made. And I think other agreements that were done. But where are we at, it seems to me we're approaching 90 days from the date of that and as I recall during the time of the arguments were going on, we were told or the investment community was told that we're talking to a lot of people, we're talking to people and I think the plan was to go there, the communication was the inference was that we're going to have some better timing of that were sooner than later. Where are we on that? What's can the investors expect over the next short period of time?

Sure. But well, obviously, the Board formed the committee to run the search. And I can tell you that they are actively viewing and bedding candidates. It is a process, and of course, they want to make the right decisions. I don't have any updates for you on timing and what I can assure you thought is that this team is incredibly focused on executing our strategy, delivering our commitments. I feel like we have prioritized the initiatives that are going to that are the most - matter the most in terms of driving value. And you might think that there's some distraction, but there isn't. We're focused. We're aligned. We feel good about the quarter. We feel good about the back half and that's the way we're operating.

Okay. Good luck to you on the balance of the year.

Thank you.

Thanks a lot.

And our next question is from the line of Josh Borstein from Longbow Research.

Good afternoon everyone, and congrats on a nice quarter. Thank you.

Dale, thank you for your service. It's been nice working with you and Barry welcome to your new role.

Thank you.

Thanks.

Just a question on the roll out of Sealy in Europe and Japan. Just could you go over what any newer in the rollout, if it's in all the countries right now that you want or all the doors that you want?

I would say it's still relatively early. We didn't see a whole lot of traction. We started to see a little bit of improvement towards the backend of the quarter and into July. But as you know, we had some issues with delivery of the products early on. And so the team has now had to reinvigorate basically the channels to get them excited again about the product. I was in Europe recently with the team and I can tell you that there is still excitement that the product is differentiated from typical offerings in Europe, and it's still compelling. But we have to kind of reinvigorate the excitement around our customers. So, lots of work to do there. It's still an early days. But the team believes that long-term, this is still a very good opportunity.

And, are all the contract manufacturer issues now work through?

Yes. Absolutely.

Okay great and then just one follow-up for you with respect to the guidance raise on the top line. Where is the outperformance coming from that gives you the confidence to raise the revenue guide?

Sure Josh. Our North American business has been strong and as Tim mentioned we outperformed in the second quarter. We have a positive bias is related to FLEX and Posturepedic and that is the principal driver as we think about the second half.

Okay. So it sounds like North America is where the outperformance and within that it's FLEX and it's Sealy Posturepedic?

Right I would say overall the Tempur business was very strong. FLEX was certainly a big piece of it but we got some really nice efficiencies in our factory. Cost productivity we talk about in Sealy but it's important in Tempur too. We leverage the volume nicely in the plant. We've got the benefit of pricing so a number of factors drove a really nice improvement in Tempur. And so we feel really good about that business.

Thank you for that and good luck in 3Q here.

Thank you.

And your next question is from the line of Brad Thomas from KeyBanc Capital Markets. Please go ahead.

Thank you. Congratulations on a great quarter. Dale, best wishes and Barry congratulations. I was hoping we could maybe talk about gross margin and some of the puts and the stakes here for this quarter?

Sure if we look at the second quarter gross margin performance was pretty good, for the overall business. And the gross margin as I said in my prepared remarks internationally gross margin was down a little bit from a North America standpoint we saw good improvement in gross margin depending on if you want to look at it on recorded or constant currency. But outstanding performance there gross margins in the U.S. in North America up 280 basis points. International was down 140. If you look at the U.S. gross margins were up quite a bit and we mentioned that Sealy margin was actually negative. But that implies is the Tempur margins were up significantly to the tune of over 600 basis points. And the drivers of that improvement in Tempur was the productivity in the plants in the volume. We talk a lot about the integration related to distribution well a lot of that benefit accrues to Tempur because it's the Tempur products that are now writing on Sealy trucks and it makes Tempur's transportation costs much less . You also have the price increases in Tempur et cetera. So there are a lot of very strong improvements in the Tempur margin that makes us feel very good about the progress there.

Great. And how are you thinking about gross margin for the third quarter and maybe specifically would you seeing in terms of the input costs?

I'll take that in reverse order Brad. From a standpoint of commodities and input costs we did experience a slight benefit in the second quarter as you might recall we had some unfavorability actually from commodities in the first quarter and so that favorability continues to ramp we've actually included in our updated guidance several million of benefit from commodities in the remainder of the year. And as it relates to guidance for gross margin I think at the beginning of the year we indicated that we thought it be right around 40% and were at probably a tip ahead of that for the full year as the way we're thinking about it.

Great. Thank you so much.

And our next question comes from Peter Keith from Piper Jaffray. Your line is now open.

Hey thanks a lot and congrats on the nice results everyone. I was hoping you could talk a little bit about the Tempur progress in Europe. I know it's been one area of sluggishness. Has there been any uptick or signs of improvement as you kind of coming out of Q2 and into Q3 for the Tempur European business specifically?

No. While we're very bullish about FLEX in the results here, we haven't seen as much of a good environment certainly in Europe for example in Germany while we're starting to see a little bit of recovery it tends to be at the low end of the business as opposed to recovery in the premium segment. So as we think about our outlook were a little bit more bullish on the U.S. and a little bit more conservative right now on our international business mainly due to the environment.

Okay. Thank you, Tim. And just thinking about the price increases that are been incorporated, I believe you did one in March in another smaller follow-on in May. At the Analyst Day earlier this year you thought it would be about a $25 million benefit from the price increases where do we stand now that you've had are we so it 25 or is that a little bit bigger number?

Actually we're a little bit bigger. We had a price increase in March as you recall and smaller one in May. We got about an 8 million give or take benefit in the quarter and I would say you can analyze - annualize that and that would be about right.

Okay. Thanks a lot. Again others have said Dale it's been a pleasure working with you in Barry looking forward to being in touch.

Thanks.

[Operating Instruction] And our next question is from the line of John Baugh from Stifel.

Thank you and Dale my best wishes as well. Very congratulations. Quickly just on Sealy Europe, could you sort of tell us where we are in terms of placements in doors in product acceptance are removing country by country. Any feel for how that moved the international revenue.

Yes a lot of the growth in international from Sealy in particular came from Asia and Latin America. We feel really good about that so constant currency we had a 14% revenue growth. But again a fair amount of that came from other parts of the world. In terms of Europe, we had the probably have a few hundred doors now we have to again rebuilt the confidence rebuild the inventory levels and make sure that our trade customers are confident to get behind the product. So as I said there's a lot of effort around retraining and re-excitement getting them going again so it's still relatively modest level of sales. I think it will be behind where we had hoped to be by the year-end, but again that's one aspect. We have other good buys in the business that we feel good about it overall. That's one. That's probably going to end up being a little bit of a slow ramp, but still long-term we have every confidence given the product is still as I said earlier compelling and different. We still think it's a good opportunity for us long-term it's just going to take a little bit longer.

Great. Thanks for the color. And then follow-up on cash flow. I think Dale or Barry somebody mentioned were quoted on target and we haven't generated much of any cash year-to-date from operations. Could you walk us through kind of how the back half of the year looks and if you want some view to 2016 and maybe related to the commentary around building up inventories around holidays in course of Labor Day coming up? Thank you.

Sure John from the standpoint of the way we're thinking about the full year with obviously this in the back half, we'd be looking for operating cash flow in that same kind of vicinity is what we're talking about at the beginning of the year right around 240 million give or take. And we would anticipate free cash flow would be right about 180 million to 185 million with CapEx being plus or minus 5 million of that sort. So as we're thinking about the second half, we expected to be up considerably and obviously up dramatically from the first half and that will be driven by both improved margin performance and the seasonality with sales in the outlook for the positive second half.

In terms of the building inventory it tends to be a wash. We build a little bit ahead, but it tends to washout from a working capital standpoint. Again I'll tell you that we did a little bit of it before Memorial Day. We did more of it before Fourth of July. The week after the Fourth of July, we had virtually no backorders, we had much less overtime. So we keep learning and building this muscle and we think we can do even more of it prior to Labor Day and we should be in a good position relative to last year's inefficiency and we keep getting better. But I'm pleased with what I've seen so far.

Thanks and good luck.

Thank you.

Our next question is from the line of Keith Hughes with SunTrust. Please go ahead.

Thank you. Question on the North America - I think you said Dale it was 3% unit growth in the quarter is that correct?

Correct.

And....

That's for the combined North America business.

So with Sealy its launch from the earlier new products were those Sealy numbers up somewhat to mid single-digit growth in North America Sealy?

If you look at the units the 3% was related to dollars sales for betting was up 10% in the quarter. From a unit standpoint Tempur was double-digit. But when you compare the units of Tempur to the units for Sealy there's a much higher volume of units within the Sealy business. From a - from a sale standpoint Tempur was in the high teens growth. Sealy was in mid- - low to mid single-digit topline growth and that's a factor of the transition of Posturepedic in getting the floor models discount out and all that kind of thing but our outstanding topline and unit growth within Tempur Sealy's topline growth and unit growth was a little bit slower because of the transition.

So on a blended basis just on mattresses what we're units for North America.

On a North America basis units were up 10% or I'm sorry 3%.

3%. Okay. Second question can you give us -

That would be betting units. Consistent with this is betting units.

It represents bedding units. Correct.

Yes.

Okay. And then just switching to currency can you give us the EBIT impact of currency in both segments of the quarter. The dollars?

For the second quarter?

Second quarter. Yes.

Yeah for the second quarter from a North America standpoint EBIT was affected about 2 million. International was actually about a wash. We had significant translation. Drag internationally on currency but we had what we often call cross-currency benefit that at the EBIT level negated the translation effect. And cross-currency we're quickly to give you an example our cost internationally is essentially in DKK so which is tied to the euro the euro goes down in value and it goes down more than the Japanese yen goes down you're selling Japanese yen you see a margin expansion in Japan. So that's what we call cross-currency in the cross-currency offsets the translation at the EBIT level within international.

Okay. All right. Thanks very much. Congratulations on good results. Thank you.

Thank you.

And your next question is from the line of Jessica Mace from Nomura Securities. Please go ahead.

Hi, good afternoon and congrats on the nice results.

Thank you.

My first question is about the strong Tempur margin I think you said it was up 600 basis points in the quarter. I was wondering if you could help us about what kind of opportunities remain for further improvement on the Tempur side and just how far along we are in realizing some of those benefits?

Sure. From a Tempur margin standpoint we absolutely believe that we can continue to see improvement in the Tempur margins as I said earlier, price was a factor. The fact that FLEX was a smaller rollout than the Cloud Contour last year so there's less discounts operations we saw very good improvement in the plants and in the supply chain. But you know that was partly negatively offset by mix which was related to adjustables still growing faster than mattresses. And that's going to we believe balance itself out in the second half because the second half last year was where we saw adjustables just really take off . And also product mix around the new product. FLEX is a little bit has a little bit lower margin than the core line, as we said when we launched it is a new product new technology that tends to be introduced at a slightly lower margin rate and then as we learned to build these things we're able to improve the margins. So will see margin improvement related to getting FLEX cost better. Will continue to see significant margin improvements around improving the distribution we've got ongoing productivity initiatives within Tempur. So, we think there's a lot of opportunity to keep improving Tempur margins even from whether it now.

Great thank you. And then my second question is on the forecast for operating margin to expand in the back half, more than in the first. I was wondering if you could give some color on the different buckets of sales marketing and G&A that will drive that.

Sure. As we think about looking at selling and marketing we would as Tim alluded to advertising as a percentage will come down a little bit, be more consistent with the first quarter and with leverage there'll be some lower as a percentage of sales than the second quarter Jessica. G&A we would expect to be a little bit of incremental leverage as compared to the first half, those would be the principal drivers.

Great. Thank you. All the best to Dale, and congrats, Barry.

Thank you.

Thank you.

And next question is from the line of Laura Champine from Cantor Fitzgerald. Please go ahead.

Good evening. Thanks for taking my question. It's really on the back half guidance for Tempur North America. What do you have built-in for price realization in your sales year-on-year in the back half? And how much of that do you think you give up on mix?

Well, we continue to expect about 8 million in a quarter. In terms of mix, it should be fairly consistent with what we saw in the second quarter. Maybe a little bit better in that, as Dale said, we're now comping in the back half, very good volume on adjustables. So while adjustables was still growing year-over-year in the second quarter that will moderate a bit. Flex growth is a little bit dilutive because of the start-up in the learning curve, but I think those would be the key drivers.

Got it. Thank you.

And our next question is from the line of Curtis Nagle from Bank of America Merrill Lynch. Please go ahead.

Good evening, and thanks for taking the question. Yeah, just curious on going back to the Flex, I guess any indication you have in terms of customer mix, I guess, existing versus new? And then any update in terms of improving the margin on the adjustable basis? I know it's very early in terms of universal platform, but any updates would be appreciated.

Yeah. On customer mix, we have - if I'm answering your question we have some variation between customers as to who is doing extremely well with it and who is not as far up the curve yet. And for those that are doing really well, we're trying to understand what it is that's driving it and share those best practices. I would also say that we rolled out on balance a little more than two lots per store per floor. And given the success, we would - we're going to push hard to get that third Flex unit, which oftentimes is actually the higher end part of the line. We rolled out more commonly the first two models in the line because the idea was that we were pulling people up on cheaper price points, but given the success we're going to push hard to try to get that third product out there which we call elite. So it's a combination of port pushing more elite in trying to share those best practices that we think will help further improve our success more broadly and more consistently across the trade. Did I answer your question?

You did. You did. And then just any commentary on the adjustable margin would be great?

Yeah. We have a lot of activity on cost productivity is a huge driver for us right now. And I say there's both opportunity to continue to reduce the current products and as well as applied global leverage which we talked about previously in our buying and our R&D and so forth. And we're still working very aggressively to try to do both. So in the shorter-term, I would continue to see cost productivity in the current line and then we are at the same time moving toward with the global project that we've mentioned previously.

Okay. Thank you very much.

Thank you.

And our next question is from the line of Budd Bugatch from Raymond James. Your line is now open.

Yeah. Thank you for letting me ask a follow-up. I'm curious on the balance sheet, Barry you talked about getting I think to three - getting close to the three times or three times leverage at the end of the year. Can you maybe give us a target for where you think the long-term debt entity at the end of the year end? Is it about 1.4 billion or where is that?

Yeah. That's about right we're kind of expecting to be approaching that three times leverage ratio but at the end of the year, so whether it's three one or right in that vicinity as Dale mentioned we're looking at approaching that long-term target at the end of the year or maybe in the first quarter. So we're obviously very much looking forward to that as we think about how to maximize value for shareholders through capital allocation.

And that's the net debt to EBITDA, Barry is that the way to think about that?

That's right, Budd.

And hazard guess for maybe the end of next year I know we wanted to get down closer to two at the time of the acquisition where do we think and kind of relaxed I believe a bit.

If you recall at the Investor Day you remember correctly and also at the Investor Day here earlier this year we updated that expectation for more like we felt like it would be three times after we looked at our optimal cash in capital allocation model we felt three times would be the appropriate place for the company. And so as it relates to hazard getting guess for next year we're certainly not setting any guidance here today for 2016 but I'd say that also depends on what we're doing with our total use of cash at that point. And so as Dale alluded to that would be something that we would be looking at as we approach the target here at the end of the year.

Okay. And last for me, Dale you said I think Tempur margins were up I think Tempur North America margins were up about 600 basis points year-over-year as I went back and looked at the numbers last year I think the number might have been 3.5% is that little watermark for the margin comparison I realize we're not necessarily apples-to-apples since the reframing of the segment data but help us understand what that comparison is to, is that the operating margin or is that the gross margin?

I was talking Tempur gross margins.

Talking gross margins.

Yeah.

So I think last year's gross margin was - what was it? 49 - high 40s, if I remember looking back.

Tempur was about 40.5 in the second quarter last year on gross margin, Tempur U.S.

So we're talking about 46.5 % growth.

Yeah. I said over 600 basis points so a little better than that.

And how about the operating margin comparison there?

You can't compare the operating margin because of the segment changes.

Okay. All right. Thank you very much and good luck again Dale.

Thanks.

And ladies and gentlemen this ends our Q&A session. I would like to turn the call back to Mr. Tim Yaggi for any final remarks.

We look forward to talking with you again in late October on our third quarter earnings call. Thank you for joining us this evening and have a good night.