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 11, 2010
TEMPUR-PEDIC INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
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Delaware
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001-31922
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33-1022198
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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 November 11, 2010, Tempur-Pedic International Inc. will host a webcast of its Investor Day. Attached as Exhibit 99.1 to this report and furnished under this Item 7.01 are copies of slides used by Tempur-Pedic International Inc. for the investor presentation at its Investor Day.
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
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Exhibit
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Description
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99.1
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Tempur-Pedic International Inc. Investor Day Presentation
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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 12, 2010
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Tempur-Pedic International Inc.
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By:
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/s/ DALE E WILLIAMS
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Name: Dale E. Williams
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Title: Executive Vice President and Chief Financial Officer
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EXHIBIT INDEX
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Exhibit
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Description
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Tempur-Pedic International Inc. Investor Day Presentation
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2
Barry Hytinen
Senior Vice President
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Agenda
Webcast participants may email questions to:
investor.relations@tempurpedic.com
November 11, 2010
Forward-Looking Statements
This presentation may contain “forward-looking statements,” within the meaning of federal securities laws, which include information concerning the
Company’s plans, objectives, goals, strategies, future revenues or performance, 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 the quality and range of existing products; increasing brand awareness and brand consideration; the impact of the
introduction of new products, including the TEMPUR-Cloud™ Collection; international and domestic growth opportunities; increasing market share;
improving gross margin; expanding and improving distribution channels; manufacturing capacity and utilization; consumer preferences and behavior; the
effectiveness of new cost structures; meeting financial obligations; cost and operating expense reductions and cash flow generation; and the Company’s
expectations for growth of sales, margins, and earnings for 2011 and beyond 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.
Company’s plans, objectives, goals, strategies, future revenues or performance, 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 the quality and range of existing products; increasing brand awareness and brand consideration; the impact of the
introduction of new products, including the TEMPUR-Cloud™ Collection; international and domestic growth opportunities; increasing market share;
improving gross margin; expanding and improving distribution channels; manufacturing capacity and utilization; consumer preferences and behavior; the
effectiveness of new cost structures; meeting financial obligations; cost and operating expense reductions and cash flow generation; and the Company’s
expectations for growth of sales, margins, and earnings for 2011 and beyond 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, as well as consumer
confidence and the availability of consumer financing; 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 and expand distribution channels; 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; rising commodity costs; the Company’s
ability to retain members of its senior management team; the effects of increased interest rates; 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.
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, as well as consumer
confidence and the availability of consumer financing; 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 and expand distribution channels; 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; rising commodity costs; the Company’s
ability to retain members of its senior management team; the effects of increased interest rates; 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.
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.
Note Regarding Trademarks, Trade Names and Service Marks:
Tempur, Tempur-Pedic, The DeluxeBed by Tempur-Pedic, The ClassicBed by Tempur-Pedic, The GrandBed by Tempur-Pedic, The TEMPUR-
Cloud Supreme, The TEMPUR-Cloud, The RhapsodyBed by Tempur-Pedic, The AdvantageBed by Tempur-Pedic, The Bella Fina Bed by Tempur-
Pedic, The CloudPillow by Tempur-Pedic, The TEMPUR-Cloud Luxe by Tempur-Pedic, The CelebrityBed by Tempur-Pedic, The AlluraBed by
Tempur-Pedic, The Sensation, The Sensation Lite, The NeckPillow by Tempur-Pedic, The SymphonyPillow by Tempur-Pedic, The ComfortPillow
by Tempur-Pedic, The RhapsodyPillow by Tempur-Pedic are trademarks, trade names or service marks of Tempur-Pedic International Inc. and its
subsidiaries. All other trademarks, trade names and service marks in this presentation are the property of their respective owners.
Cloud Supreme, The TEMPUR-Cloud, The RhapsodyBed by Tempur-Pedic, The AdvantageBed by Tempur-Pedic, The Bella Fina Bed by Tempur-
Pedic, The CloudPillow by Tempur-Pedic, The TEMPUR-Cloud Luxe by Tempur-Pedic, The CelebrityBed by Tempur-Pedic, The AlluraBed by
Tempur-Pedic, The Sensation, The Sensation Lite, The NeckPillow by Tempur-Pedic, The SymphonyPillow by Tempur-Pedic, The ComfortPillow
by Tempur-Pedic, The RhapsodyPillow by Tempur-Pedic are trademarks, trade names or service marks of Tempur-Pedic International Inc. and its
subsidiaries. All other trademarks, trade names and service marks in this presentation are the property of their respective owners.
5
Mark Sarvary
President & Chief Executive Officer
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Key Topics
u Overview Of Tempur-Pedic
u Industry Update
u Tempur-Pedic Strategy
u Sources Of Growth In 2011 And Beyond
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Overview Of Tempur-Pedic
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The Sensation Mattress by Tempur® Unique Range Of Products Utilizing The Proprietary Pressure Relieving Tempur Material The CloudPillow by Tempur-Pedic® The ComfortPillow by Tempur-Pedic® The TEMPUR-Cloud™ Supreme The Advanced Ergo Adjustable Base by Tempur-Pedic™ The Rhapsody Pillow by Tempur-Pedic®z The RhapsodyBed by Tempur-Pedic® The NeckPillow by Tempur-Pedic™ The AdvantageBed by Tempur-Pedic™
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Company Thesis
u Established: Worldwide leader in specialty mattresses and premium mattresses
Ø Leader in the $5B premium segment of the $13B global mattress market
Ø Leader in the fastest growing segments
u Differentiated: Consumer preferred, branded product line
Ø Most highly recommended brand by owners, most desired brand by non-owners
Ø Over a decade of industry-leading brand advertising, very high level of owner referrals
Ø Consumer research at the core of everything we do
u Profitable: Industry-leading margins and cash flows
Ø Gross margin 50%+
Ø Operating margin 22%+
Ø High returns with low cash needs
u Growing: Significant top line growth opportunity
Ø 3% U.S. mattress market share, up from 2% last year
Ø Intermediate goal of ~7%
Source: Management estimates
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2010 Year-To-Date Performance
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3rd Quarter Year-To-Date
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Actual
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Variance to
Prior Year |
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Sales
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$813 M
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+39%
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Gross Margin
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49.7%
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+280 bps
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Operating Margin
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21.4%
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+470 bps
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Net Income
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$111 M
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+98%
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EPS
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$1.51
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+104%
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Shares Repurchased
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8.5 million
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For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10Kfilings.
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Management Team In Place to Scale to World’s Favorite Mattress
Brand
Brand
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Expanding Global Presence
Note: China was converted to a joint venture market effective in the first quarter of 2010. All other light green countries are subsidiary markets.
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State-of-the-Art Vertically Integrated Manufacturer
Denmark (500K sq ft)
Virginia (500K sq ft)
New Mexico (800K sq ft)
u Highly automated, ISO-certified plants
u > $200 million invested
u Significant opportunity to leverage
infrastructure (only ~40% utilized)
infrastructure (only ~40% utilized)
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Industry Update
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Industry Situational Assessment
u Mattress industry experiencing growth, but recovery is uneven
u “Barbell” recovery appears to be playing out, though industry pricing is generally firm
u Retailers report traffic continues to be below “normal” but “off the bottom”
u Macro-economic environment progressing, but confidence still relatively weak
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After Years Of Decline, We Believe Significant “Pent Up Demand”
Exists And Will Benefit Industry Sales For Several Years
Exists And Will Benefit Industry Sales For Several Years
Units
(In Thousands)
Dollars
(In Millions)
Note 1: 2009 and 2004 Annual ISPA Report of Sales and Trends
Note 2: Management estimates
Note 3: YTD 2010E assumes 2010 year-to-date growth rates implied for full year
US Industry Annual Performance
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‘84 - ‘06
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‘06 - ‘09
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$ CAGR
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7.5%
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(5.5%)
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Unit CAGR
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2.3%
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(7.0%)
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2010 YTD
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Sales
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+8.4%
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Units
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+10.3%
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Industry Growth Has Resumed in 2010, Though “Comps” Are
Relatively Easy
Relatively Easy
Source: September 2010 ISPA Sales Report
ISPA Performance vs. Prior Years by Month
2010
2009
2008
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Long-term Secular Shift To Specialty And Premium Has Resumed
Source: 2009 ISPA Sales Report, ISPA Bedding Barometer Sep 2010, and management estimates
Note: Premium mattress category defined as $1,000+
Specialty Share
Premium Share
u Industry sample year-to-date September 2010 sales performance
Ø Specialty +30%
Ø Total Industry +8%
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Tempur-Pedic Strategy
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Our goal is to become the world’s
favorite mattress and pillow brand.
Goal
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Strong Preference For Tempur
u Voted most comfortable mattress by US consumers
Ø Tempur-Pedic 41% vs. Springs 21-29%
u Highest rating for future purchase intent
Ø Tempur-Pedic 26% vs. Springs 8-20%
u Consumer Reports: #1 Mattress - “Would definitely buy again”
Source: Consumer Reports October 2009
2010 Gallup Consumer Mattress Market Survey
3rd party research
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Tempur Vision
People who sleep on Tempur 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
2. Make sure there is a Tempur mattress and pillow that appeals to everyone
3. Make sure that Tempur is available to everyone
4. Make sure Tempur continues to deliver the best sleep
Make sure our cost structure is optimized to enable marketing and product investments
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Make Sure Everyone Knows They Would Sleep Better On Tempur
Source: The 2010 Gallup Consumer Mattress Market Study
US Brand Awareness
US Future Purchase Interest
2004
2006
2008
2010
2004
2006
2008
2010
2004
2006
2008
2010
2004
2006
2008
2010
2004
2006
2008
2010
2004
2006
2008
2010
2004
2006
2008
2010
2004
2006
2008
2010
u Expanding brand awareness leads to significantly improved purchase intent
u US advertising driving increased brand awareness
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Source: 2009 SMI/Alcott Mattress Attitude & Usage Study
Premium = Will spend $1,000+ for my next mattress set
Make Sure There Is A Tempur Mattress And Pillow That Appeals
To Everyone
To Everyone
u Product development is based on research
u Traditional Tempur-Pedic beds are perceived as firm by consumers
u TEMPUR-Cloud™ product concept developed in response
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US Mattress Feel Preference - % Consumers Who Prefer
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All Buyers
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Future Premium Buyers
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Firm
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51%
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48%
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Soft / Medium
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49%
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52%
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Source: 2009 Tempur-Pedic company research
Note: % of people rating a 6 or 7 on a 7 point scale.
Better Than Competition
, Different From Classic
u Cloud developed after utilizing extensive head-to-head research
Make Sure There Is A Tempur Mattress And Pillow That Appeals
To Everyone
To Everyone
TEMPUR-Cloud™ Collection: Already Our Best Selling Line
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The
TEMPUR-Cloud™ Luxe
$3,599
The
TEMPUR-Cloud™ Supreme
$2,299
The
TEMPUR-Cloud™
$1,599
Price reflects Queen mattress
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The CloudPillow
by Tempur-Pedic®
The
Sensation Mattress
by Tempur®
Most successful
international product
launch
international product
launch
Building on success of
Cloud Collection
Cloud Collection
Entry price point Ergo
introduced
introduced
The
Ergo Adjustable Base
by Tempur-Pedic™
Make Sure There Is A Tempur Mattress And Pillow That Appeals
To Everyone
To Everyone
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Make Sure That Tempur Is Available To Everyone
u Distribution gains
Ø Flagship stores in Japan, China, emerging markets, and selected European markets
u Expanding points of distribution
Ø North America: potentially 500 - 1,500 incremental doors
Ø International: potentially 2,000+ incremental doors
Management estimates
29
Price reflects Queen mattress
Make Sure That Tempur Is Available To Everyone
u Improved brand architecture
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Make Sure That Tempur Is Available To Everyone
u Newly re-launched website
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Make Sure Tempur Continues To Deliver The Best Sleep
u Increasing investment in R&D
u Recent Innovations
Ø TEMPUR-ES™ material
Ø Consumer research
Ø Materials research
Ø Product characterization
Ø Sleep research
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Sources Of Growth In 2011 And Beyond
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Driving Growth - Imperatives For 2011 And Beyond
u Maintain strong annual sales growth u Maintain healthy gross margins and EBIT growth u We will invest in those areas that will drive growth 1. Make sure everyone knows they would sleep better on Tempur – Increase awareness and preference in the US, Canada, Europe, and China 2. Make sure there is a Tempur mattress and pillow that appeals to everyone – Develop major new products validated by consumer research 3. While we continue to improve performance in all key areas 4. Make sure t
hat Tempur is available to everyone 5. Make sure Tempur continues to deliver the best sleep …and make sure our cost structure is optimized to enable marketing and product investments
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Growth From The North American Segment
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North American Growth Strategy
u Capitalize on Cloud Collection’s full potential
u Improve Ergo Adjustable attach rate
u Improve and expand product range
u Continue to invest in advertising to build awareness
u Continue to invest in sales execution infrastructure
u Resumption of category growth and secular shift to specialty together with increased
preference for Tempur-Pedic
preference for Tempur-Pedic
u Capitalize on Canadian acquisition
Capitalize On The Cloud Collection’s Full Potential
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3Q09
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4Q09
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1Q10
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2Q10
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3Q10
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4Q10
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1Q11
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2Q11
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u Generally, new products have a significant ramp following distribution
Note: This timeline is not exact. It is intended for illustrative purposes only.
15% price
increase
Expand Ergo Adjustable Base Distribution And Attach Rates
u 96% overall satisfaction by Ergo System owners
u Recently extended adjustable product range with entry price point
u Driving increased Ergo Adjustable Base attach rate
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The
Ergo Adjustable Base
by Tempur-Pedic™
The
Advanced Ergo Adjustable Base
by Tempur-Pedic™
New Product Development
38
u New products and upgrades will be delivered in 2011
Continue To Advertise
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u Investment will be maintained at 9%
u Campaign will evolve to broaden consumer awareness of Tempur-Pedic’s product line
breadth
breadth
u Will be even more focused on expanding Tempur specific retailer advertising in 2011
Ø Highly successful program in 2010
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Sales Execution Infrastructure
One-of-a-kind multichannel consumer marketing and selling strategy
u Sales
Ø Improved call cycles, increased training and stronger account management
Ø Retail sales CRM to better track performance versus KPIs
u eCommerce and Direct
Ø World class selling platform
Ø Significant consumer database / leads capability
Ø Improved direct marketing and media strategy
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Industry, Specialty, And Tempur Preference
u ISPA’s 2011 sales growth projection is +6%
u Secular shift to specialty has resumed
Ø This year, Specialty sales +30% as compared to Innersprings +3%
u Future purchase intent for Tempur-Pedic now stands at 26%, up from 18% in 2008
u Tempur-Pedic’s share is small, but growing
Ø US unit share at ~3%, up from 2% in 2009
ISPA 2010-2012 Mattress Industry US Market Forecast, October 2010
ISPA Bedding Barometer October 2010
The 2008, 2009, and 2010 Gallup Consumer Mattress Market Study
Capitalize On Canadian Acquisition
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Note 1: Total Retail - 2002 Economic Census; Comparison of US and Canada census data
Note 2: Autos - Scotiabank Group, Global Auto Report; September 29, 2010
Note 3: Electronics - 2002 Economic Census; Comparison of US and Canada census data
Note 4: Mattresses - Management estimate based on publicly available data of major mattress competitors with sales in US and Canada
Note 5: TPX - Trailing twelve month
u Brand awareness is low, so we will invest in advertising
u Distribution significantly improved in 2010
u Canada normally represents 10-15% of US sales
u Large growth opportunity as Tempur is significantly below comparables
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Growth From The International Segment
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Significant International Growth Opportunity Exists
u Over next 5 years, we expect at least $300 million of International growth
u Expect 65% of growth will come from four major markets
Ø The European “Big 3” (France, Germany, UK) - represents 50% of European Union GDP
Ø China
5 Year Sales Growth
Management estimates
Source: International Monetary Fund 2009
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European “Big 3”
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Europeans Currently Spend Significantly Less On Premium
Mattresses Than US Consumers
Mattresses Than US Consumers
Source: 3rd party research study commissioned by Tempur-Pedic and management estimates
Premium normalized to European pricing standards
u US premium mattress category growth demonstrates opportunity in other markets
Gap
$5
47
Five Factors Account For The Difference Between The US And
European “Big 3” Premium Mattress Markets
European “Big 3” Premium Mattress Markets
Consumers’ ability
to pay
to pay
Consumers’
willingness to pay
willingness to pay
Retail structure
Consumers’
mattress
replacement cycle
and size
mattress
replacement cycle
and size
Manufacturer
actions to develop
premium
actions to develop
premium
• Lower income
structures in
Europe vs. US
structures in
Europe vs. US
• Lower spending on
premium products
in Europe vs. US
premium products
in Europe vs. US
• Difference in
availability of
premium
mattresses in
Europe vs. the US
availability of
premium
mattresses in
Europe vs. the US
• Longer
replacement cycle
for mattress in
Europe vs. US
replacement cycle
for mattress in
Europe vs. US
• Smaller mattress
sizes in Europe vs.
US
sizes in Europe vs.
US
• Levers have been
‘pushed’ harder in
the US vs. Europe
‘pushed’ harder in
the US vs. Europe
Structural
cannot be influenced
cannot be influenced
Less structural
may be influenced only in long run
may be influenced only in long run
Not structural
can be influenced
can be influenced
Source: 3rd party research study commissioned by Tempur-Pedic
48
Spending On Premium Products In Europe Versus US
u Europeans spend as much or more as US consumers on Premium
Source: 3rd party research study commissioned by Tempur-Pedic
Note: Premium category varies by country
Note: In 2000, the US Premium mattress share was ~31%
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Five Factors Drive The Difference Between The US And European
“Big 3” Premium Mattress Markets
“Big 3” Premium Mattress Markets
Consumers’ ability
to pay
to pay
Consumers’
willingness to pay
willingness to pay
Retail structure
Consumers’
mattress
replacement cycle
and size
mattress
replacement cycle
and size
Manufacturer
actions to develop
premium
actions to develop
premium
• Lower income
structures in
Europe vs. US
structures in
Europe vs. US
• Ability to pay only
explains <10% of
the $ / capita
spend gap to US:
explains <10% of
the $ / capita
spend gap to US:
• Assuming same
income structure
as US, spend/
capita would
grow <$0.50
income structure
as US, spend/
capita would
grow <$0.50
• Lower spending on
premium products
in Europe vs. US
premium products
in Europe vs. US
• In fact, except for
mattresses
consumers spend
as much on
premium in
Europe
mattresses
consumers spend
as much on
premium in
Europe
• This factor has no
impact on
spend/capita
impact on
spend/capita
• Difference in
availability of
premium
mattresses in
Europe vs. the US
availability of
premium
mattresses in
Europe vs. the US
• Europe has a
similar proportion
of stores carrying
premium, but they
are smaller stores
similar proportion
of stores carrying
premium, but they
are smaller stores
• A retail structure
similar to the US
would increase
spend/capita by
$1.20
similar to the US
would increase
spend/capita by
$1.20
• Longer
replacement cycle
for mattress in
Europe vs. US
replacement cycle
for mattress in
Europe vs. US
• Smaller mattress
sizes in Europe vs.
US
sizes in Europe vs.
US
• Both factors are
true, but together
only account for
$0.20 to $0.75
spend/capita
true, but together
only account for
$0.20 to $0.75
spend/capita
• Levers have been
‘pushed’ harder in
the US vs. Europe
‘pushed’ harder in
the US vs. Europe
- Awareness building
- Product range
• 60% of the gap
between US and
Europe, a
potential
additional
$2.50/capita
between US and
Europe, a
potential
additional
$2.50/capita
Source: 3rd party research study commissioned by Tempur-Pedic
50
Five Factors Conclusion
Per Capita Spend
u 60% of the gap between US and Europe, a potential additional $2.50 / capita driven by
manufacturer actions
manufacturer actions
Source: 3rd party research study commissioned by Tempur-Pedic
51
Brand Awareness Will Be Increased In Europe
u Ad spend positively correlated with brand awareness and market share
Mattresses
Sleep
Systems
Systems
TEMPUR®
Original Collection
featuring supportive
firmer feel
firmer feel
Relaxation
Supreme
Signature
Premium
Zen
Original Supreme
Original Royal
Original Deluxe
Original
TEMPUR®
Sensation Collection
featuring supportive
traditional feel
traditional feel
Relaxation
Sensation
Sensation Supreme
Sensation Deluxe
Sensation
TEMPUR®
Cloud Collection
featuring supportive
softer feel
softer feel
Promessa
Relaxation
Cloud Supreme
Cloud Deluxe
Cloud
Product Range Will Be Broadened And Strengthened
52
53
Cloud Collection To Begin International Rollout In Early 2011
u Phased rollout by market during 2011
u 3-4 models / price points per market
54
China
China: Summary Of Key Findings From Recent Research Study
u Substantial market potential for premium mattresses in four city focus
Ø Existing premium retail market greater than $250 million
u Already a significant potential customer base
Ø 60 million people in the four city focus
u Mattress preferences and buying habits show no particular barriers to market
development
development
u Established distribution model
Ø Department stores and furniture malls
u Advertising and brand development viable
Ø Opportunity to develop targeted marketing for wealthy consumers
55
Source: 3rd party research study commissioned by Tempur-Pedic
China Plan
u Complete consumer testing to determine Tempur product range
u Broaden product collection to meet market specific consumer needs
u Adapt retail model to match local market
u Quadruple store count by 2014
56
Management estimates
57
Potential For China To Grow 10x Or More Over Next Five Years
2010
2014
$50 - $100
million
million
Management estimates
58
Summary
u 2009 Objective:
Ø “Maintain A Reasonable Cushion To The Covenants”
u 2010 Objective:
Ø “Moving From Survive To Thrive”
59
Summary
u 2009 Objective:
Ø “Maintain A Reasonable Cushion To The Covenants”
u 2010 Objective:
Ø “Moving From Survive To Thrive”
u 2011 Objective:
Ø “Building The Foundation For The World’s Favorite Mattress And Pillow Brand”
60
Dale Williams
Executive Vice President & Chief Financial Officer
61
Financial Overview
62
Net Sales
u Negotiated difficult recession in 2008 - 2009
u 2010 rebound impacted by Cloud, AskMe, and modest industry growth
($ in millions)
For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10Kfilings.
2004
2005
2006
2007
2008
TTM
Sept 10
YTD
Sept 10
2009
63
Mattresses Drive Global Business, With Significant Revenue In
Other Product Lines
Other Product Lines
International
North America
3Q10 YTD Sales
u US mattress revenue up 46% in 2010, driven by Cloud collection
u US “Other” up 52% as Ergo attach rates improving
For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10Kfilings.
64
Gross Margin
u In 2nd year of 4 year productivity program to drive +700 basis points of margin
u We plan to invest in our product line to drive growth and continue our technological
leadership
leadership
2004
2005
2006
2007
2008
Long
Range
Target
Range
Target
3Q10
YTD
Sept 10
Sept 10
50%+
2009
For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10Kfilings.
65
Significant Opportunity To Improve COGS
66
Operating Margin
u Operating margin benefiting from gross margin expansion
u Sales growth drives leverage of fixed expenses in SG&A
2004
2005
2006
2007
2008
Long
Range
Target
Range
Target
3Q10
YTD
Sept 10
Sept 10
2009
For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10Kfilings.
Excellent Cash Flow Dynamics With Significant Opportunity To
Continue Cash Cycle Improvement
Continue Cash Cycle Improvement
67
2004
2005
2006
2007
2008
2009
3Q10
72
85
57
82
63
46
42
Long-term
25
Long-term estimate is intended for illustrative purposes only. Figure not drawn to scale.
68
Depreciation & Amortization vs. Capital Expenditures
u Multi-year add back to net income as D&A should exceed capex
u Anticipate annual capex of $20 million or less for the foreseeable future
($ in millions)
For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10Kfilings.
Low Levels Of Capital Should Continue To Drive High Returns
Going Forward
Going Forward
For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10K filings.
*Note: For a reconciliation of 2008 Adjusted Net Income, Return on Assets, Return on Invested Capital and a reconciliation of non-GAAP to GAAP financial measures,
please see Appendix of this presentation.
please see Appendix of this presentation.
2004
*
2005
2006
2007
2008
TTM
Sept 10
Sept 10
2004
*
2005
2006
2007
2008
TTM
Sept 10
Sept 10
Return on Assets
Return on Invested Capital
2009
2009
69
70
Significant Operating Cash Flow With Commitment To Enhance
Stockholder Value
Stockholder Value
u Repurchased >30% of the company since 2005
Ø Diluted share count @ 12/04: ~103 million
Ø Diluted share count @ 10/10: ~70 million
For a discussion of the Company’s performance, please refer to the Company’s 3rd quarter 10Q filing and prior 10Kfilings.
$76
$144
$344
$18
$250
71
2011 First Look: Sales
u Anticipate 2011 will be another year of market share gains
North America
Cloud collection
Ergo attach rates
New products
Advertising
Macro
Canada
Other (pricing, new accounts)
International
Cloud and other new products
New distribution
Advertising / awareness
Emerging markets
72
2011 First Look: Margins
u Anticipate 2011 will be another year of margin expansion partially offset by
inflationary commodities outlook and marketing investments
inflationary commodities outlook and marketing investments
Gross Margin
+ Productivity program
+ Fixed cost leverage
+ Product mix
- Commodities
? Geographic segment mix
Operating Margin
+ Gross margin
+ SG&A leverage
- Marketing investments
73
Intermediate Term Goals - 2014
u $2 billion Sales
u 25%+ Operating Margin
u Cash / Stockholder value
u World’s Favorite Mattress And Pillow Brand
74
Q&A
u 2010 Limited Edition
My Tempur-Pedic
Teddy Bear®
My Tempur-Pedic
Teddy Bear®
u Supporting the fight
against Pancreatic
Cancer
against Pancreatic
Cancer
PANCAN Charitable Giving Drive
75
77
Appendix
78
Reconciliation of Adjusted Net Income to Net Income TTM 2009 and 2008 and Adjusted Earnings Per Share for 2008
Non-GAAP Measures
The Company provides information regarding Adjusted Net income and Adjusted Earnings per share which are not recognized terms under GAAP
(Generally Accepted Accounting Principles) and do not purport to be alternatives to Net income and Earnings per share as a measure of operating
performance. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other
companies. A reconciliation of Adjusted Net income and Adjusted Earnings per share to the Company’s Net income and Earnings per share is provided
below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the
impact of the repatriation of foreign earnings.
(Generally Accepted Accounting Principles) and do not purport to be alternatives to Net income and Earnings per share as a measure of operating
performance. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other
companies. A reconciliation of Adjusted Net income and Adjusted Earnings per share to the Company’s Net income and Earnings per share is provided
below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the
impact of the repatriation of foreign earnings.
The following table sets forth the reconciliation of the Company’s reported Net income to the calculation of Adjusted Net income for the trailing nine
months ending September 30, 2009 and twelve months ended December 31, 2008 and the reconciliation of the Company’s reported Earnings per share
to the calculation of Adjusted Earnings per share for the twelve months ended December 31, 2008.
months ending September 30, 2009 and twelve months ended December 31, 2008 and the reconciliation of the Company’s reported Earnings per share
to the calculation of Adjusted Earnings per share for the twelve months ended December 31, 2008.
GAAP To Non-GAAP Reconciliations - Net Income and Earnings
Per Share
Per Share
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 GAAP Net Income
|
58,868
|
|
Plus:
|
|
|
Q408 Tax provision related to
|
|
|
repatriation of foreign earnings
|
11,631
|
|
Adjusted Net Income
|
70,499
|
|
|
|
|
GAAP Earnings per share, diluted
|
$ 0.79
|
|
Tax provision related to repatriation of foreign earnings
|
$ 0.15
|
|
Adjusted Earnings per share, diluted
|
$ 0.94
|
|
|
|
79
Calculation Of Return On Assets
The Company provides information regarding Return on Assets as the Company believes it provides investors with
useful information. Return on Assets is calculated by dividing Net Income/Loss by Total Assets as reported in the
Company's 10K and 10Q filings. No adjustment for dividends was made in this calculation. See the GAAP to Non-GAAP
Reconciliation for a reconciliation of Adjusted Net Income in 2008.
useful information. Return on Assets is calculated by dividing Net Income/Loss by Total Assets as reported in the
Company's 10K and 10Q filings. No adjustment for dividends was made in this calculation. See the GAAP to Non-GAAP
Reconciliation for a reconciliation of Adjusted Net Income in 2008.
80
Calculation Of Return On Invested Capital
The Company provides information regarding Return on Invested Capital as the Company believes it provides investors
with useful information. We consider our Invested Capital to be Total Assets less Accounts Payable and Accrued
Expenses & Other Current Liabilities as reported in the company's 10K and 10Q filings. Return on Invested Capital is
calculated by dividing Net Income/Loss (less any dividends) by Invested Capital. See the GAAP to Non-GAAP
Reconciliation for a reconciliation of Adjusted Net Income in 2008.
with useful information. We consider our Invested Capital to be Total Assets less Accounts Payable and Accrued
Expenses & Other Current Liabilities as reported in the company's 10K and 10Q filings. Return on Invested Capital is
calculated by dividing Net Income/Loss (less any dividends) by Invested Capital. See the GAAP to Non-GAAP
Reconciliation for a reconciliation of Adjusted Net Income in 2008.