8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) March 4, 2013

 

 

TEMPUR-PEDIC INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-31922   33-1022198

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

1000 Tempur Way

Lexington, Kentucky 40511

(Address of principal executive offices) (Zip Code)

(800) 878-8889

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 7.01. Regulation FD Disclosure

On March 4. 2013, Tempur-Pedic International Inc. ( the “Company”) will present at the Raymond James Institutional Investors Conference (the “Conference”). Attached as Exhibit 99.1 to this report and furnished under this Item 7.01 are copies of slides used by the Company at the Conference.

The information in this report (including Exhibit 99.1) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit

  

Description

99.1    Tempur-Pedic International Inc. Investor Presentation


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: March 4, 2013

 

Tempur-Pedic International Inc.
By:   /s/ DALE E WILLIAMS
  Name: Dale E. Williams
 

Title: Executive Vice President and Chief

Financial Officer


EXHIBIT INDEX

 

Exhibit

  

Description

99.1    Tempur-Pedic International Inc. Investor Presentation
EX-99.1
1
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Exhibit 99.1


Note Regarding Trademarks, Trade Names and Service Marks:  Tempur, Tempur-Pedic, TEMPUR-Cloud Collection, TEMPUR-Cloud Select, TEMPUR-Cloud Supreme, TEMPUR-Cloud Supreme Breeze,
TEMPUR-Cloud Luxe, TEMPUR-Cloud Allura, TEMPUR-Cloud Luxe Breeze, TEMPUR-Choice Collection, TEMPUR-Choice Supreme, TEMPUR-Choice Luxe, TEMPUR-Weightless Collection, TEMPUR-
Weightless Select, TEMPUR-Weightless Supreme, TEMPUR-Contour Collection, TEMPUR-Contour, TEMPUR-Contour Select, TEMPUR-Contour Signature, TEMPUR-Rhapsody, TEMPUR-Rhapsody Breeze,
TEMPUR-Allura, GrandBed, TEMPUR-Simplicity Collection, TEMPUR Original Collection, TEMPUR Sensation Collection, TEMPUR-Ergo Advanced System, TEMPUR-Ergo Premier, TEMPUR-Cloud Pillow,
TEMPUR-Neck Pillow, TEMPUR-Symphony Pillow, TEMPUR-Comfort Pillow, TEMPUR-Rhapsody Pillow, and TEMPUR-Traditional Pillow are trademarks, trade names or service marks of Tempur-Pedic
International Inc. and its subsidiaries.
Sealy, Sealy Posturepedic, Stearns & Foster, and Optimum are trademarks, trade names or service marks of Sealy Corporation and its subsidiaries. All other trademarks, trade names and service marks in
this presentation are the property of the respective owners.
Forward-Looking Statements
2
This presentation contains "forward-looking statements,”
within the meaning of 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," "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 proposed
initiatives and product introductions; the Company’s growth potential and strong brand; the proposed merger with Sealy Corporation, including
expectations regarding earnings accretion, cost synergies and revenue synergies, and the ability to invest in key growth areas and rapidly delever the
combined company; and expectations regarding the Company’s net sales and adjusted EPS for 2013. 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
general
economic,
financial
and
industry
conditions,
particularly
in
the
retail
sector,
as
well
as
consumer
confidence and the availability of consumer financing; 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; 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; changing commodity costs; and the effect of
future legislative or regulatory changes.
Additional information concerning these and other risks and uncertainties are discussed in the Company's filings with the Securities and Exchange
Commission, including without limitation the Company's Annual Report on Form 10-K under the headings "Special Note Regarding Forward-Looking
Statements"
and
"Risk
Factors."
In
addition,
the
proposed
merger
with
Sealy
presents
risk
factors
including
the
ability
of
the
parties
to
complete
the
proposed merger in a timely manner or at all; satisfaction of the conditions precedent to the proposed merger, the ability to secure regulatory approvals;
the possibility of litigation (including relating to the merger itself); and the ability to successfully integrate Sealy into Tempur-Pedic’s operations and realize
synergies from the proposed transaction.  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 for any reason, including to reflect events or circumstances after the date on which such statements
are made or to reflect the occurrence of anticipated or unanticipated events or circumstances.


Tempur-Pedic Overview


Tempur Vision
People who sleep on TEMPUR material sleep better than
those who don’t
Our goal is to become the world’s
favorite mattress and pillow brand
To achieve our goal we will:
1.
Make sure everyone knows they would sleep better on TEMPUR material
2.
Make sure there is a TEMPUR mattress and pillow that appeals to everyone
3.
Make sure that TEMPUR mattresses are available to everyone
4.
Make sure TEMPUR material continues to deliver the best sleep
Make sure our cost structure is optimized to enable marketing and
product investments
4


Retail Price Point
$2,499-$7,999
$3,499-$3,999
$1,999-$4,999
$2,199-$2,699
$1,399
Tempur-Pedic “At-a-Glance”
Leading global specialty mattress manufacturer
Uniquely consumer focused and marketed
product that is consumer preferred
Additional products include: adjustable bases,
pillows, bed linens, slippers and cushions
Products are sold under the TEMPUR and
TEMPUR-PEDIC brand names
2012 Revenue: $1,403 million
2012 Adjusted EBITDA: $303 million
Company Highlights
By Product
Brand Portfolio
Sales Mix ¹
By Geography
5
Mattresses
Pillows
Other
1
Last 12-months ended December 31, 2012
North America
International
Note: TEMPUR-Choice Collection expected availability 2Q 2013.


6
Growth Driven by Successful Innovation
Contour
HD
Cloud
Net Sales ($ in billions)
Contour
HD
Cloud
Contour
HD
Cloud
Contour
HD
Cloud
Simplicity
Weightless
Original
Sensation
Original
Sensation
Original
Sensation
Cloud
Original
Sensation
Cloud
TEMPUR-CLOUD has been a major success in
North America and Internationally
Introduced in North America in November
2009 and in International markets beginning in
March 2011
Most successful innovation to date and quickly
became Tempur-Pedic’s top selling collection
TEMPUR-CLOUD
Other Innovations
TEMPUR-Sensation
TEMPUR-Weightless
TEMPUR-Breeze Technology
TEMPUR-Choice
1
TEMPUR-Ergo
Premier
Adjustable
1
Pillows and Slippers
Cloud North America
Late 2009, 2010
Cloud Int’l
2011
Weightless
Breeze Tech
Late 2012
Simplicity
2012
Tempur NA
Mattress
Collections
Tempur
International
Mattress
Collections
1
Expected availability 2Q 2013.
Source: Company filings, management estimates. For a discussion of the Company’s performance, please refer to the Company’s 10Q and 10K filings.
Choice
2013
1
Original
Sensation
Cloud
Contour
HD
Cloud
Simplicity
Weightless
Choice
$0.8
$1.1
$1.4
$1.4
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
2009
2010
2011
2012
2013E


Diversified Global Platform With State-of-the-Art
Manufacturing Facilities
Subsidiary
Third Party
Global Footprint
Global Manufacturing Presence
In 2012 generated 69% of revenue from North 
America and 31% from international operations
> $2.5B of sales capacity
across three existing
manufacturing facilities
Capacity utilization
approximately 45%
U.S. Facilities
Global Facilities
Manufacturing Facility
Virginia
New Mexico
R&D Facility 
Virginia
Manufacturing Facility 
Denmark
R&D Facility 
Denmark
Virginia (540K sq ft)
New Mexico (800K sq ft)
Denmark (517K sq ft)
7


Strong, Established Management Team
Prior Experience
Years
Name
Position
Prior Experience
Consumer
Products
Inter'l
with
Tempur
Mark Sarvary
President and CEO
President, Campbell Soup North America
CEO, J. Crew Group
5
President, Stouffer's Frozen Food Division at Nestle
Rick Anderson
EVP and President,
VP, Gillette                                                    
North America
Gillette / P&G
7
Matt Clift*
EVP, Global Operations
VP / GM Lexmark International
Lexmark / IBM
8
Lou Jones
EVP and General Counsel
General Counsel, Papa John's International
SVP, Blockbuster, Inc.
4
David Montgomery
EVP and President,
President, Rubbermaid Europe      
International
VP, Black & Decker Europe, Middle East, Africa
10
Brad Patrick
EVP, Human Resources
SVP, Sara Lee Corporation
Gillette / P&G
3
Delta Air Lines
Dale Williams
EVP and CFO
CFO, Honeywell Control Products
CFO, Saga Systems
10
CFO, GE Information Systems
Tim Yaggi
COO
Group President, Masco Corporation
Joined
EVP, Whirlpool Corporation
2013
Norelco (Philips)
8
Note: Matt Clift is retiring in 2013.


Net Sales
Net Sales decreased 1% Y/Y for the full year ended December 31, 2012
-4.0% in North America
+6.1%
Internationally,
+11.3%
approximately
on
a
constant
currency
basis¹
($ in millions)
1
For
a
discussion
of
the
Company’s
performance,
please
refer
to
the
Company’s
10Q
and
10K
filings.
9
The
references
to
“constant
currency
basis”
in
this
presentation
do
not
include
operational
impacts
that
could
result
from
fluctuations
in
foreign
currency
rates.
Certain
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. Refer to ITEM 7A under Part II of the
Company’s 2012 Form 10-K.


Gross Margin
Gross margin decreased 150bps Y/Y for the full year ended December 31,
2012
as a result of:
Increased promotions and discounts, new product introductions and
unfavorable product mix
Offset partially by geographic mix
For a discussion of the Company’s performance, please refer to the Company’s 10Q and 10K  filings.
10


Operating Margin
Operating margin decreased 630 bps Y/Y for the full year ended December 31,
2012,
primarily
as
a
result
of:
Increased Selling & Marketing expenses +320bps Y/Y (Advertising investment
+120bps Y/Y)
General, administrative and other (including R&D) expenses increased
+160bps
For a discussion of the Company’s performance, please refer to the Company’s 10Q and 10K  filings.
11


Tempur-Pedic
Well positioned in an attractive market
Executing on strategy to improve competitive position, market share and
shareholder value:
Product Innovation
Strengthening Brand
Restore Margins
Significant long term growth potential
Acquiring Sealy to enhance strategic position and broaden global
opportunity
Note: For a discussion of the Company’s performance, please refer to the Company’s 10K and 10Q filings.
12


Sealy Overview


Business Highlights
Sales Breakdown
Sealy is a leading bedding manufacturer in the U.S.
Manufactures a full line of bedding products under the
Sealy, Posturepedic, Stearns & Foster and Optimum brand
names
Stearns & Foster addresses growth at premium price
points, and achieved strong growth in 2012
Leading global brand with significant global scale
Top market position in Canada, Mexico and
Argentina
Continuing investments in vertical integration in
Mexico and South America
Expanding manufacturing and retail presence in
China
Owned and operated retail stores in South America
and Asia
Founded in 1881 and is based in Trinity, NC
FY 2012 Sales by Geography
Net Sales $1.3Bn
United States
77%
Canada
15%
Other
8%
FY 2012 U.S. Sales
U.S. Sales $1.0Bn
U.S. Innerspring
86%
U.S. Specialty
12%
U.S. Other
2%
Leading global bedding manufacturer with
broadest portfolio of established brands
14
Sealy “At-a-Glance”
Note: Sealy’s FY 2012  ended December 2, 2012.  For a discussion of the Sealy’s performance, please refer to Sealy’s 10Q and 10K  filings.


Strategic Rationale For The Acquisition
Comprehensive Portfolio of Iconic Brands
Tempur-Pedic,
Sealy,
Sealy
Posturepedic,
and
Stearns
&
Foster
are
among
the
most
highly
recognized
brands
in
North
America
Strong brand recognition across South America, Europe, and Asia with Tempur-Pedic and Sealy
Complementary Product Offering
Tempur-Pedic’s expertise in visco-elastic
Sealy’s expertise in innerspring
Ability to leverage more in R&D to strengthen existing products and develop innovative new offerings
Global Footprint
Tempur-Pedic: Strong presence around the world, particularly in North America, Europe and Asia
Sealy: Well represented in U.S., Canada, Mexico, Argentina and Asia
Significant Value Creation
Expected to be accretive in the first full year of operations
Cost synergy estimate in excess of $40 million by the third year
Attractive
upside
potential
from
revenue
synergies
across
organizations
hybrid
technologies,
cross-selling,
international
Strong Financial Characteristics
Combined adjusted EBITDA of $453 million for last 12 months¹
Ability to invest in key growth areas
Commitment
to
delever
Cash
flow
characteristics
will
enable
rapid
deleveraging
15
1
Last 12-months ended December 31, 2012 for Tempur-Pedic and December 2, 2012 for Sealy. See Appendix for Adjusted EBITDA reconciliation.


Combined Comprehensive Portfolio of Iconic Brands
16


Appendix


18
Use of Non-GAAP Financial Measures
Tempur-Pedic International Inc. (the “Company”) has presented the following non-GAAP financial measures in this presentation:
adjusted EBITDA of each of the Company and Sealy, and adjusted EBITDA of the combined company. The Company and Sealy each
define its non-GAAP adjusted EBITDA to exclude the following: (1) interest expense, net; (2) provision for income taxes; and (3)
depreciation and amortization expense. The Company and Sealy also exclude certain unusual items and other adjustments permitted in
calculating its respective debt covenants in its debt agreements. The reconciliations of these historical non-GAAP measures to each of
Tempur-Pedic’s and Sealy’s GAAP financial measures for the periods presented, are set forth on slide 19.
The Company believes the use of these non-GAAP financial measures are useful to investors in comparing the
results of operations for
comparable periods by eliminating certain of the more significant effects of adjusted EBITDA. These measures also reflect how the
Company and Sealy manage their businesses internally. In addition to the adjustments included in the calculation of the Company’s
non-GAAP
adjusted
EBITDA
eliminates
the
effects
of
financing,
income
taxes
and
the
accounting
effects
of
capital
spending
and
acquisitions.
As
with
the
items
eliminated
in
its
calculation
of
non-GAAP
adjusted
EBITDA,
these
items
may
vary
for
different
companies for reasons unrelated to the overall operating performance of a company’s business. When analyzing Tempur-Pedic’s,
Sealy’s and the combined company’s operating performance, investors should not consider these non-GAAP financial measures as a
substitute for comparable measures in accordance with GAAP.


19
Adjusted EBITDA Reconciliation
1
Last 12-months ended December 31, 2012 for Tempur-Pedic and December 2, 2012 for Sealy.
LTM Combined Adjusted EBITDA
($ in millions)
2
Includes Comfort Revolution acquisition costs, noncontrolling interest, and various immaterial adjustments.
Tempur-Pedic
Sealy
Combined
Net income (loss)
$106.8
($1.2)
$105.6
Interest expense
18.8
89.3
108.1
Income taxes
122.4
12.5
134.9
Depreciation and amortization
42.0
26.4
68.4
EBITDA
$290.0
$127.1
$417.1
Transaction costs
8.9
2.5
11.4
Integration costs
2.2
2.2
Refinancing charges
3.7
3.7
Non-cash compensation
8.1
8.1
Restructuring and impairment related charges
1.5
2.4
3.9
Discontinued operations
2.0
2.0
Other ²
4.3
4.3
Adjusted EBITDA
$302.6
$150.1
$452.7
1
1
1


1
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Exhibit 99.1