Somnigroup International Inc. · NYSE:SGI
Somnigroup International — Tempur Pedic International — Investor Day (February 2012)
85 slides from Somnigroup International's investor day presentation, Feb 22, 2012
Slide 1: Tempur-Pedic Investor Day
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Slide 2: Mark Rupe, Vice President
Mark Rupe Vice President
Slide 3: Agenda
Agenda Webcast participants may email questions to: investor.relations@tempurpedic.com February 22, 2012 Welcome / Agenda Mark Rupe Overview & Growth Initiatives Mark Sarvary Financial Overview Dale Williams Q&A
Slide 4: Forward-Looking Statements
Forward-Looking Statements Note Regarding Trademarks, Trade Names and Service Marks: Tempur, Tempur-Pedic, The TEMPUR-Cloud Supreme, The TEMPUR-Cloud, The RhapsodyBed by Tempur-Pedic, The TEMPUR-CloudPillow, The TEMPUR-Cloud Luxe, TEMPUR Advanced Ergo System, The AlluraBed by Tempur-Pedic, The Sensa
Slide 5: Mark Sarvary, President & Chief Executive Officer
Mark Sarvary President & Chief Executive Officer
Slide 6: Tempur-Pedic Overview: Key Topics
Tempur-Pedic Overview Macro-Industry Update Tempur-Pedic Growth Strategies & Initiatives Key Topics
Slide 7: Tempur-Pedic Overview
Tempur-Pedic Overview
Slide 8: Company Thesis
Company Thesis Established: Leader in the $6B premium segment of the $20B global mattress and pillow market Differentiated: Most highly recommended brand by owners, most desired brand for non-owners Industry-leading brand advertising, nearly $1B over past decade Innovative: Systematic proven track r
Slide 9: Tempur Vision
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 t
Slide 10: In 2009, We Introduced Our 5-Year (2014) Goal
In 2009, We Introduced Our 5-Year (2014) Goal Note 1: Management estimates Note 2: For a discussion of the Company’s performance, please refer to the 2009 10K filing. 2009 Actual 2014 Goal Sales $831M $2B Gross Margin 47.4% 50.0% Operating Margin 17.4% 25.0% 2009 Investor Day
Slide 11: We Are Well On Our Way To Achieving The 2014 Goal
We Are Well On Our Way To Achieving The 2014 Goal Note 1: Management estimates Note 2: For a discussion of the Company’s performance, please refer to the 10K filing. 2011 Actual 2014 Goal Sales $1.4B $2B Gross Margin 52.4% 50.0% Operating Margin 24.0% 25.0%
Slide 12: 2011 Performance
2011 Performance For a discussion of the Company’s performance, please refer to the 10K filing. 2011 Actual Y/Y Chg Sales $1.4 B +28% Gross Margin 52.4% +220 bps Operating Margin 24.0% +180 bps EBITDA $391 M +35% Net Income $220 M +40% EPS $3.18 +47%
Slide 13: Tempur-Pedic Range Of Products
Tempur-Pedic Range Of Products The ComfortPillow by Tempur-Pedic ® The NeckPillow by Tempur-Pedic ™ The TEMPUR-Cloud ™ Supreme The Sensation Mattress by Tempur ® The Advanced Ergo Adjustable Base by Tempur-Pedic ™ TEMPUR-Traditional ™ Pillow The TEMPUR-Simplicity™ Medium The TEMPUR-Contour™ Select T
Slide 14: Tempur Products
Tempur Products For a discussion of the Company’s performance, please refer to the 2009 10K filing. ($ in billions) Sales $0.8 Tempur Tempur-HD
Slide 15: Tempur Products
Tempur Products For a discussion of the Company’s performance, please refer to the Company’s 10K filings. ($ in billions) Sales $0.8 Tempur Tempur-HD $1.1 $1.4 Tempur Tempur-HD Cloud Tempur Tempur-HD Cloud
Slide 16: Tempur Products
Tempur Products Note 1: Management estimates Note 2: For a discussion of the Company’s performance, please refer to the Company’s 10K filings.
Slide 17: Tempur Products
Tempur Products Note 1: Management estimates Note 2: For a discussion of the Company’s performance, please refer to the Company’s 10K filings.
Slide 18: Introducing Our New 5-Year Goal
Introducing Our New 5-Year Goal Sales $3B EPS $8 2016 Goal Management estimates ™
Slide 19: Introducing Our New 5-Year Goal
Introducing Our New 5-Year Goal Sales $3B EPS $8 2016 Goal the World. Management estimates
Slide 20: Global Manufacturing Presence
Global Manufacturing Presence Denmark (500K sq ft) New Mexico (800K sq ft) > $2.5B of sales capacity across three existing manufacturing facilities Capacity utilization approximately 50% Opportunity to expand New Mexico capacity with relatively low amount of capital deployment Management estimates V
Slide 21: State-of-the-Art Research & Development
State-of-the-Art Research & Development Multi-faceted R&D facilities in Denmark and Virginia: >50 Employees – PhDs, Advanced Degrees… Chemistry and process research, development and testing Commercialization and product development Product testing
Slide 22: Strong, Established Management Team
Strong, Established Management Team Prior Experience Years Name Position Prior Experience Consumer Products Inter'l with Tempur Mark Sarvary President and CEO President, Campbell Soup North America CEO, J. Crew Group President, Stouffer's Frozen Food Division at Nestle Rick Anderson EVP and Presiden
Slide 23: Macro-Industry Update
Macro-Industry Update
Slide 24: Global Bedding Industry is Large and Growing
Global Bedding Industry is Large and Growing Note 1: Includes mattresses, foundations, and pillows Note 2: Management estimates Note 3: 2010 CSIL report Global Market Opportunity Mattresses, Foundations and Pillows
Slide 25: US Mattress Unit and Dollar Volume
Note 1: 2010 Annual ISPA Report of Sales and Trends Note 2: Non-spring data not available prior to 2004 Note 3: Management estimates US Mattress Unit and Dollar Volume
Slide 26: Tempur-Pedic Growth Strategies & Initiatives
Tempur-Pedic Growth Strategies & Initiatives
Slide 27: Tempur Vision
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 t
Slide 28: Growth Strategy – Overview
Growth Strategy – Overview Introduce New Products to Increase Addressable Market Tempur Brand Advertising Global investment in advertising “Heavy up” local market advertising Dealer integrated advertising Increase Retail Advocacy Global Distribution
Slide 29: New Products
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Slide 30: TEMPUR-Cloud
TEMPUR-Cloud ™ Tempur-Cloud has been a major success in North America and Internationally Introduced in North America in November 2009 Introduced in International markets beginning in March 2011 Management estimates
Slide 31: TEMPUR-Contour
TEMPUR-Contour Tempur-Contour was a comprehensive line upgrade of the original Tempur offering Introduced in North America in June 2011 Gained incremental distribution and exceeded expectations Management estimates ™
Slide 32: Many Others As Well
Many Others As Well…. Sensation Traditional pillow Opening price point Ergo Adjustable Slippers
Slide 33: 2012 Major Initiative: Fixing the Barbell
2012 Major Initiative: “Fixing the “Barbell” Source: Management estimates based on ISPA and Traqline ($ in Millions) Queen set price at retail
Slide 34: TEMPUR-Simplicity Collection
"TEMPUR | = simplicity OLLECTION
Slide 35: TEMPUR-Simplicity Collection
= TEMPUR- simplicity’ COLLECTION $1,499 $1,499 — <-TEMPUR-PEDIC
Slide 36: Continuing the Revolution in Consumer Research
Continuing the Revolution in Consumer Research months of consumer research and development 2,500 total consumers rounds of consumer testing on three models for three feels 14,000+ prototype evaluations
Slide 37: TEMPUR-Simplicity Consumer Testing Results
Source: Third Party Research, 2011 TEMPUR-Simplicity Consumer Testing Results TEMPUR-Simplicity Collection Competitor 1 Competitor 2 Competitor 3 Competitor 4 ™
Slide 38: New Proprietary Tempur-Pedic Technology
New Proprietary Tempur-Pedic Technology New TEMPUR ® formulations Firm, medium and soft options for every sleep preference Absorbs motion so partner movement is less likely to disturb sleep 10-year full warranty
Slide 39: Growing Appeal
Growing Appeal Prices effective 4/3/12. Queen size sets featured.
Slide 40: Growing Appeal: More new products to come
Growing Appeal More new products to come…
Slide 41: Brand Advertising
Brand Advertising
Slide 42: Tempur Relative Ad Spend
Tempur Relative Ad Spend Note 1: Based on Kantar Media, 2011 (through October 2011) based on rate card value not negotiated rates; digital spending and co-op spending not included. Note 2: Management estimates US Consumer Advertising Tempur-Pedic 94% The 3 "S's" Total 6%
Slide 43: Accelerating Ad Spend in 2012
Accelerating Ad Spend in 2012 Cumulative ad spend of nearly $1B over past decade Tempur Global Advertising Spend Note 1: For a discussion of the Company’s performance, please refer to the Company’s 10K filings. Note 2: Management estimates
Slide 44: Investing to Build an Iconic Brand
Investing to Build an Iconic Brand Ad Spend Ratio Note 1: Based on 2010 Ad Age Top 50 U.S. Ad Spend Note 2: For a discussion of the Company’s performance, please refer to the 2011 10K filing. Note 3: Management estimates
Slide 45: Continue To Advertise
Continue To Advertise ™
Slide 46: Tempur Advertisement
\ L | Call 1-888-453-8011 or visit TempurPedic.com TEMPUR Advanced ERG Osystem =o <TEMPUR-PEDIC
Slide 47: Heavy Up Media Test Market Results
Heavy Up Media – Test Market Results Heavy up advertising - tested over 2 years Yielded almost double the growth Will expand in 2012 Prime time network heavy up Management estimates
Slide 48: Media Highlights – February 2012
Media Highlights – February 2012 Management estimates
Slide 49: Retailer Advertising
Retailer Advertising
Slide 50: Advertising Spend by Retailers
Advertising Spend by Retailers Note 1: Based on 2010 Ad Age Top 50 U.S. Ad Spend Note 2: Management estimates
Slide 51: Retailer Advertisements
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Slide 52: Industry Campaigns
Industry Campaigns
Slide 53: Tempur Introduces: Integrated Advertising Fund Program
Tempur Introduces: Integrated Advertising Fund Program Retailer ad directly integrated with Tempur consumer communication Exclusively features Tempur and is consistent with guidelines Tempur contributes modestly to help fund integrated ad Tested in 2010 and 2011, expanded in 2012
Slide 54: Integrated Advertising
Integrated Advertising Tempur National Ad Retailer Integrated Tempur Ad
Slide 55: Retail Advocacy
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Slide 56: Dealer Advocacy Programs
Dealer Advocacy Programs Consumer Education Dealer Profitability Retail Associate Support
Slide 57: Direct Consumer Education
Direct Consumer Education million US website visits – up 50% in million International website visits – up 58% in Management estimates
Slide 58: Dealer Profitability - Industry AUSP Growth
Dealer Profitability - Industry AUSP Growth (Average Mattress Unit Selling Price at Retail) Note 1: For a discussion of the Company’s performance, please refer to the Company’s 10K filings. Note 2: 2010 Annual ISPA Report of Sales and Trends Note 3: Management estimates
Slide 59: Dealer Profitability - Dealer Margin Growth
0% 5% 7% 8% 11% 15% 0% 2% 4% 6% 8% 10% 12% 14% 16% 2005 2009 2012 Dealer Profitability - Dealer Margin Growth Management estimates Baseline Lowest Margin Model Highest Lowest Highest Lowest Highest +800bps +500bps +1,100bps +700bps +1,500bps Dealer Margin vs 2005 Baseline
Slide 60: Retail Salesforce Training & Support
Retail Salesforce Training & Support • Doubled sales force since 2009 • Tempur Mobile • Sophisticated systems
Slide 61: Elite Retailer
Tempur-Pedic ® Elite Retailer Elite Retailer is a powerful program that identifies and differentiates premier dealers to consumers, and directs Tempur website visitors to shop with them
Slide 62: International
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Slide 63: International
International International segment is 30% of sales and more profitable than North America Low share of $13B international market Australia, Austria, New Zealand, China, South Korea, and Canada acquired since Note 1: For a discussion of the Company’s performance, please refer to the Company’s 10K fi
Slide 64: International Distribution
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Slide 65: International Distribution
International Distribution Extensive distribution with significant opportunity for future growth Increased slot presence within stores equally important – Sensation/Cloud Company-owned flagships China Japan Holland Singapore Norway Note 1: For a discussion of the Company’s performance, please refer
Slide 66: International Advertising Markets
0% 5% 10% 15% 20% 25% 30% International Advertising Markets Weightless campaign Limited but growing awareness – in strategic markets awareness increased meaningfully 26% 13% Advertised Markets All Other International 2011 International Net Sales Growth Note 1: For a discussion of the Company’s perfo
Slide 67: International Advertisement
A mattress so supportive, ‘A mattress so supportive the only thing you feel
Slide 68: International Advertisement (German)
jeder das angenehm druckentlastende Gefahl —_, TEMPUR.
Slide 69: Summary
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Slide 70: Summary
Summary Established: Industry leader of a $20B growing global market Differentiated: Unique, preferred product with strong brand supported by ubiquitous advertising Innovative: Proven track record of introducing multi-$100M new product lines Profitable: Industry-leading profitability, and clear path
Slide 71: Dale Williams, EVP & Chief Financial Officer
Dale Williams Executive Vice President & Chief Financial Officer
Slide 72: Financial Overview
Financial Overview
Slide 73: Net Sales
Net Sales 2011 Net Sales increased 28% +30% in North America +24% Internationally, +16% constant currency basis ($ in millions) For a discussion of the Company’s performance, please refer to the Company’s 10K filings.
Slide 74: Sales Growth Trajectory – Geographic Segments
Sales Growth Trajectory – Geographic Segments Note 1: International Sales Growth on Constant Currency basis. Note 2: For a discussion of the Company’s performance, please refer to the Company’s 10K and 10Q filings. (28%) (19%) (12%) 40% 56% 59% 47% 31% 37% 29% 30% 26% (17%) (19%) (7%) 3% 15% 15% 11%
Slide 75: Mattresses Drive Global Business
Mattresses Drive Global Business International North America 2011 Net Sales North America revenue up 30% in 2011, driven by Cloud and Contour collections and improved Ergo attach rates International revenue up 24% in 2011, driven by Cloud introduction and advertising For a discussion of the Company’
Slide 76: Gross Margin
Gross Margin Considerable margin opportunity related to ongoing productivity program, engineering and volume leverage For a discussion of the Company’s performance, please refer to the Company’s 10K filings.
Slide 77: Gross Margin Drivers
Gross Margin Drivers Management estimates + Productivity program + Productivity program + Volume leverage + Volume leverage + Price/mix Price/mix - Commodities - Commodities - Floor model discounts ? Geographic mix - Geographic mix +500bps 2012 - Future 2009 - 2011
Slide 78: Significant Opportunity To Continue Cost Reduction
Significant Opportunity To Continue Cost Reduction Management estimates Strong visibility in productivity program delivering bps per year of cost reduction over the next 5 years Focus Area Operational Excellence Yield LEAN / Six Sigma Productivity Direct Costing Sourcing Competition Supplier Managed
Slide 79: Operating Margin
Operating Margin Operating margin increased 180 bps in 2011, while expanding advertising investment to approximately 10.5% of sales (+175 bps) For a discussion of the Company’s performance, please refer to the Company’s prior 10K filings.
Slide 80: Excellent Cash Flow Dynamics With Significant Growth Potential
Excellent Cash Flow Dynamics With Significant Growth Potential In 2011, we repurchased 6.5 million shares for $368 million Repurchased $1.2 billion since 2005 ($ in millions) For a discussion of the Company’s performance, please refer to the Company’s 10K filings.
Slide 81: Depreciation & Amortization vs. Capital Expenditures
Depreciation & Amortization vs. Capital Expenditures Multi-year add back to net income as D&A should exceed Capex Capex in 2012 includes additional spending for strategic projects, IT systems, and new headquarters ($ in millions) For a discussion of the Company’s performance, please refer to the Com
Slide 82: Goal Implies Continued Solid Future Growth
Goal Implies Continued Solid Future Growth Management estimates ($ in billions)
Slide 83: Introducing Our New 5-Year Goal
Introducing Our New 5-Year Goal Sales $3B EPS $8+ 2016 Goal the World. Management estimates
Slide 84: Questions
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Slide 85: Tempur-Pedic
oo <TEMPUR-PEDIC The most highly recommended bed in America.
Tempur Pedic International — Investor Day (February 2012) on 6ix