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) May 6, 2008

 

 

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.)

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. Second Quarter 2008 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: May 6, 2008

 

Tempur-Pedic International Inc.
By:  

/s/ Dale E. Williams

Name:   Dale E. Williams
Title:   Executive Vice President, Chief Financial Officer and Secretary


EXHIBIT INDEX

 

Exhibit

 

Description

99.1

  Tempur-Pedic International Inc. Second Quarter 2008 Investor Presentation
Tempur-Pedic International Inc. Second Quarter 2008 Investor Presentation
Investor Presentation
2Q 2008
Exhibit 99.1


2
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, including without limitation, the Company’s expectations regarding improving manufacturing output
capacity, increasing brand awareness, growth opportunities, new products, unit share opportunities, increasing slots per store,
new consumer segments, consumer preferences and behavior, opportunities for SG&A leverage and cash flow generation, 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, particularly in the retail sector, and consumer confidence; the Company’s ability to reduce
expenses to align with reduced sales levels; 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 U.S. retail furniture channel, including the
timing
of
opening
or
expanding
within
large
retail
accounts;
the
Company’s
dependence
on
its
significant
customers;
the
Company’s ability to address issues in certain underperforming international markets; the Company’s ability to continuously
improve its product line, maintain efficient, timely and cost-effective production and delivery of its products, and manage its
growth; changes in foreign tax rates, including the ability to utilize tax loss carry forwards; rising commodity costs; the
Company’s
ability
to
protect
and
maintain
its
intellectual
property;
the
Company’s
ability
to
respond
to
regulatory
requirements;
the Company’s ability to retain members of its senior management team; the effects of increased interest rates; the effects of
labor
relations
on
business
operations
and
costs;
the
effects
of
increased
product
return
rates
or
a
reduction
in
warranty
reserves; the market price for the Company’s common stock prevailing from time to time; and the nature of other investment
opportunities presented to the Company from time to time.
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".  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.


3
Overview
Worldwide leader in Premium Sleep, estimated to be
50% of the ~$13 billion wholesale mattress market
Global
sales
under
the
“Tempur-Pedic®”
and
“TEMPUR®”
trademarks in >70 countries
Products
provide
greater
overall
comfort
and
better
quality
sleep
Most profitable
company in the industry
Highest
customer
satisfaction
rates
in
the
industry
Over 25,000 health care professionals recommend
the brand


4
Tempur-Pedic Swedish Sleep System
Pressure & Pain Management
94% of owners experience a reduction in painful pressure
points
Open Cell Technology
Body Conforming & Support
92% of owners sleep better and wake more refreshed
Safe and Healthy
Maintenance Free
Source: Independent survey commissioned by Tempur-Pedic


5
Seasoned Management Team
Executive team has ~130 years managing large international businesses
Name
Position
Prior Experience
Consumer
Products
Inter'l
Tom Bryant
President & CEO
CEO, Stairmaster Sports & Medical Products
President, Dunlop Maxfli
Johnson & Johnson
Rick Anderson
EVP and President,
VP, Gillette
North America
Gillette/P&G
David Montgomery
EVP and President,
President, Rubbermaid Europe
International
VP, Black & Decker Europe, Middle East, Africa
Matt Clift
EVP, Global Operations
VP/GM Lexmark International
Lexmark/IBM
Dale Williams
EVP & CFO
CFO, Honeywell Control Products
CFO, Saga Systems
CFO, GE Information Services
Prior Experience
(1)
(1) In February 2008, Mr. Bryant announced his plan to retire effective mid-year 2008.


6
Global Presence
International Subsidiary
International Third Party
Domestic Subsidiary
Domestic Third Party


7
Global Sales
Healthcare
2%
Direct
10%
Retail
86%
Third Party
2%
Mattress
74%
Pillow
9%
Other
17%
1.
Data represents results of full year 2007.
Domestic represents ~66% of total sales while International represents ~34%
Products sold through four distinct channels in three product categories
US & European-based R&D centers focused on unique, regional preferences
Brand building via advertising campaign to drive market share gains
Domestic Sales
International Sales
Direct
3%
Healthcare
9%
Third Party
11%
Retail
77%
Mattress
61%
Pillow
19%
Other
20%


8
Vertically Integrated


9
Denmark
(500K sq ft)
Duffield, VA
(500K sq ft)
Albuquerque, NM
(800K sq ft)
Manufacturing Facilities
Global, vertically integrated manufacturer
State of the art, highly automated, ISO-
certified plants
> $200 million invested
Goal: Improve output capacity every year
without significant new capital investment
1.
Albuquerque facility is in the process of ISO certification.


10
Building Brand Equity


11
“Welcome To Bed”
Marketing Campaign


12
Increasing Brand Awareness
86%
89%
78%
73%
60%
44%
26%
20%
30%
40%
50%
60%
70%
80%
90%
2002
2003
2004
2005
2006
2007
2008
Awareness %
1.
Total
Brand
Awareness
for
mattresses
based
on
study
commissioned
by
Tempur-Pedic
and
completed
in
the
first
quarter
of
each
year.
2.
Advertising and trade expenses FY 2002 through 1Q08. For a discussion of the Company’s performance, please refer to the Company’s press release for 1Q08 results and the Company’s prior 10K and 10Q filings.
Global Marketing Investment
>$575 million
(since 2002)


13
Source: Independent survey commissioned by Tempur-Pedic.
~95% Tempur-Pedic®
consumers recommend the product
~65% of consumers recommended Tempur-Pedic up to 5 times 
42% of consumers report someone purchased a Tempur-Pedic mattress as a
result of their recommendation
Consumer Passion
95%
65%
18%
17%
42%
0%
20%
40%
60%
80%
100%
Recommend
Tempur-Pedic
1-5 times
6-10 times
11+ times
Purchase
resulted from
recommendation


14
Significant Unit Share Opportunity
Only represent ~2.3% of U.S. mattress units (‘07 est.)
Slots Very Low Versus % of Retail Sales
Gaining “slots”
with new models, key price points
Investing in Marketing and Expanding Brand Awareness
Targeting Key New Consumer Segments
BellaSonna
“Traditionalist”
consumers
Targeting 77 Million Baby-Boomers
Selectively Adding New Retail Accounts
Growth Opportunities


15
Premium consumers are comparatively more likely to defer
mattress purchases during an economic downturn
Premium has reached >25% household penetration
Among consumers who expect to buy a mattress in the next
five years, ~46% plan to purchase premium
Premium Mattress Consumer Research
Source:
Based
on
recent
independent
third
party
research
of
over
1,200
US
consumers.
Based on third party research, we believe the following market factors will
create favorable market conditions for the premium segment:


16
Among consumers who are likely to buy a premium mattress in
the next five years:
~80% say they are most likely to purchase specialty
Specialty has reached >7% household penetration
Specialty currently represents 40% of premium installed base
Innerspring currently represents 60% of premium installed base
~60% of consumers who are likely to buy a premium mattress
in the next 5 years report they are most likely to buy visco
Specialty Mattress Consumer Research
Source:
Based
on
recent
independent
third
party
research
of
over
1,200
US
consumers.


17
$222
$298
$479
$685
$837
$945
$1,107
$247
$0
$200
$400
$600
$800
$1,000
$1,200
2001
2002
2003
2004
2005
2006
2007
1Q '08
Worldwide Net Sales
Revenue growth led by
mattresses
1Q’08 sales down 7% as U.S.
macroeconomic environment
deteriorates
($ in millions)
1.
For a discussion of the Company’s performance, please refer to the Company’s press release for 1Q08 results and the Company’s prior 10K and 10Q filings.


18
Operating Income
Historically, operating leverage
offset most of the prior Gross
Margin erosion
Opportunities for SG&A leverage
over the long term
1Q’08 Operating margin declined
primarily related to:
Gross margin decline driven by
channel shift, raw material inflation,
fixed cost de-leverage
Operating expenses planned and
incurred assuming much higher sales
level (e.g. advertising de-leveraged  >
200 bps)
Have completed restructuring
($ in millions)
1.
For a discussion of the Company’s performance, please refer to the Company’s press release for 1Q08 results and the Company’s prior 10K and 10Q filings.
$30
$41
$97
$244
$29
$151
$191
$209
$0
$50
$100
$150
$200
$250
2001
2002
2003
2004
2005
2006
2007
1Q '08


19
Capital Expenditures & Cash Flow
Completed major capital
investments
Free cash flow opportunities
Cash cycle opportunities
Revised production plans to align
with sales expectations
Anticipate inventory will be
source of cash in 2008
($ in millions)
Capital Expenditures
1.
For a discussion of the Company’s performance, please refer to the Company’s press release for 1Q08 results and the Company’s prior 10K and 10Q filings.
$35
$11
$33
$38
$85
$16
$3
$37
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2001
2002
2003
2004
2005
2006
2007
1Q '08


20
Investment Highlights
#1
In
The
Fast
Growing
Viscoelastic
Market
1
#1
In
The
Fast
Growing
Premium
Mattress
Market
1
#1 In The Premium Pillow Market
#1 In International Operations of U.S. Bedding Manufacturers
#1 In The Industry For Profitability
#1 In U.S. Consumer Referrals for Mattresses
#1 In Retail Sales And Profit Per Sq Ft
1.
Based
on
net
sales,
including
management’s
estimates
of
sales
by
companies
that
do
not
publicly
report
sales
of
viscoelastic
mattresses
and
pillows,
premium
mattress
and
premium
pillows.
2.
Based on total company-owned foreign operations by U.S. based bedding manufacturers, including management’s estimates for companies that do not publicly report such information.
3.
Based
on
total
net
income
for
all
publicly
reporting
US
mattress
manufacturers.
4.
Based
on
independent
survey(s)
commissioned
by
Tempur-Pedic®
and
management
estimates.
4
4
2
3
2


Investor Presentation
2Q 2008