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Form 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) November 18, 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. November 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:    November 17, 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. November 2005 Investor Presentation.
Tempur-Pedic International Inc. Nov 2005 Investor Presentation
Investor Presentation
November 2005

1
1
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.
These
risk
factors
include
general
economic
and
industry
conditions
and
consumer
confidence;
uncertainties
arising
from
global
events;
consumer
acceptance
of
the
Company’s
products;
industry
competition;
the
efficiency
and
effectiveness
of
the
Company’s
advertising
campaign
and
other
marketing
programs;
the
Company’s
ability
to
further
penetrate
the
U.S.
retail
furniture
channel,
continuously
improve
its
product
line,
maintain
efficient,
timely
and
cost-effective
production
and
delivery
of
its
products,
and
manage
its
growth;
rising
commodity
costs;
the
market
price
for
the
Company’s
common
stock
prevailing
from
time
to
time;
the
nature
of
other
investment
opportunities
presented
to
the
Company
from
time
to
time;
and
the
inability
to
obtain
foreign
tax
rulings
required
to
complete
an
additional
repatriation
of
foreign
earnings.
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
in
the
Company’s
Annual
Report
on
Form
10-K
under
the
headings
“Special
Note
Regarding
Forward
Looking
Statements”
and
“Business-Risk
Factors.”
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.

2
2
Bob Trussell
Chief Executive Officer

3
3
Business Review
Business Review
Leading producer of premium mattresses and pillows
Leading producer of premium mattresses and pillows
–
–
Proprietary formula and manufacturing process
Proprietary formula and manufacturing process
–
–
#1 visco-elastic market share
#1 visco-elastic market share
Global sales under the “TEMPUR™”
Global sales under the “TEMPUR™”
and “Tempur-Pedic™”
and “Tempur-Pedic™”
trademarks
trademarks
–
–
43.4% CAGR in the four years ending December 31, 2004
43.4% CAGR in the four years ending December 31, 2004
–
–
Sales in 60 countries through 4 diverse channels
Sales in 60 countries through 4 diverse channels
Premium segment (>$1,000) of ~$10.6 billion global wholesale mattress market
Premium segment (>$1,000) of ~$10.6 billion global wholesale mattress market
–
–
Fastest-growing segment of U.S. market
Fastest-growing segment of U.S. market
–
–
Represented ~24% of U.S. mattress sales in 2004
Represented ~24% of U.S. mattress sales in 2004
TEMPUR
TEMPUR™
TM
products provide greater overall comfort and better quality sleep
products provide greater overall comfort and better quality sleep
–
–
Temperature-sensitive and contours more naturally to the body
Temperature-sensitive and contours more naturally to the body
–
–
Recommended by more than 25,000 healthcare professionals
Recommended by more than 25,000 healthcare professionals

4
4
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
Drive
awareness
of
Tempur
and
Tempur-Pedic
brands
through
targeted
marketing and advertising campaigns
Direct response advertising generates over 4.3 billion consumer “impressions ”
per month in the U.S.
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
Focus on premium mattress and pillow franchise
Leverage vertically-integrated, proprietary manufacturing process
Continue to improve and expand product line (e.g., Euro & Original)
Focus on Core
Products
Further Penetrate
Existing Channels
Investment to
Support Growth
Continue to Build
Global Brand
Business Strategy
Business Strategy

5
5
Diversity Across Products
Diversity Across Products
3Q05 YTD Sales: $104.2 million (16.8% of Total)
3Q05 YTD Sales: $104.2 million (16.8% of Total)
Retail Price:
Retail Price:
–
–
Adjustable Beds: $1,300 –
Adjustable Beds: $1,300 –
$2,800
$2,800
–
–
Other: $35 –
Other: $35 –
$150
$150
3Q05 YTD Sales: $92.9 million (15.0% of Total)
3Q05 YTD Sales: $92.9 million (15.0% of Total)
Retail Price: $70 –
Retail Price: $70 –
$165
$165
3Q05 YTD Sales: $424.0 million (68.3% of Total)
3Q05 YTD Sales: $424.0 million (68.3% of Total)
Queen Retail Price Point: $1,199 –
Queen Retail Price Point: $1,199 –
$2,999
$2,999
Pillows
Adjustable
Beds / Other
Mattresses

6
6
U.S. Mattresses and Foundations
Attractive Industry Growth Dynamics
Attractive Industry Growth Dynamics
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1982
1985
1988
1991
1994
1997
2000
2003
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Units Shipped
Dollar Value
Dollar Value (mm’s)
Units Shipped (000’s)
___________________________
Source: International Sleep Products Association, 2004Annual Report
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%

7
7
Tempur-Pedic Addresses Fastest
Tempur-Pedic Addresses Fastest
Growing Segment
Growing Segment
U.S. market segments:
U.S. market segments:
–
–
Over $1,000
Over $1,000
24%
24%
–
–
$500 –
$500 –
$1,000
$1,000
41%
41%
–
–
Under $500
Under $500
35%
35%
Tempur-Pedic’s addressable
Tempur-Pedic’s addressable
market: $3.6 billion
market: $3.6 billion
The premium market grew 36% in
The premium market grew 36% in
2004
2004
$5.6 Billion U.S. 2004 Market by Segment
Over $1,000
$500 - $1,000
Under $500
Tempur-Pedic’s Addressable
Market
Market
Other
Other
___________________________
Source: International Sleep Products Association, 2004 Annual Report

8
8
Robust Retail Channel Growth
Robust Retail Channel Growth
U.S. Furniture Retail Net Sales & Store Count
($ in millions)
Sales to established
accounts: expect 20-25%
growth in 2005
Average floor slots per
store increased from 1.7 to
2.2 in 2004, up to 2.8 in
3Q05
Total doors targeted in
U.S.: 10,000
Overall U.S. mattress
market:
~$5.6 billion in 2004
$24
$32
$35
$48
$52
$71
$71
$93
$79
$85
4,100
3,900
4,830
5,100
4,400
2,018
2,713
2,515
3,111
3,606
0
1,000
2,000
3,000
4,000
5,000
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
Store
Count
$0
$20
$40
$60
$80
$100
$120
Net Sales

9
9
Recent U.S. Mattress Introductions
Recent U.S. Mattress Introductions
The OriginalBed by Tempur-Pedic™
Significantly expands addressable market
–
Fills important price gap in premium category
Queen SRP: $1,199
Shipping as of September ’05
28% Account Penetration as of 9/30/05
The EuroBed by Tempur-Pedic™
Brought to U.S. following great
performance in Europe
Queen SRP: $2,600
Shipping as of July ’05
24% Account Penetration as of 9/30/05

10
10
The Scandinavian Bed Collection by
The Scandinavian Bed Collection by
Tempur-Pedic™
Tempur-Pedic™
Unique bed system: Tempur-Pedic mattress, foundation and adjustable frame
Unique bed system: Tempur-Pedic mattress, foundation and adjustable frame
Designed for the Nordic region; very successful launch
Designed for the Nordic region; very successful launch
–
Began broader European rollout mid ’05; exceeding expectations
Demonstrates our continued investment in product innovation
Demonstrates our continued investment in product innovation
–
–
Leveraging
Leveraging
our
our
2
2
R&D
R&D
centers
centers
to
to
develop
develop
product
product
for
for
the
the
U.S.
U.S.
and
International
International
markets
markets

11
11
New Pillow Introductions
New Pillow Introductions
Domestic
Travel-size ComfortPillow
by Tempur-Pedic™
–
Fills need as airlines eliminate pillows
–
Shipping November ’05 -
Holiday shopping
–
SRP: $80
International
September 2005 re-launch in Japan
–
New Japan-specific packaging and
formulation
–
Follows successful futon roll-out

12
12
Dale Williams
SVP and Chief Financial Officer

13
13
$79.3
$116.8
$156.0
$268.2
$433.3
$424.0
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2004
2004
2000
2000
Mattresses Key Growth Driver
Mattresses Key Growth Driver
Mattress Revenues
2001
2001
2002
2002
2003
2003
New stores
New stores
Increasing slots per store
Increasing slots per store
Growing brand awareness
Growing brand awareness
39% Growth 3Q05 YTD
39% Growth 3Q05 YTD
($ in millions)
9M05
9M05

14
14
> 80 million “impressions”
per month
> 600 million “impressions”
per month
Includes national spots on such shows as: The Radio Factor with Bill
O’Reilly, Westwood One, Dr. Laura, Dr. Joy Browne and WOR with
John Gambling
> 900 million “impressions”
per month
> 2.8 billion “impressions”
per month
High profile events:  The Apprentice, Oscar’s, Emmy’s, Grammy’ s
Newspapers
Television
Radio
Magazines
Cost Effective Advertising to Build
Cost Effective Advertising to Build
Global Brand
Global Brand
Tempur-Pedic’s national advertising campaign drives over 4.3 billion
consumer “impressions”
per month

15
15
Continue to Build Global Brand
Continue to Build Global Brand
Clear, product-oriented advertising and credible consumer industry
endorsement communicate the Tempur-Pedic proposition

16
16
Source: Independent survey commissioned by Tempur-Pedic
Almost all of our customers have recommended Tempur-Pedic, with about
Almost all of our customers have recommended Tempur-Pedic, with about
two-thirds reporting that they recommended Tempur-Pedic one to five times.  
two-thirds reporting that they recommended Tempur-Pedic one to five times.  
42% of retail customers report that someone purchased a Tempur-Pedic
42% of retail customers report that someone purchased a Tempur-Pedic
mattress as a result of their recommendation.
mattress as a result of their recommendation.
Recommending Tempur-Pedic
Recommending Tempur-Pedic
95%
65%
18%
17%
42%
0%
20%
40%
60%
80%
100%
Recommended
Tempur-Pedic
1-5 times
6-10 times
11+ times
Purchase resulted
from
recommendation

17
17
Historical Net Sales
Historical Operating Income
(1)
Growing Net Sales and Profitability
Growing Net Sales and Profitability
$162.0
$221.5
$298.0
$479.1
$684.9
$621.1
$0
$100
$200
$300
$400
$500
$600
$700
Net Sales
($ in millions)
$22.4
$30.4
$39.4
$97.1
$151.0
$136.8
$0
$20
$40
$60
$80
$100
$120
$140
$160
Operating
Income
___________________________
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. 9M05 includes $1.9 million in compensation expense relating to stock option grants.
($ in millions)
2000
2000
2001
2001
2002
2002
2003
2003
2000
2000
2001
2001
2002
2002
2003
2003
2004
2004
2004
2004
9M05
9M05
9M05
9M05

18
18
___________________________
1.
GAAP EPS of $0.50 for 9M04 and $0.67 for 9M05 for a 34% GAAP 9M YTD growth
42% Growth
42% Growth
Pro-Forma EPS
Operating Cash Flows
Growing Earnings and Cash Flows
Growing Earnings and Cash Flows
$55.7
$79.1
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
($ in millions)
9M04
9M04
9M05
9M05
32% Growth
32% Growth
$0.57
$0.75
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
9M04
9M04
9M05
9M05

19
19
Recent Financial Accomplishments
Recent Financial Accomplishments
$80M Share Repurchase Plan
$80M Share Repurchase Plan
–
–
Announced our first repurchase plan effective October 20, 2005
Announced our first repurchase plan effective October 20, 2005
New Global Senior Credit Facility
–
$340M comprised of $200M U.S. revolver, $30M European revolver and $110M
European 5-year term loan
–
Approximately 100 basis point reduction in interest margin on outstanding borrowings
and improved terms and conditions
–
Letter of credit under new facility supporting $75M of Industrial Revenue Bonds to
finance Albuquerque construction
Repatriated $115M in Foreign Earnings under the American Jobs Creation Act
–
We expect to repatriate $30-35M more by year end
–
Reinvesting
proceeds
in
Albuquerque
facility,
advertising,
other
capital
needs

20
20
Investment Highlights
Investment Highlights
Global brand recognition
Global brand recognition
Superior product offering
Superior product offering
Favorable secular demand trends
Favorable secular demand trends
Diversified business model
Diversified business model
Track record of profitable growth
Track record of profitable growth

21
21
Supplemental Information
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 income
tax expense on repatriation
of foreign dividend of $6.5 million for the nine months ended September 30, 2005. In addition,
non-cash
stock-based compensation expense of $0.02 and $0.04 for the nine months ended
September 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. 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 nine months ended
September 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 the income tax provision on repatriation dividend, 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.

22
22
Reconciliation of Net Income per Share to Pro
Reconciliation of Net Income per Share to Pro
forma Net Income per Share
forma Net Income per Share
___________________________
1.
Amounts presented represent the Company's GAAP net income per share before income tax provision on repatriation dividend of $0.06 for the nine months ended
September
30,
2005
and
non-cash
stock-based
compensation
expense
of
$0.02
and
$0.04
for
the
nine
months
ended
September
30,
2005
and
2004,
respectively.
2.
Pro forma net income also excludes loss on debt extinguishment, net of tax.
The Company believes that excluding income tax provision for repatriation dividend, non-cash stock-based 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.
(Amounts are per Share)
Sept. 30,
Sept. 30,
2005
2004
GAAP Net Income per Share, Diluted
0.67
$        
0.50
$        
Income Tax provision on Repatriation
0.06
$        
-
$          
Stock-based compensation expense
0.02
$        
0.04
$        
Loss on debt extinguishment and
transaction expenses, net of tax
-
$          
0.03
$        
Proforma Net Income per Share, Diluted
0.75
$        
0.57
$        
Year to Date

Investor Presentation
November 2005