Somnigroup International Inc. · NYSE:SGI
Somnigroup International — Tempur Sealy International — Investor Presentation (June 2015)
38 slides from Somnigroup International's investor presentation, Jun 5, 2015
Slide 1: Executing A Compelling Strategy To Deliver Value To Stockholders
1 Tempur Sealy International, Inc. (TPX) “Executing A Compelling Strategy To Deliver Value To Stockholders” Investor Presentation June 2015
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements Note Regarding Trademarks, Trade Names and Service Marks: TEMPUR, Tempur-Pedic, TEMPUR-Cloud, TEMPUR-Choice, TEMPUR-Weightless, TEMPUR-Contour, TEMPUR-Rhapsody, TEMPUR-Flex, GrandBed, TEMPUR-Simplicity, TEMPUR-Ergo, TEMPUR-UP, TEMPUR-Neck, TEMPUR-Symphony, TEMPUR-Comfort
Slide 3: Tempur Sealy Overview
3 Tempur Sealy Overview Iconic Brands Globally DiverseComprehensive Offering Most recognized brands in the industry Complementary brands with distinct roles and messaging All key product technologies All key consumer preferences Market leader in specialty and premium mattresses and adjusta
Slide 4: Investment Thesis
4 Investment Thesis Global Leader in Attractive Bedding Industry Large and stable growing market with solid financial characteristics Tempur Sealy is the largest and only truly global player and is the most profitable1 Compelling Strategy Focused on Growth and Margin Improvement Significan
Slide 5: Attractive Industry – Stable, Growing And Profitable
5 Attractive Industry – Stable, Growing And Profitable Attractive Global Bedding Industry $20+ billion industry1 that is stable and growing, with healthy margins and strong cash flow characteristics Positive secular trends as consumers place increasing value on sleep quality and product lifest
Slide 6: Tempur Sealy Is The Global Leader
6 Tempur Sealy Is The Global Leader Tempur Sealy aspires to be the leader in every major market Only truly global bedding company with portfolio of iconic brands that are globally marketed and recognized Unique global scale creates critical competitive advantages – product development, procure
Slide 7: Investment Thesis
7 Investment Thesis Global Leader in Attractive Bedding Industry Large and stable growing market with solid financial characteristics Tempur Sealy is the largest and only truly global player and is the most profitable1 Compelling Strategy Focused on Growth and Margin Improvement Significan
Slide 8: Compelling Strategy
8 Compelling Strategy Leverage and Strengthen Our Comprehensive Portfolio Of Iconic Brands & Products Expand Distribution And Seek Best Dealer Support Expand Margins With Focus On Driving Significant Cost Improvement Accretive Acquisitions Of Licensees And Joint Ventures Leverage Global Scale For Co
Slide 9: Leverage And Strengthen Portfolio Of Iconic Brands
9 Leverage And Strengthen Portfolio Of Iconic Brands Tempur Sealy has the strongest brand portfolio Brands are complementary and cover key consumer needs: Tempur-Pedic • Nothing precisely adapts, supports and aligns like Tempur-Pedic for the “Best Sleep of Your Life” Stearns & Foster • Tradition
Slide 10: Strong Marketing Campaign, Pervasive Across Platforms
10 Strong Marketing Campaign, Pervasive Across Platforms Focused on improving the effectiveness of our marketing spend to: Strengthen brand preference Drive traffic and conversion Improve return on investment TV Joint Marketing PrintCatalog Digital Social Internet & Mobile
Slide 11: Leverage and Strengthen Portfolio Of Products
11 Leverage and Strengthen Portfolio Of Products Tempur Sealy has the most comprehensive portfolio of products in the industry Focus on developing differentiated, consumer-preferred products 2014 product launches were very successful, leading to U.S. market share gains TEMPUR-Cloud/Contour b
Slide 12: Expand Distribution And Improve Productivity
12 Expand Distribution And Improve Productivity Current and emerging channels Furniture & bedding retailers, department stores, warehouse/club stores, mass merchant and discount stores Electronics/appliance retailers and direct-to-consumer (e-commerce) Increased placement within existing ret
Slide 13: Integrated Sales Team, Best Dealer Support
13 Integrated Sales Team Best Dealer Support Best Partner To Deliver Gross Profit $ Category Management Integrated Product Portfolio Best Brands In-Store Marketing & Training Seek Best Dealer Support Tempur, Sealy, Stearns & Foster Innerspring, Hybrid, Tempur material, Adjustable bases, Pillows Full
Slide 14: North America Growth Opportunity
14 $525 $993 $1,098 $1,412 2009 2014 Tempur Sealy $1,624 $2,405 North America Growth Opportunity Tempur Sealy has a solid growth opportunity in North America New product introductions – TEMPUR-Flex and Posturepedic Continue to build awareness of brands and drive sales through effective marketi
Slide 15: International Growth Opportunity
15 $306 $472 $76 $113 2009 2014 Tempur Sealy $382 $585 International Growth Opportunity Tempur Sealy has a significant international growth opportunity Further penetrate geographies (Sealy Europe is a $200+ million opportunity – leverage Tempur distribution) Build Tempur and Sealy brand awaren
Slide 16: Investment Thesis
16 Investment Thesis Global Leader in Attractive Bedding Industry Large and stable growing market with solid financial characteristics Tempur Sealy is the largest and only truly global player and is the most profitable1 Compelling Strategy Focused on Growth and Margin Improvement Significa
Slide 17: Margin Improvement Initiatives 2015-2018 Objectives
17 Note 1: Represents initiatives to be achieved by 2018. Our expectation is that they will ramp through the period. Approximately 35% of the total $125+ million is incorporated into our full year 2015 adjusted EPS guidance. See “Forward Looking Statements”. Note 2: Refers to Sealy gross margin in t
Slide 18: Sealy US Gross Margin Improvement Initiatives
Sealy US Gross Margin Improvement Initiatives 18 Product Design Materials (cost basis is largely in materials) SKU differentiation Procurement Cost productivity Create competitive attention Price-Margin-Realization (PMR) Trade spend effectiveness Pricing / mix Factory Productivit
Slide 19: 2015 Gross Margin Factors
2015 Gross Margin Factors 19 2015 North America Tempur US Sealy US International North America will drive consolidated margin improvement in 2015 Significant margin expansion and a majority of the North America increase through volume leverage, pricing and manufacturing efficiencies Mo
Slide 20: Investment Thesis
Investment Thesis Global Leader in Attractive Bedding Industry Large and stable growing market with solid financial characteristics Tempur Sealy is the largest and only truly global player and is the most profitable1 Compelling Strategy Focused on Growth and Margin Improvement Significant
Slide 21: Historical Performance: Adjusted EPS and Net Income
$1.04 $1.32 $1.74 $0.94 $1.12 $2.16 $3.18 $2.61 $2.38 $2.65 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Adjusted Earnings Per Share $107 $116 $141 $70 $85 $157 $220 $164 $146 $165 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Adjusted Net Income Historical Performance Note 1: For a more de
Slide 22: Return On Invested Capital Historical Performance
24% 25% 27% 16% 19% 34% 41% 21% 13% 13% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Return On Invested Capital Historical Performance Note 1: Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization adjusted for
Slide 23: Annual Base Growth Targets 2015-2018
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 ADJUSTED OPERATING MARGIN IMPROVEMENT ADJUSTED EPS GROWTH 6% 50bps 15% Note 1: Management estimates
Slide 24: 2015 Outlook Above Annual Base Growth Targets
2015 Outlook Above Annual Base Growth Targets1 FY 2015 Guidance Guidance Range Y/Y Chg. Net Sales $3.100 to $3.175 Billion +4% to +6% Constant Currency3 Net Sales +8% to +10% Adjusted EPS2 $2.80 to $3.15 +6% to +19% Constant Currency Adj. EPS +18% to +31% Note 1: Targets are based on constant curren
Slide 25: Improving Capital Structure
25 Improving Capital Structure $1,798 $1,573 $1,450 4.4x 3.9x 3.4x 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10 0 500 1000 1500 2000 2500 3000 2013 2014 2015P Debt Leverage ($ in millions) Consolidated Funded Debt Less Qualified Cash to Adjusted EBITDA Note 1: Information for 2015
Slide 26: Significant Operating Cash Flow With Commitment To Enhance Stockholder Value
Significant Operating Cash Flow With Commitment To Enhance Stockholder Value $76 $144 $344 $18 $250 $368 $139 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Buyback Dividends ($ in millions) Prior to the Sealy acquisition, repurchased 49 million shares between 2005 and 2012 for $1.3 billion ($2
Slide 27: Appendix
Appendix | TEMPUR*SEALY
Slide 28: 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 29: 1Q 2015 and 1Q 2014 Adjusted EPS Reconciliation
1Q 2015 and 1Q 2014 Adjusted EPS Reconciliation 1Q 2014 and 1Q 2015 Adjusted EPS 29 Three Months Ended Three Months Ended (in millions, except per share amounts) March 31, 2015 March 31, 2014 GAAP net income $ 23.4 $ 27.4 Plus: Redemption value adjustment on redeemable non-controlling interest, net
Slide 30: 2005 – 2014 Adjusted Net Income and Adjusted EPS Reconciliation
2005 – 2014 Adjusted Net Income and Adjusted EPS Reconciliation 30 Note: 2013 includes Sealy only for the period from March 18, 2013 (the date the Sealy Acquisition was completed) to December 31, 2013. Accordingly, the information presented for 2013 and 2014 may not be comparable. (in millions, exce
Slide 31: 2013 and 2014 Adjusted EBITDA Reconciliation
2013 and 2014 Adjusted EBITDA Reconciliation 2013 and 2014 Adjusted EBITDA 31 (1) 2013 is presented according to the methodology used for the Company’s senior secured facilities and is based on the mathematical combination of the Company’s historical financial results for the twelve months ended Dec
Slide 32: 2005 – 2012 Adjusted EBITDA Reconciliation
2005 – 2012 Adjusted EBITDA Reconciliation 32 ($ in millions) 2005(1) 2006(2) 2007 2008 2009 2010(3) 2011 2012(4) GAAP net income $99 $112 $141 $59 $85 $157 $220 $107 Interest expense 20 24 30 25 17 15 12 19 Income tax provision 67 62 71 49 43 74 109 122 Depreciation and amortization 28 29 40 41 40
Slide 33: Debt Reconciliation and Leverage Ratio Calculation
Debt Reconciliation and Leverage Ratio Calculation Reconciliation of Total Debt to Consolidated Funded Debt Less Qualified Cash (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 34: Adjusted Operating Expenses And Adjusted Operating Expense Leverage
Adjusted Operating Expenses And Adjusted Operating Expense Leverage 2014 Adjusted Operating Expenses 34 Tempur Sealy International, Inc. Year Ended (in millions, except percentage amounts) December 31, 2014 Consolidated net sales $2,989.8 Selling and marketing expenses 619.9 G neral, administrative
Slide 35: 2014 Adjusted Operating Income and Margin
2014 Adjusted Operating Income and Margin 35 Fiscal Year Ended North America December 31, (in millions) 2014 GAAP operating income $255.0 GAAP Net Sales $2,404.9 Operating Margin (GAAP) 10.6% GAAP operating income $255.0 Adjustments (1) 30.0 Adjusted operating income $285.0 GAAP Net Sales $2,404.9 A
Slide 36: 1Q 2015 and 1Q 2014 Adjusted Operating Margin
1Q 2015 and 1Q 2014 Adjusted Operating Margin 1Q 2015 Adjusted Operating Margin 36 Consolidated Margin North America (1) Margin International (2) Margin Corporate (3) Net sales $ 739.5 $ 594.1 $ 145.4 — Gross profit 278.7 37.7 % 203.1 34.2 % 75.6 52.0 % — Adjustments 6.3 5.7 0.6 — Adjusted gross pro
Slide 37: Return On Invested Capital
Return On Invested Capital 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GAAP Operating Income $191 $209 $244 $134 $145 $246 $341 $248 $244 $276 Adjustments $0 $0 $0 $0 $0 $0 $0 $13 $52 $44 Adjusted Operating Income $191 $209 $244 $134 $145 $246 $341 $261 $296 $320 Add Operating Lease expense $4
Slide 38: 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
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