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) August 3, 2005
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 No.) | (I.R.S. Employer Identification No.) |
1713 Jaggie Fox 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
Attached as Exhibit 99.1 to this report and furnished under this Item 7.01 are copies of slides used in investor presentations by Tempur-Pedic International Inc.
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
(c) Exhibits
| Exhibit |
Description | |
| 99.1 | Tempur-Pedic International Inc. August 2005 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: August 3, 2005
| Tempur-Pedic International Inc. | ||
| By: | /s/ Robert B. Trussell, Jr. | |
| Name: | Robert B. Trussell, Jr. | |
| Title: | Chief Executive Officer | |
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Tempur-Pedic International Inc. August 2005 Investor Presentation. |
Exhibit 99.1
Exhibit 99.1
Investor Presentation
August 2005
Forward-Looking Statements
This presentation may contain “forward-looking statements” which include information concerning the Company’s plans, objectives, goals, strategies, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. When used in this presentation, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” and variations of such words or similar expressions are intended to identify forward-looking statements. 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.
There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained in this presentation. 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. Certain of these risk factors are discussed in the Company’s filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and except as required by law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events or circumstances.
Non-GAAP Financial Information
This presentation includes certain “non-GAAP financial measures”, including pro forma net income per share. Information relating to these non-GAAP financial measures, including a presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and a reconciliation of the differences between the non-GAAP financial measures and the most directly comparable financial measures calculated and presented in accordance with GAAP, are included at the end of this presentation.
1
Industry & Business Overview
Thomas Bryant
President
2
Business Review
Leading producer of premium mattresses and pillows
Proprietary formula and manufacturing process
#1 visco-elastic market share
Global sales under the “TEMPUR™” and “Tempur-Pedic ™” trademarks
43.4% CAGR in the four years ending December 31, 2004
Sales in 60 countries through 4 diverse channels
Premium segment (>$1,000) of ~$10.6 billion global wholesale mattress market
Fastest-growing segment of U.S. market
Represented ~24% of U.S. mattress sales in 2004
TEMPURTM products provide greater overall comfort and better quality sleep
Temperature-sensitive and contours more naturally to the body
Recommended by more than 25,000 healthcare professionals
3
Business Strategy
Focus on Core Products
Focus on premium mattress and pillow franchise
Leverage vertically-integrated, proprietary manufacturing process
Continue to improve and expand product line (e.g., Euro & Original)
Further Penetrate Existing Channels
Drive new store growth of the U.S. and International Furniture & Bedding channels
Continue to increase slots per door
Continue penetration of the healthcare channel
Continue to Build Global Brand
Drive awareness of Tempur and Tempur-Pedic brands through targeted marketing and advertising campaigns
Direct response advertising generates over 3.6 billion consumer “impressions” per month in the U.S.
Investment to Support Growth
Expand manufacturing production capacity – Albuquerque facility on schedule to open 2Q06
Continued R&D investments to maintain innovation and market leadership
Augment management and employee base as growth dictates
4
Diversity Across Products
Mattresses
1H05 Sales: $284.9 million (68.6% of Total)
Queen Retail Price Point: $1,199 – $2,999
Pillows
1H05 Sales: $61.9 million (14.9% of Total)
Retail Price: $70 – $165
Adjustable Beds / Other
1H05 Sales: $68.2 million (16.4% of Total)
Retail Price:
– Adjustable Beds: $1,300 – $2,800
– Other: $35 – $150
5
Attractive Industry Growth Dynamics
Consumer demand for premium mattresses driven by:
Increased housing purchases, especially by the baby-boomer generation
Aging population with greater disposable income seeking health and sleep benefits
Increased awareness of the health benefits of a better quality mattress
Replacement cycles
Trajectory continued in 2004
Units increased 3.7%
Dollars increased 11.3%
U.S. Mattresses and Foundations
Units Shipped (000’s)
Dollar Value (mm’s)
Source: International Sleep Products Association, 2004Annual Report
6
Tempur-Pedic Addresses Fastest Growing Segment
U.S. market segments:
Over $1,000 24%
$500 – $1,000 41%
Under $500 35%
Tempur-Pedic’s addressable market: $3.6 billion
The premium market grew 36% in 2004
$5.6 Billion U.S. 2004 Market by Segment
Tempur-Pedic’s Addressable Market
Other
Source: International Sleep Products Association, 2004 Annual Report
7
Seasonality in U.S. Retail Furniture
Seasonally stronger quarters:
1Q: Pent-up demand from holiday season
3Q: Families move over the summer; pent-up demand from 2Q
Seasonally slower quarters:
2Q: Summer and outdoors activities
4Q: Holiday shopping, less focus on furniture
Sales Seasonality by Quarter
Baseline: 1Q (averages 25% of total)
2002-2004 Quarterly Average
Source: International Sleep Products Association, 2004 Annual Report
8
Robust Retail Channel Growth
Sales to established accounts increased 49% in 2004 – expect 30-35% in 2005
Average floor slots per store increased from 1.7 to 2.2 in 2004, up to 2.4 in 2Q05
Total doors targeted in U.S.: 10,000
Overall U.S. mattress market:
~$5.6 billion in 2004
U.S. Furniture Retail Net Sales / Store Count
($ in millions)
$86
9
New Mattress Introductions
The EuroBed by Tempur-Pedic™
Brought to U.S. following great performance in Europe
Striking design elements
Integrated two piece sleep system
The OriginalBed by Tempur-Pedic™
Significantly expands addressable market
Fills important price gap in premium category
Outstanding retailer reception at Las Vegas show
10
New Pillow Introductions
Domestic
The BodyPillow by Tempur-Pedic™
Supports stomach, hips, back and shoulders
International
September 2005 re-launch in Japan
New packaging and formulation
Follows successful futon roll-out
11
Cost Effective Advertising to Build Global Brand
Tempur-Pedic’s national advertising campaign drives over 3.6 billion consumer “impressions” per month
Television
Over 2.2 billion “impressions” per month
High profile events: The Apprentice, Oscar’s, Emmy’s, Grammy’s
Magazines
Over 756 million “impressions” per month
Radio
Over 581 million “impressions” per month
Includes national spots on such shows as: Bill O’Reilly, Westwood One, Dr. Laura Schlessinger, Dick Clark, Dr. Joy Browne and WOR with John Gambling
Newspapers
Over 74 million “impressions” per month
12
Continue to Build Global Brand
Clear, product-oriented advertising and credible consumer industry endorsement communicate the Tempur-Pedic proposition
13
Recommending Tempur-Pedic
Almost all of our customers have recommended Tempur-Pedic, with about two-thirds reporting that they recommended Tempur-Pedic one to five times.
42% of retail customers report that someone purchased a Tempur-Pedic mattress as a result of their recommendation.
Source: Independent survey commissioned by Tempur-Pedic
14
Financial Review
Dale Williams
SVP and Chief Financial Officer
15
Growing Net Sales and Profitability
Historical Net Sales
($ in millions)
43.4% CAGR
2000
2001
2002
2003
2004
1H05
Historical Operating Income(1)
($ in millions)
61.1% CAGR
2000
2001
2002
2003
2004
1H05
1. Includes $9.8 million in non-cash charges for the two months ended December 31, 2002 relating to the step-up in inventory as of November 1, 2002 relating to the Tempur acquisition. The year ended December 31, 2003 includes $4.1 million in compensation expense relating to stock option grants and acceleration. 2004 includes $5.4 million in compensation expense relating to stock option grants and acceleration and $0.9 million in fees related to secondary offering. 1H05 includes $1.4 million in compensation expense relating to stock option grants
16
Mattresses Key Growth Driver
New stores
Increasing slots per store
Strong acceptance of our high MSRP products
Successful direct marketing initiatives
53% growth in 1H05
Mattresses
($ in millions)
52.9% CAGR
2000
2001
2002
2003
2004
1H05
17
Growing Earnings
Pro-Forma EPS
2003
2004
49% EPS Growth
Pro-Forma EPS
($ in millions)
1H04
1H05
50% 1H EPS Growth
1 GAAP full-year EPS of $0.39 in 2003 and $0.73 in 2004 for an 87% GAAP full-year EPS growth
2 GAAP 1H EPS of $0.28 in 1H 2004 and $0.50 in 1H 2005 for a 79% GAAP 1H EPS growth
18
FY 2005 Guidance
Revenue range: $880 - $890 million
Pro-forma EPS range: $1.10 - $1.13
Confirmed July 21, 2005
The Company confirmed its Guidance on July 21, 2005 and notes that its expectations are based on information available at that time and are subject to changing conditions, many of which are outside the Company’s control. GAAP EPS includes amortization of stock-based compensation expense of $0.02.
19
Investment Highlights
Global brand recognition
Superior product offering
Favorable secular demand trends
Diversified business model
Track record of profitable growth
20
Supplemental Information
To further provide investors useful information, pro forma net income per share is presented and represents the Company’s GAAP net income per share before non-cash stock-based compensation expense of $0.01 and $0.03 for the year to date period ended June 30, 2005 and 2004, respectively, and $0.05 and $0.05 for the year ended December 31, 2004 and 2003, respectively. The Company has unearned non-cash stock-based compensation of $0.04 as of December 31, 2004 that will be recognized as expense in future periods. For the year ended December 31, 2004, GAAP net income per share includes $0.01 of secondary public offering expenses related to the registration and offering of the company’s common stock in the fourth quarter of 2004, while pro forma net income per share excludes these expenses. In addition to these pro forma adjustments, GAAP net income per share includes, and pro forma net income per share excludes, a loss on debt extinguishment totaling $0.03, net of tax, for the year to date period ended June 30, 2004 and the year ended December 31, 2004 relating to the Company’s redemption in January 2004 of $52.5 million aggregate principal amount of the outstanding 10-1/4% Senior Subordinated Notes due 2010 issued by its subsidiaries Tempur-Pedic, Inc. and Tempur Production USA, Inc. For the year ended December 31, 2003, GAAP net income per share includes, and pro forma net income per share excludes, transaction related expenses totaling $0.11, net of tax, relating to the write-off of deferred financing fees, original issue discount and prepayment penalties relating to the Company’s re-capitalization in August 2003, and these amounts are included in loss on debt extinguishment, net of tax.
The Company believes that excluding secondary offering expenses, non-cash stock-based compensation expense and loss on debt extinguishment provides a measure that is more representative of ongoing costs and therefore more comparable to the Company’s historical operations.
21
Reconciliation of Net Income per Share to Pro forma Net Income per Share
(Amounts are per Share)
Year Ended Year to Date
December 31, December 31, June 30, June 30,
2004 2003 2005 2004
GAAP Net Income per Share, Diluted $ 0.73 $ 0.39 $ 0.50 $ 0.28
Stock-based compensation expense $ 0.05 $ 0.05 $ 0.01 $ 0.03
Secondary public offering expenses $ 0.01 $ - $ - $ -
Loss on debt extinguishment and transaction expenses, net of tax $ 0.03 $ 0.11 $ - $ 0.03
Proforma Net Income per Share, Diluted $ 0.82 $ 0.55 $ 0.51 $ 0.34
1. Amounts presented represent the Company’s GAAP net income per share before non-cash stock-based compensation expense of $0.01 and $0.03 for the year to date periods ended June 30, 2005 and 2004, respectively, and $0.05 and $0.05 for the years ended December 31, 2004 and 2003, respectively.
2. Pro forma net income also excludes secondary public offering expenses and loss on debt extinguishment, net of tax.
The Company believes that excluding secondary offering expenses, non-cash stock compensation expenses and loss on debt extinguishment provides a measure that is more representative of ongoing costs and therefore more comparable to the Company’s historical operations.
22
Investor Presentation
August 2005