![]() 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 |