Somnigroup International Inc. · NYSE:SGI
Somnigroup International — Tempur Sealy International — Investor Day (February 2015)
167 slides from Somnigroup International's investor day presentation, Feb 18, 2015
Slide 1: Tempur Sealy 2015 Investor Day
Exhibit 99.1 Tempur Sealy 2015 Investor Day New York, NY February 18, 2015 “ Improving the Sleep of More People Every Night, All Around the World ”
Slide 2: Mark Rupe, Vice President, Investor Relations
Mark Rupe Vice President, Investor Relations
Slide 3: Agenda and Company Participants
• Mark Sarvary Investment Highlights & Strategy • Tim Yaggi North America • David Montgomery International • Dale Williams Financial Overview • Leadership Team Q&A Session Webcast participants may email questions to: investor.relations@tempursealy.com Agenda Tim Yaggi Chief Operating Officer Mark Sa
Slide 4: Forward-Looking Statements
Forward-Looking Statements This investor presentation contains "forward-looking statements,” within the meaning of the federal securities laws, which include information concerning one or more of the Company's plans, objectives, goals, strategies, and other information that is not historical informa
Slide 5: Mark Sarvary, President & Chief Executive Officer
Mark Sarvary President & Chief Executive Officer
Slide 6: Investment Highlights Key Topics
Investment Highlights Industry Landscape Strategy Summary Key Topics
Slide 7: Largest And Only Truly Global Bedding Company
Largest And Only Truly Global Bedding Company Comprehensive Portfolio of Iconic Brands Complete and Complementary Product Offering Strong Management Team, Executing A Compelling Strategy Significant Sales, Margin and Earnings Growth Opportunity Strong Cash Flow
Slide 8: The Industry's Only Truly Global Company
The Industry’s Only Truly Global Company Note: Presence includes subsidiaries, joint ventures, third party, and licensee markets. Tempur Sealy Presence
Slide 9: Complete and Complementary Portfolio of Brands
Complete and Complementary Portfolio of Brands Luxury Premium Mid-Price Value Tempur-Pedic • #1 US Brand People Are Most Interested In Purchasing Sealy • #1 US Brand In Total Awareness • #1 US Brand People Are Most Likely To Buy Stearns & Foster • #1 US Brand In Luxury Innerspring Sales Note 1: 2014
Slide 10: Complete Range Of Products
Innerspring Hybrid Tempur Material Other Specialty Adjustable Bases Pillows Complete Range Of Products Stearns & Foster TEMPUR-Flex Adjustable Comfort TEMPUR-Cloud Memory Foam, Gel Visco, Latex TEMPUR-Ergo Plus TEMPUR Pillows
Slide 11: Strong, Established Management Team
Strong, Established Management Team Experienced Management Team With Proven Track Record Of Execution Years with Consumer Tempur Name Position Prior Experience Products Inter'l Sealy Mark Sarvary President and CEO President, Campbell Soup North America CEO, J. Crew Group President, Stouffer's Frozen
Slide 12: Tempur Sealy Strategic Priorities
Tempur Sealy Strategic Priorities Leverage and Strengthen Our Comprehensive Portfolio Of Iconic Brands & Products Expand Distribution And Seek Highest Dealer Advocacy Expand Margins With Focus On Driving Significant Cost Improvement Accretive Acquisitions Of Licensees And Joint Ventures Leverage Glo
Slide 13: Strategic Accomplishments 2009 – 2014
Strategic Accomplishments 2009 – Grew Tempur-Pedic US net sales from $525 million in 2009 to $1.0 billion in 2014, a 14% CAGR Introduced the highly successful TEMPUR-Cloud line, which doubled the Company’s U.S. mattress business Grew Tempur International net sales from $306 million in to $472 millio
Slide 14: Focused On Execution
Focused On Execution Financial Results Operational Achievements Actions Have Positioned Us For Enhanced Future Growth And Margin Improvement Initiated major cost reduction projects related to Sealy in late Acquired strategic growth platforms and divested non-core assets Organizational integration wi
Slide 15: Annual Base Growth Targets 2015-2018
6% 50bps 15% DELEVERAGING TO 3X AND RETURN VALUE TO SHAREHOLDERS SALES GROWTH OPERATING MARGIN IMPROVEMENT ADJUSTED EPS GROWTH Annual Base Growth Targets 2015-2018 Targets are based on Constant Currency Note 1: Management estimates. Please refer to “Forward Looking Statements”. Note 2: Targets are b
Slide 16: Target: 100bps Annual Operating Margin Improvement
Internal Target: 100bps Annual Operating Margin Improvement 2015 -2018 Objective Annual Incremental Operating Income Initiative Sealy US Gross Margin Improvement 30% 33% $45 million Cost Synergies $45 million $70 million $25 million Adjusted Operating Expense Leverage 29% 28% $30 million $125 millio
Slide 17: Guidance Consistent With Targets
Guidance Consistent With Targets FX Adjusted 1,2 Guidance Range Net Sales Growth 2% to 5% 5.5% to 8.5% Adjusted Operating Margin Growth ~10 to 80bps ~80 to 150bps Adjusted EPS Growth 2% to 17% 12% to 27% Guidance Mid-Point FX Adjusted 1,2 7.0% ~115bps 20% Note 1: The Company issued guidance on Febru
Slide 18: Investment Highlights Key Topics
Investment Highlights Industry Landscape Strategy Summary Key Topics
Slide 19: Global Mattress Industry Is Large And Growing
Global Mattress Industry Is Large And Growing Note: CSIL World Mattress Report, 2014 (Top 35 Markets Mattress Consumption) ($ in billions at wholesale) Doubled In 10 Years
Slide 20: Industry Evolving, Particularly In US
US Manufacturer Consolidation US Bedding Specialty Stores Consolidation New Channels Technological Innovations Industry Evolving, Particularly In US Tempur Sealy Is Well-Positioned To Capitalize On The Industry Evolution Source of Tempur Sealy Advantage Examples Serta Simmons • Leader of the consoli
Slide 21: Investment Highlights Key Topics
Investment Highlights Industry Landscape Strategy Summary Key Topics
Slide 22: Clear Strategic Priorities
Clear Strategic Priorities Leverage and Strengthen Our Comprehensive Portfolio Of Iconic Brands & Products Expand Margins With Focus On Driving Significant Cost Improvement Delivering Value For Stockholders Expand Distribution And Seek Highest Dealer Advocacy Leverage Global Scale For Competitive Ad
Slide 23: Drivers Of Mattress Industry Growth
Drivers Of Mattress Industry Growth Total Sales Growth Driven By Brand Strength And Innovation Total Unit Growth Price Growth Driven By Population Growth And Replacement Note 1: Mattress industry growth information is based on ISPA 2013 Mattress Industry Report of Sales & Trends. 2014 is based on ma
Slide 24: We Are Committed To Driving Retail AUSPs Higher
We Are Committed To Driving Retail AUSPs Higher Tempur-Pedic US Avg. Transaction Value +9% CAGR Tempur-Pedic US Mattress AUSP +6% CAGR Stearns & Foster Mattress AUSP +7% CAGR $0 $1,000 $2,000 Note: All numbers are based on wholesale price growth. Transaction value is defined as “Bedding sales”, whic
Slide 25: Industry Leading Investment In Breakthrough Marketing
Industry Leading Investment In Breakthrough Marketing Tempur Sealy Invested Over $500 million In Global Marketing in 2014
Slide 26: U.S. Consumers Are Most Likely To Buy Our Brands
Tempur-Pedic Sleep Number U.S. Consumers Are Most Likely To Buy Our Brands 35% 15% 11% Note: Mattress Industry Consumer Research – U.S. Market Simmons Serta Sealy Brands Most Likely To Buy – Prospective US Buyers Tempur Sealy Serta Simmons Select Comfort
Slide 27: Our Investment In Product Innovation Exceeds Competitors
Over 2x Greater Our Investment In Product Innovation Exceeds Our Competitors Note 1: Reflects R&D spend in 2014. Note 2: Competitor information is based on management estimates. Tempur Sealy Competitor A & B Competitor C
Slide 28: Last Year's Innovative New Products Were A Major Success
Tempur Cloud & Contour Optimum & Sealy Stearns & Foster Tempur Breeze Last Year’s Innovative New Products Were A Major Success Execution of a record number of product introductions in 2014 Delivered compelling consumer benefits Drove US market share increases
Slide 29: Investing To Drive Additional Growth In 2015 And Beyond
Tempur Pillows Posturepedic Tempur North Tempur Flex Investing To Drive Additional Growth In 2015 And Beyond Note: Tempur-Flex products are priced at queen set retail price points above $2,000. We believe TEMPUR-Flex expands consumer appeal and can drive incremental sales above $2,000 New Postureped
Slide 30: Broad Distribution In Traditional And Alternative Channels
9,400 11,700 6,000 5,200 Furniture and bedding retailers Department stores Warehouse / club stores Company-owned stores (over 100) Electronics and appliance retailers Mass merchant and discount stores Direct-to-consumer (e-commerce/call center) Hospitality and contract 15,400 16,900 Broad Distributi
Slide 31: Striving For Highest Dealer Advocacy
Integrated Sales Team Best Dealer Support Best Partner To Deliver Gross Profit $ Category Management Integrated Product Portfolio Best Brands In-Store Marketing & Training Striving For Highest Dealer Advocacy Tempur, Sealy, Stearns & Foster Innerspring, Hybrid, Tempur material, Adjustable bases, Pil
Slide 32: The Industry's Only Truly Global Company
The Industry’s Only Truly Global Company Tempur Sealy Presence Note: Presence includes subsidiaries, joint ventures, third party, and licensee markets.
Slide 33: Tempur Sealy Has A Significant Market Share Opportunity
Tempur Sealy Has A Significant Market Share Opportunity Market Leader Top 5 Market Position Underpenetrated Asia Pacific Europe US and Canada Latin America
Slide 34: Capitalizing On Opportunity Different By Geography
US Canada Europe Asia Pacific Latin America Capitalizing On Opportunity Different By Geography Marketing Product Innovation Opening Own Stores Leveraging Distribution Synergies Leverage JV (CR)
Slide 35: Global Scale And Capabilities Provides A Distinct Competitive Advantage
Global Scale And Capabilities Provides A Distinct Competitive Advantage Tempur Sealy Is Uniquely Positioned To Capitalize On Its Integrated Product And Brand Portfolio On A Global Basis • Procurement • R&D • Engineering and design Product Development • Cloud and Breeze Beds • Stearns & Foster • Post
Slide 36: Tempur Distribution Rights
Tempur Distribution Rights Licensees and Third Party Distributors Acquired Since 2006 we have acquired brand rights and distributors or distribution rights in several markets More than 65 Tempur 3 rd Party Distributors Existing Licensee & 3 rd Party Distributor Markets Note: In certain markets where
Slide 37: Asia JV Markets
Asia JV Markets Own 50% with option to purchase remaining 50% in 2020 JV Partner is Sealy of Australia, a Sealy brand Licensee ~$100 million in annual 2014 sales, with 25%+ CAGR since 2009 Accretive operating margin profile Asia Joint Ventures Note 1: Sales and operating margin figures for Asia JV i
Slide 38: Comfort Revolution JV
Own 45% with option to purchase remaining 55% in 2017 JV Partner is industry pioneer and founder of Sleep Innovations Comfort Revolution JV
Slide 39: Investment Highlights Key Topics
Investment Highlights Industry Landscape Strategy Summary Key Topics
Slide 40: Tempur Sealy Strategic Priorities
Tempur Sealy Strategic Priorities Leverage and Strengthen Our Comprehensive Portfolio Of Iconic Brands & Products Delivering Value For Stockholders • Base Annual Targets: Sales Growth Of 6% And Adjusted EPS Growth Of 15% • Strong Cash Flow To Reduce Debt And Return Value to Stockholders Expand Distr
Slide 41: Annual Base Growth Targets 2015-2018
6% 50bps 15% Annual Base Growth Targets 2015-2018 Internal Target: 100bps Annual Operating Margin Improvement Targets are based on Constant Currency DELEVERAGING TO 3X AND RETURN VALUE TO SHAREHOLDERS SALES GROWTH OPERATING MARGIN IMPROVEMENT ADJUSTED EPS GROWTH Note 1: Management estimates. Please
Slide 42: Committed, Capable People With Strong Shared Values
Committed, Capable People With Strong Shared Values
Slide 43: Tim Yaggi, Chief Operating Officer
Tim Yaggi Chief Operating Officer
Slide 44: North America Key Topics
Overview Industry Update 2014 Review Growth Initiatives Profitability Focus Summary North America Key Topics
Slide 45: North America – A $2.4 Billion Segment
North America Segment North America – A $2.4 Billion Segment
Slide 46: Tempur Sealy North America
Tempur Sealy North America Comprehensive portfolio of iconic brands Complete and complementary product offering Luxury Premium Mid-Price Value 2014 Sales by Brand Tempur-Pedic Posturepedic Stearns & Foster Sealy Broadly distributed across all key channels – sold in well over 10,000 doors Address eve
Slide 47: Best Brands With Distinct Roles And Messaging
Best Brands With Distinct Roles And Messaging The Best Sleep There’s only one Tempur-Pedic ® ; nothing precisely adapts, supports and aligns like TEMPUR ® Unsurpassed Back Support
Slide 48: Complete Range Of Mattress Technologies – TEMPUR Material
Complete Range Of Mattress Technologies – TEMPUR Material
Slide 49: Complete Range Of Mattress Technologies – Hybrid
Complete Range Of Mattress Technologies – Hybrid
Slide 50: Complete Range Of Mattress Technologies – Innerspring
Complete Range Of Mattress Technologies – Innerspring
Slide 51: Complete Range Of Mattress Technologies – Other
Complete Range Of Mattress Technologies – Other Specialty Memory Foam and Gel Visco Latex Adjustable Comfort
Slide 52: Complete Range Of Adjustable Bases – Tempur-Pedic
TEMPUR-Ergo Premier TEMPUR-Ergo Plus TEMPUR-UP Complete Range Of Adjustable Bases – Tempur-Pedic
Slide 53: Complete Range Of Pillows And Comfort Products
Complete Range Of Pillows And Comfort Products
Slide 54: North America Key Topics
Overview Industry Update 2014 Review Growth Initiatives Profitability Focus Summary North America Key Topics
Slide 55: US Mattress Industry Sales At Record Level
($ in billions at wholesale) representative sample for 2006 and 2011. Specialty data not available prior to 2004. 2014 is based on management estimates. US Mattress Industry Sales At Record Level 15 Year CAGR: +5% $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 Innerspring Specialty Market 2014E $2.8 $3.0 $
Slide 56: US Mattress Industry Units Well Below Prior Peak
19,063 19,874 20,077 20,375 US Mattress Industry Units Well Below Prior Peak Units (units in thousands) ($ in billions at wholesale) 15 Year CAGR: 0% Innerspring Specialty Market representative sample for 2006 and 2011. Specialty data not available prior to 2004. 2014 is based on management estimate
Slide 57: Growth Mostly Driven By Higher Mattress Prices
Growth Mostly Driven By Higher Mattress Prices ($ at wholesale) 15 Year CAGR: +5% $133 $140 $145 $153 $163 $182 $199 $229 $242 $244 $240 $239 $261 $278 $286 $296 2014E Note: Based on ISPA 2013 Mattress Industry Report of Sales & Trends, with ISPA revised representative sample for 2006 and 2011. 2014
Slide 58: Tempur Sealy Is A Key Driver Of Industry AUSP
Tempur Sealy Is A Key Driver Of Industry AUSP Note 1: Based on gross wholesale mattress AUSP. Note 2: Information for competitors is based on management estimates and ISPA data. Average US Mattress Unit Wholesale Price Competitors Tempur-Pedic
Slide 59: US Industry Adjustable Base Sales Have More Than Doubled
US Industry Adjustable Base Sales Have More Than Doubled Note 1: Adjustable base shipment data is based on ISPA 2013 Mattress Industry Report of Sales & Trends. 2014 is based on management estimates. Note 2: Information for Tempur-Pedic share of adjustable base industry growth is based on management
Slide 60: North America Key Topics
Overview Industry Update 2014 Review Growth Initiatives Profitability Focus Summary North America Key Topics
Slide 61: Built Capabilities in 2014
Built Capabilities in 2014 Product Development: Launch execution Global innovation pipeline Brand Marketing: New talent and enhanced capabilities, strong media campaign Strong creative development and media buying Channel: Combined field selling organization Category management Operations: Began the
Slide 62: 2014 Product Launch Capability
2014 Product Launch Capability Record number of launches All delivered on time with high quality Supporting materials on time Transitions from old to new were well managed Contained compelling consumer benefits Supported with rigorous market research Offered strong value propositions Delivered benef
Slide 63: 2014 Product Launch Results
2014 Product Launch Results Tempur Cloud/Contour launch was largest ever and very effective Stearns & Foster launch delivered all-time sales record Sealy Innerspring launch returned brand to double-digit growth Sealy Optimum 2.0 line revitalized
Slide 64: Solid Growth From Other Key Products
Posturepedic Adjustable Bases TEMPUR-Breeze Solid Growth From Other Key Products Achieved Growth Across The Portfolio Dramatic growth in adjustable bases with attach rates exceeding 50% Continued success of Breeze and Posturepedic
Slide 65: 20%+ Higher Invested Media Synergies In 2014
20%+ Higher Invested Media Synergies In 2014 Tempur Sealy TRPs In 2014 Kantar media data from January – September, 2014. TRPs are target rating points and are a measure of reach for a specifically targeted audience. Source:
Slide 66: Effective National TV Ad Campaigns
Effective National TV Ad Campaigns New Creative Tested Extremely Well With Our Target Audience
Slide 67: Strong Results From Marketing Investments
Strong Results From Marketing Investments Website Visits +24% Target Rating Points >+20% Adjustable Base Sales +32% Retail Locator Visits +62% Note: Data reflects 2014 versus 2013.
Slide 68: North America Key Topics
Overview Industry Update 2014 Review Growth Initiatives Profitability Focus Summary North America Key Topics
Slide 69: Introducing TEMPUR-Flex
Introducing TEMPUR-Flex – Breakthrough 3 rd Feel Responsive support that moves with you, with the personalized comfort of TEMPUR • Prima ($2,299) • Supreme ($2,899) • Elite ($3,499) Note: Retail list price point for queen set.
Slide 70: 2015 Tempur-Pedic Core Portfolio
2015 Tempur-Pedic Core Portfolio TEMPUR-Cloud® Prima TEMPUR-Cloud® Supreme TEMPUR-Contour™ Supreme TEMPUR-Flex™ Supreme TEMPUR-Cloud® Elite TEMPUR-Contour™ Elite TEMPUR-Flex™ Elite TEMPUR-Cloud® Luxe TEMPUR-Contour™ Rhapsody Luxe TEMPUR-Cloud® Luxe Breeze TEMPUR-Contour™ Rhapsody Breeze TEMPUR-Cloud
Slide 71: Supported With In-Store Marketing Investment
Supported With In-Store Marketing Investment
Slide 72: Rededicating Posturepedic Brand To Its Heritage
Rededicating Posturepedic Brand To Its Heritage Of Unsurpassed Back Support For Posturepedic has stood for… : The Original Posture pedic Mattress
Slide 73: New 2015 Posturepedic Collection
New 2015 Posturepedic Collection – Significantly Improved Value Proposition POSTUREPEDIC POSTUREPEDIC PLUS POSTUREPEDIC PREMIER HYBRID HYBRID experience TRADITIONAL experience ($999-$1,399) ($699-$999) ($1,299-$1,999) Improved Aesthetics And Core Support Center In Every Model Note: Retail list price
Slide 74: Showcased In New Sealy Showroom
Showcased In New Sealy Showroom
Slide 75: New Stearns & Foster Limited Edition Collection
New Stearns & Foster Limited Edition Collection Better Materials Better Craftsmanship Better Design Priced at $1,799-$1,999 Note: Retail list price point for queen set.
Slide 76: Enhancing Stearns & Foster Brand Message
Enhancing Stearns & Foster Brand Message
Slide 77: New Tempur-Pedic Pillows
New Tempur-Pedic Pillows Late 2014 TEMPUR-Cloud Pillows
Slide 78: Marketing Investments Pervasive Across Platforms
MOBILE DIRECT MAIL WEBSITE PRINT Marketing Investments Pervasive Across Platforms We Remain Committed To Investing In Our Brands
Slide 79: Partnering With Retailers To Leverage Ad Spend
Partnering With Retailers To Leverage Ad Spend Proactively working with customers to leverage our collective efforts Joint creative and media buying opportunities Best in class In-store execution
Slide 80: Effective Key National Holiday Promotions
Effective Key National Holiday Promotions
Slide 81: North America Key Topics
North America Key Topics Overview Industry Update 2014 Review Growth Initiatives Profitability Focus Summary
Slide 82: Significant Margin Improvement Opportunities
Significant Margin Improvement Opportunities 2015 -2018 Objective Annual Incremental Operating Income Initiative Sealy US Gross Margin Improvement 30% 33% $45 million Cost Synergies $45 million $70 million $25 million Adjusted Operating Expense Leverage 29% 28% $30 million $125 million 2015 Pricing
Slide 83: Sealy Assembly Transformation
Sealy Assembly Transformation Key Initiatives Within The Plants Standardize best practices Embed lean principles and eliminate waste Improve hiring and staffing Smooth production, reduce overtime Elevate focus on quality and customer satisfaction, lower returns Key Initiatives Across The Network Imp
Slide 84: Warehouse/Distribution Network Initiatives Timing
Warehouse/Distribution Network Initiatives Timing Consolidated Sealy Ft. Worth, TX facility into Brenham, TX facility Announced closure of Sealy Batavia, IL facility Opening Tempur Sealy multi-purpose facility in Plainfield, IN (Indianapolis) 2Q 2015 Opening Tempur Sealy multi-purpose facility in Wi
Slide 85: Optimizing Warehouse/Distribution Network (2015)
Sealy Distribution Points Tempur Warehouses Tempur Sealy Multi-Purpose Facility Distribution network to service national retailers with considerable efficiency opportunities Optimizing Warehouse/Distribution Network (2015)
Slide 86: Tempur Sealy Multi-Purpose Facility – Plainfield, IN
Tempur Sealy Multi-Purpose Facility – Plainfield, IN
Slide 87: Tempur Distribution Center – Plainfield, IN
Tempur Distribution Center – Plainfield, IN
Slide 88: Capitalize On Tempur-Pedic's Brand Strength
Capitalize On Tempur-Pedic’s Brand Strength Price increase on Tempur-Pedic adjustable bases (select) in late 2014 Price increase on Tempur-Pedic mattresses (select) in March 2015 Note: Prices were increased on select models. Low Single-Digit Pricing Actions Drive $25 Million Of Margin Improvement
Slide 89: North America Key Topics
Overview Industry Update 2014 Review Growth Initiatives Profitability Focus Summary North America Key Topics
Slide 90: North America Summary
North America Summary Tempur Sealy Has A Complete And Complementary Portfolio Of Brands And Products We Expect Strong Market Share Gains In 2014 To Continue Growth From New Products, Effective Marketing And Channel Synergies Robust Product Pipeline Commitment To Strengthening Brands Effective Trade
Slide 91: David Montgomery, President, International
David Montgomery Executive Vice President & President, International
Slide 92: International Key Topics
Overview 2014 Review Growth Initiatives Summary International Key Topics
Slide 93: International Is A $600 Million Segment
International Segment International Is A $600 Million Segment
Slide 94: Estimated Wholesale Bedding Sales by Region
Estimated Wholesale Bedding Sales by Region Large Markets Outside Of North America Note: Based on CSIL World Mattress Report, 2014 (Top 35 Markets Mattress Consumption) ($ in millions at wholesale) $8,188 $5,090 $1,616 Asia/Australia Europe Rest of World
Slide 95: Geographic Commentary
Geographic Commentary Europe growth is muted, due in particular to a challenged Central European region Tempur’s distribution is significant in Europe Sealy’s opportunity in Europe is large Asia-Pacific region continues to experience solid growth Tempur has a mixed distribution model with traditiona
Slide 96: Tempur Sealy International
60% 20% Tempur Sealy International Sealy Tempur Sales by Brand Tempur Sealy has strong market positions in Europe, Asia Pacific and Latin America Mix of wholly-owned subsidiaries, JVs, licensees and rd party distributors Broadly distributed across all key channels Blend of wholesale distribution and
Slide 97: Range Of Mattress Technologies – TEMPUR Material
Range Of Mattress Technologies – TEMPUR Material Cloud Original Sensation
Slide 98: Range Of Mattress Technologies – Innerspring, Hybrid And Luxury Innerspring
Range Of Mattress Technologies – Innerspring, Hybrid And Luxury Innerspring Innerspring Luxury Innerspring Hybrid
Slide 99: Complete Range Of Adjustable Bases And Bed Systems
Complete Range Of Adjustable Bases And Bed Systems Flex Tempur North Zero G
Slide 100: Complete Range Of Pillows And Accessories
Complete Range Of Pillows And Accessories Original Millennium Breeze EasyClean
Slide 101: International Key Topics
Overview 2014 Review Growth Initiatives Summary International Key Topics
Slide 102: 2014 Review
2014 Review 2014 sales growth driven by double-digit increases in Asia Pacific and positive growth in Latin America and Europe Tempur-branded direct channel sales increased 39% on a constant currency basis in 2014 Operating margin pressured by Sealy introduction in Europe, unfavorable FX and country
Slide 103: International Key Topics
Overview 2014 Review Growth Initiatives Summary International Key Topics
Slide 104: Growth Initiatives
Tempur Sealy Japan Distribution Growth Production Innovation & Marketing ` Sealy Europe Growth Initiatives
Slide 105: Sealy Europe Is A $200+ Million Opportunity
Tempur Sealy Japan Distribution Growth Product Innovation & Marketing Sealy Europe Sealy Europe Is A $200+ Million Opportunity Note: Management estimates. Please refer to “Forward Looking Statements”.
Slide 106: Sealy Europe Is A Key Growth Investment
Sealy Europe Is A Key Growth Investment Sealy Europe is a $200+ million opportunity Tempur has mid-single digit share of the $4+ billion Continental European market Sealy Europe opportunity based on achieving a similar market share level to Tempur Build scale through mixed manufacturing model Stearn
Slide 107: Premium Brand Positioning
Premium Brand Positioning Stearns & Foster positioned as an All-American style luxury-priced mattress Sealy Hybrid targets mainstream core with pricing beneath Tempur and Stearns & Foster
Slide 108: Investing To Support Distribution And Build Awareness
Investing To Support Distribution And Build Awareness In-Store Marketing Advertising
Slide 109: Significant Distribution Growth Potential
Tempur Sealy Japan Distribution Growth Product Innovation & Marketing Sealy Europe Significant Distribution Growth Potential
Slide 110: Growth Of Distribution Around The World
Growth Of Distribution Around The World Tempur distributes through ~6,000 retail doors and Sealy distributes through ~5,200 retail doors Focused on expanding distribution in 2015
Slide 111: Significant Tempur Brand Direct Sales Growth
Significant Tempur Brand Direct Sales Growth Tempur brand direct sales growth in the International segment has been driven by an increase in the number of company-owned stores and e-commerce
Slide 112: Tempur Branded Company-Owned Stores
Tempur Branded Company-Owned Stores Approaching 100 Tempur Sealy owned stores in Europe, Asia Pacific and Latin America China Holland Singapore Norway U.K.
Slide 113: Tempur Sealy Owned Stores In Latin America
Tempur Sealy Owned Stores In Latin America Argentina Store Approximately 50 Sealy stores in Latin America
Slide 114: Sealy Branded Stores Operated By Our Asia JVs
Sealy Branded Stores Operated By Our Asia JVs Over 175 Sealy-branded stores operated by our Asia JVs
Slide 115: Tempur Branded Stores Operated By Third Party Distributors
Tempur Branded Stores Operated By Our 3 Party Distributors South Africa Dubai India Saudi Arabia Kuwait Philippines Over 100 Tempur-branded or Tempur-only stores operated by third party distributors rd
Slide 116: Tempur Sealy Japan Is A Key Growth Opportunity
Tempur Sealy Japan Distribution Growth Product Innovation & Marketing ` Sealy Europe Tempur Sealy Japan Is A Key Growth Opportunity
Slide 117: Tempur Sealy Japan – Growth Opportunity
Tempur Sealy Japan – Growth Opportunity Acquired Sealy brand rights in July 2014 and subsequently integrated into Tempur Japan Integration strengthens Tempur Sealy’s market positioning and provides significant growth opportunities to leverage portfolio by expanding product offering and distribution
Slide 118: Robust Product Pipeline Provides Large Market Share Opportunity
Tempur Sealy Japan Distribution Growth Product Innovation & Marketing ` Sealy Europe Robust Product Pipeline Provides Large Market Share Opportunity
Slide 119: Robust Pipeline Of Consumer Preferred Products
Leveraging global product development scale and capabilities – significant plans for 2016 Robust Pipeline Of Consumer Preferred Products TEMPUR-Breeze TEMPUR-Cloud TEMPUR North TEMPUR Adjustable Bases
Slide 120: Committed To Building Brand Awareness
Committed To Building Brand Awareness “For a more restful sleep than ever” Tempur France China “Weightless” Campaign Tempur brand awareness internationally is below 50%, and well below level in North America Note: Management estimates.
Slide 121: Effective TV Ad Campaigns
Effective TV Ad Campaigns
Slide 122: TEMPUR | = x
=. ee TEMPUR | = x Grand Jeu Concours a TEMPUR EXPERIENCE TEMPUR#SEALY
Slide 123: Increasing Focus On Digital Communication
Increasing Focus On Digital Communication
Slide 124: Effective In-Store Marketing/Product Investments
Effective In-Store Marketing/Product Investments
Slide 125: Striving For Highest Dealer Advocacy
Integrated Sales Team Best Dealer Support Best Partner To Deliver Gross Profit $ Category Management Integrated Product Portfolio Best Brands In-Store Marketing & Training Striving For Highest Dealer Advocacy Tempur, Sealy, Stearns & Foster Innerspring, Hybrid, Tempur material, Adjustable bases, Pil
Slide 126: International Key Topics
Overview 2014 Review Growth Initiatives Summary International Key Topics
Slide 127: International Summary
International Summary 2014 Growth Was Driven Largely By Higher Sales In Asia Pacific And Latin America Investing In Future Growth – Sealy Europe Is A Significant Opportunity, Tempur Sealy Japan Will Expand Distribution – Traditional Retailers and Company-Owned Stores Robust Product Pipeline Provides
Slide 128: Dale Williams, Executive Vice President & Chief Financial Officer
Dale Williams Executive Vice President & Chief Financial Officer
Slide 129: Financial Overview Key Topics
Financial Overview Financial Outlook Capital Structure and Cash Flow Financial Key Topics
Slide 130: Segment Overview
Dicnsreco + US and Canada me International pamanannnnnnnnnnnnnn + Europe, Asia-Pacific and Latin America + Royalty Income and Equity Income in Earnings of Asia JVs a + Corporate expenses 3 © £ © 2 ° a i=} fo] S) TEMPUR#SEALY
Slide 131: 2014 Net Sales
2014 Net Sales Globally Diverse Bedding Provider Largely Sold In The Retail Channel By Segment International North America By Geographic Region Europe US Canada Asia Pacific Latin America Other Retail By Channel Other By Product Bedding
Slide 132: 2014 Net Sales North America Segment
2014 Net Sales North America Segment North America – Bedding Products Principally Sold In Retail Channel Other Retail By Channel Other Bedding By Product Mattresses Account For ~85% Of Bedding Pillows Account For ~67% Of Other
Slide 133: 2014 Net Sales International Segment
2014 Net Sales International Segment Other Retail By Channel Other Bedding By Product International – Higher Mix Of Other Products Sold In Other Channels Versus North America Mattresses Account For ~80% Of Bedding Pillows Account For ~75% Of Other
Slide 134: Balanced Cost Of Goods Sold Mix
Balanced Cost Of Goods Sold Mix Consolidated Other Materials Commodities (Foam/Steel) Logistics Manufacturing/Overhead Labor
Slide 135: Financial Overview Key Topics
Financial Overview Financial Outlook Capital Structure and Cash Flow Financial Key Topics
Slide 136: Annual Base Growth Targets 2015-2018
6% 50bps 15% Annual Base Growth Targets 2015-2018 Internal Target: 100bps Annual Operating Margin Improvement Targets are based on Constant Currency DELEVERAGING TO 3X AND RETURN VALUE TO SHAREHOLDERS SALES GROWTH OPERATING MARGIN IMPROVEMENT ADJUSTED EPS GROWTH Note 1: Management estimates. Please
Slide 137: Financial Guidance – Net Sales & Adjusted EPS Growth
Consolidated Net Sales FY 2015 vs. FY 2014 Adj. Earnings Per Share FY 2015 vs. FY 2014 Financial Guidance – Net Sales & Adjusted EPS Growth Note 1: Management estimates. Please refer to “Forward Looking Statements”. Note 2: Growth presented is based on the Company’s guidance issued on February 5, 20
Slide 138: Segment Assumptions – Net Sales Growth
North America FY 2015 vs. FY 2014 International FY 2015 vs. FY 2014 Segment Assumptions – Net Sales Growth Net Sales Growth +3% to +5% Currency -1% Constant Currency Sales Growth +4% to +6% Net Sales Growth -1% to +6% Currency -13% Constant Currency Sales Growth +12% to +19% Note 1: Updated historic
Slide 139: Expect To Reverse Gross Margin Trend In 2015
Expect To Reverse Gross Margin Trend In 2015 margin improvement to be driven by pricing, volume leverage and cost efficiencies, offset partially by unfavorable currency, product and channel mix and slight commodity inflation Excluding FX, gross margin is expected to be up approximately 150bps to 200
Slide 140: Operating Margin Expansion In 2015
(GAAP Reported Operating Margin) GAAP operating margin includes $43.8 million of integration costs (1.5% of sales) Excluding integration and financing costs, operating margin is expected to be up 10bps to 80bps in 2015 On a constant currency basis, and excluding integration and financing costs, oper
Slide 141: Tempur North America Margins Are Improving
Tempur North America Margins Are Improving Our first half of 2014 investments are paying off as sales grew double-digits and margins expanded considerably in the second half of 2014 as compared to the second half of 2013 guidance assumes significant further margin improvement Volume leverage, cost p
Slide 142: Focused On Driving Sealy Margin Improvement
Focused On Driving Sealy Margin Improvement Note 1: Targeted Sealy US gross margin improvement based on management estimates. Please refer to “Forward Looking Statements”. Sealy operating margins deteriorated in the second half of 2014 vs. the second half of 2013 due primarily to manufacturing ineff
Slide 143: Tempur International Margins Pressured By Sealy Mix
Tempur International Margins Pressured By Sealy Mix Note: Please refer to “Forward Looking Statements”. Tempur International operating margins deteriorated in 2014 vs. 2013 due primarily to launch of Sealy Europe, unfavorable FX and market weakness in Central Europe International margins will contin
Slide 144: Significant Margin Improvement Opportunities
Significant Margin Improvement Opportunities Internal Target: 100bps Annual Operating Margin Improvement 2015 -2018 Objective Annual Incremental Operating Income Initiative Sealy US Gross Margin Improvement 30% 33% $45 million Cost Synergies $45 million $70 million $25 million Adjusted Operating Exp
Slide 145: Targeting Base Annual Adjusted EPS Growth Of 15%
Targeting Base Annual Adjusted EPS Growth Of 15% Note 1: Management estimates. Please refer to “Forward Looking Statements”. Note 2: GAAP EPS for was $1.28 and GAAP EPS for was $1.75. Note 3: 2015P is based on the Company’s February 5, 2015 issued guidance for Adjusted EPS for full year 2015 of $2.7
Slide 146: Strengthening US Dollar Against Key Currencies
Strengthening US Dollar Against Key Currencies Note: Factset, based on currency rates as of February 1, 2015.
Slide 147: Significant Profit Impact From Unfavorable FX
Significant Profit Impact From Unfavorable FX FX ~$13M Operating Income Impact 2015P FX ~$24M Operating Income Impact -$37M Operating Income IMPACT Note 1: For information on the methodology used to present constant currency information please refer to slide 167. Note 2: 2015 impact from FX based on
Slide 148: We Are On Track To Our 2016 Targets
We Are On Track To Our 2016 Targets Adjusted EPS Based On High End Of 2015 Guidance And Our Annual Growth Targets, We Would Be On Pace To Achieve Our 2016 $4.00 Adj. EPS Target, On A Constant Currency Basis Note 1: Management estimates. Please refer to “Forward Looking Statements”. Note 2: Growth pr
Slide 149: Financial Overview Key Topics
Financial Overview Financial Outlook Capital Structure and Cash Flow Financial Key Topics
Slide 150: Efficient Capital Structure
Revolving credit facility $16.0 Term A Facility $484.5 Term B Facility $594.4 Senior Notes (6.875%) $375.0 Sealy Notes (8.0%) $104.7 Capital lease obligations and other $27.7 Total $1,602.3 Dec. 31, 2014 Maturity Efficient Capital Structure Considerable covenant headroom and sufficient liquidity Deb
Slide 151: Strong Cash Flow Characteristics
Strong Cash Flow Characteristics ($ in millions) Operating and Free Cash Flow Note 1: Management estimates. Please refer to “Forward Looking Statements”. Note 2: Free cash flow is a non-GAAP measure. For information on the methodology used to present free cash flow information and a reconciliation t
Slide 152: Solid Adjusted EBITDA Growth
Solid Adjusted EBITDA Growth ($ in millions) Adjusted EBITDA Note 1: Management estimates. Please refer to “Forward Looking Statements”. Note 2: For information on the methodology used to present constant currency information please refer to slide 167. Note 3: Adjusted EBITDA (which is a non-GAAP me
Slide 153: Adjusting Leverage Target To 3x
Adjusting Leverage Target To 3x ($ in millions) Consolidated Funded Debt Less Qualified Cash to Adjusted EBITDA As a larger more stable company, our optimal capital structure is 3x 2014 credit agreement amendment allows cash utilization flexibility below 3.5x Value creation generated through delever
Slide 154: Significant Operating Cash Flow With Commitment To Enhance Stockholder Value
Significant Operating Cash Flow With Commitment To Enhance Stockholder Value ($ in millions) Prior to the Sealy acquisition, repurchased 49 million shares between 2005 and 2012 for $1.3 billion ($26.46 average price)
Slide 155: Mark Sarvary, President & Chief Executive Officer
Mark Sarvary President & Chief Executive Officer
Slide 156: Tempur Sealy Strategic Priorities
Tempur Sealy Strategic Priorities Leverage and Strengthen Our Comprehensive Portfolio Of Iconic Brands & Products Expand Distribution And Seek Highest Dealer Advocacy Expand Margins With Focus On Driving Significant Cost Improvement Leverage Global Scale For Competitive Advantage Delivering Value Fo
Slide 157: Q&A with Leadership Team
Q&A with Leadership Team
Slide 158: Tempur Sealy logo
TEMPUR#SEALY
Slide 159: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures In this investor presentation and certain of its press releases and SEC filings, the Company provides information regarding adjusted net income, adjusted earnings per share, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA
Slide 160: 2013 and 2014 Adjusted EPS
2013 and 2014 Adjusted EPS Adjusted EPS Reconciliation (1) Loss on disposal of business represents costs associated with the disposition of the three U.S. innerspring component facilities and related equipment. (2) Transaction and integration represents costs, including legal fees, professional fees
Slide 161: 2013 and 2014 Adjusted EBITDA
2013 and 2014 Adjusted EBITDA Adjusted EBITDA Reconciliation Year Ended Year Ended (in millions) December 31, December 31, (1) Net income attributable to Tempur Sealy International, Inc. 75.6 $ 108.9 $ Interest expense 133.2 91.9 Income taxes 39.0 64.9 Depreciation & amortization 98.6 89.7 EBITDA 34
Slide 162: Reconciliation of Total Debt to Consolidated Funded Debt Less Qualified Cash
Reconciliation of Total Debt to Consolidated Funded Debt Less Qualified Cash Debt Reconciliation and Leverage Ratio Calculation (1) Qualified cash as defined in the Company's senior secured credit facility equals 100.0% of unrestricted domestic cash plus 60.0% of unrestricted foreign cash. For purpo
Slide 163: Tempur North America Adjusted Operating Income And Operating Margin
Tempur North America Adjusted Operating Income And Operating Margin Tempur North America Adjusted Operating Margin Reconciliation Tempur North America 2013 - 2014 Year Ended Year Ended (in millions, except percentage amounts) December 31, December 31, Operating Income, Tempur North America segment $
Slide 164: 2014 Adjusted Operating Expenses
2014 Adjusted Operating Expenses Adjusted Operating Expenses Tempur Sealy International, Inc. Year Ended (in millions, except percentage amounts) December 31, Consolidated net sales $2,989.8 Selling and marketing expenses 619.9 General, administrative and other expenses 280.6 Operating Expenses 900.
Slide 165: 2014 Adjusted Operating Income and Margin
2014 Adjusted Operating Income and Margin Adjusted Operating Margin Tempur Sealy International, Inc. Year Ended (in millions, except percentage amounts) December 31, Operating Income, Tempur Sealy International, Inc. $276.3 Consolidated net sales 2,989.8 Operating Margin (GAAP) 9.2% Operating Income
Slide 166: 2014 Free Cash Flow
2014 Free Cash Flow Free Cash Flow Tempur Sealy International, Inc. Year Ended Year Ended (in millions) December 31, December 31, Net cash provided by operating activities $98.5 $225.2 Less: Purchases of property, plant and equipment 40.0 47.5 Free Cash Flow $58.5 $177.7
Slide 167: Constant Currency Information
Constant Currency Information In this investor presentation the Company refers to, and in other press releases and other communications with investors the Company may refer to, net sales or earnings or other historical financial information on a “constant currency basis” or “excluding FX”, which is
Tempur Sealy International — Investor Day (February 2015) on 6ix