Somnigroup International Inc. · NYSE:SGI
Somnigroup International — Tempur Pedic International — Investor Day (September 2007)
73 slides from Somnigroup International's investor day presentation, Sep 6, 2007
Slide 1: 1st Annual Analyst Day
September 6, 2007 1 st Annual Analyst Day
Slide 2: Barry Hytinen
Barry Hytinen Vice President, Investor Relations and Financial Planning & Analysis
Slide 3: 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 presen
Slide 4: Tom Bryant, President & CEO
Tom Bryant President & Chief Executive Officer
Slide 5: Seasoned Management Team
Ø Executive team has ~160 years managing large international businesses Seasoned Management Team
Slide 6: Overview
Overview u Worldwide leader in Premium Sleep , the fastest growing segment of the ~$13 billion wholesale mattress market u Global sales under the “TEMPUR®” and “Tempur-Pedic®” trademarks in >70 countries u Leading producer of premium mattresses and pillows u Products provide greater overall comfort
Slide 7: Tempur-Pedic Swedish Sleep System
Source: Independent survey commissioned by Tempur-Pedic Tempur-Pedic Swedish Sleep System u Pressure & Pain Management – 94% of owners experience a reduction in painful pressure points u Open Cell Technology u Body Conforming & Support – 92% of owners sleep better and wake more refreshed u Safe and
Slide 8: Domestic Sales
1. Data represents first half 2007 results. Domestic Sales u Domestic represents 66% of total sales with long-term growth prospects u Products sold through four channels with focus on established retail accounts and new opportunities for growth u US-based R&D center focused on product development an
Slide 9: International Sales
1. Data represents first half 2007 results. International Sales u International represents ~34% of total sales with long-term growth prospects u Products sold through four channels u Products designed for unique, regional preferences at European-based R&D center u Building brand with large advertisi
Slide 10: Sleep In The News
Sleep In The News
Slide 11: Sleep In The News
Don’t lose sleep buying the perfect mattress - By Janice Lieberman “Companies try to help workers sleep more” Sleep, Snoring and the Blues - By SANJAY GUPTA Sleep Deprivation: New Concerns; Four More Studies Show It Harms Health Who Needs Sleep? “Sleep for longer if you want to stay healthy” Not get
Slide 12: Sleep In The News
Ø U.S. Sleep aid industry estimated at >$3B/yr and growing! Tempur-Pedic is neither associated nor affiliated with any of the entities displayed above. Note: U.S. Sleep Aid Industry annual market size estimate based on management estimates and publicly available industry estimates for prescription a
Slide 13: Better Mattress … Better Sleep!
1. Source: International Sleep Products Association Better Mattress … Better Sleep! u “Sleep in the News” is fueling consumer interest and involvement in sleep related products and categories u Impact on all consumers, but especially the 77 million Baby-Boomers u 47% of Americans surveyed said they
Slide 14: Consumer Passion
Consumer Passion
Slide 15: Consumer Passion
Source: Independent survey commissioned by Tempur-Pedic u ~95% Tempur-Pedic® consumers recommend the product u ~65% of consumers recommended Tempur-Pedic up to 5 times u 42% of consumers report someone purchased a Tempur-Pedic mattress as a result of their recommendation Consumer Passion
Slide 16: Business Update
Business Update u Continue to be pleased with recent business trends u US retail consumer demand running ahead of prior expectations - throughout the quarter and across mattress line u Some suppliers have not been able to keep up with increased demand leading to sporadic product shortages u Have tak
Slide 17: Rick Anderson, President, North America
Rick Anderson Executive Vice President & President, North America
Slide 18: Domestic Snapshot
Domestic Snapshot u The Market Opportunity for Tempur-Pedic is significant – Our Share Position within both mattress and pillow categories is expanding – Brand Awareness is at an all-time high (and still growing) – Consumer Satisfaction and referrals are world class – Sales Performance continues to
Slide 19: 2006 U.S. Market Share
Source: Industry data and company estimates Mattresses - Dollars Mattresses - Units TPX TPX u 2006 U.S. Market Share The Market Opportunity is Huge
Slide 20: Increasing Brand Awareness
Total Brand Awareness for mattresses based on study commissioned by Tempur-Pedic and completed in the first quarter of each year 26% 44% 60% 73% 78% 86% Increasing Brand Awareness
Slide 21: Overall Consumer Satisfaction is World Class
95% 94% 93% 88% Source: Independent survey commissioned by Tempur-Pedic - April 2007 Attribute Rating Overall Satisfaction (Extremely/Very) (Excellent/Very Good) Quality (Meets/Exceeds) Expectations Would Buy Again % TPX Owners Stating 95% 94% 93% 88% Overall Consumer Satisfaction is World Class
Slide 22: Domestic Historical Net Sales
u Brand awareness/satisfaction/ recommendations u Established customer growth u Existing product line distribution expansion u Selectively adding new retail customers u Value added new product launches 1. For a discussion of the Company’s performance for the second quarter of 2007, please refer to t
Slide 23: Growing Household Penetration
Growing Household Penetration A Consumer-Centric Growth Model
Slide 24: TPNA Consumer-Centric Growth Model
Demographic/Psychographic Sleep and Well-Being Product Communications Distribution Medical TPNA Consumer-Centric Growth Model
Slide 25: TPNA Consumer-Centric Growth Model
Demographic/Psychographic Sleep and Well-Being Product Communications Distribution Medical TPNA Consumer-Centric Growth Model
Slide 26: Demographic/Psychographic: Baby Boomers
77 Million Baby Boomers Higher education levels More discretionary income More Involved Better Informed More Active More Demanding than previous generations These consumers demand quality, place an enormous value on their personal well-being and believe that investment in their home is not only rewa
Slide 27: Sleep and Well-Being
Sleep and Well-Being Sleep as a health issue being reinforced by: Medical Studies Industry Studies Consumer Surveys Pharmaceutical Products and Messages Bedding Retailers Mattress Companies Demographic/Psychographic Sleep and Well-Being TPNA Consumer-Centric Growth Model
Slide 28: 2007 Consumer Wellness Study
19% Nutrition Exercise Sleep 39% 42% (1,511 U.S. Adults) Does the Most to Restore Sense of Well-Being Q.6: Which one of the following do you believe does the most to restore your sense of well-being ? (please select one answer) Source: 2007 TPX Consumer Wellness Study 2007 Consumer Wellness Study
Slide 29: TPNA Consumer-Centric Growth Model
Demographic/Psychographic Sleep and Well-Being Product Communications Distribution Medical TPNA Consumer-Centric Growth Model
Slide 30: Product Development Strategy
Product Development Strategy u We strive to develop innovative products using TEMPUR® material that improve the lives of consumers u New pillow and mattress products must: – Fill an unmet consumer need – Over-deliver performance and quality – Delight the consumer – Be differentiated versus “siblings
Slide 31: TPNA Consumer-Centric Growth Model
Demographic/Psychographic Sleep and Well-Being Product Communications Distribution Medical TPNA Consumer-Centric Growth Model
Slide 32: Consumer Communication Strategy
Consumer Communication Strategy u At Tempur-Pedic, we don’t just bring you a bed, we believe your bed should do more: – Your bed should relieve your pain, not add to it – Your bed should make stress go away – Your bed should always give you comfort u Delivered through a significant, integrated, mult
Slide 33: Welcome To Bed TV Ads
Welcome To Bed TV Ads u Show Welcome To Bed Short Form – Stress – Pain – Comfort
Slide 34: Welcome To Bed Print Ads
Welcome To Bed Print Ads
Slide 35: tempurpedic.com
tempurpedic.com
Slide 36: Direct Response TV
u Classic DR Advertising: – Testimonials – Endorsements – Calls to action Direct Response TV
Slide 37: TPNA Consumer-Centric Growth Model
Demographic/Psychographic Sleep and Well-Being Product Communications Distribution Medical TPNA Consumer-Centric Growth Model
Slide 38: US Distribution - Number of Total Doors
w Significant growth in slots per store w Specialty w Department Stores - Significant opportunities for selective door growth w Furniture & Bedding stores: - Target 7,000 - 8,000 doors - +22% door growth at midpoint of target 1,500 7,500 6,150 6,053 5,310 4,100 1,500 1,500 1,500 1,500 US Distributio
Slide 39: Department Store Strategy
Source: Industry and company estimates Department Store Strategy u According to Home Accent Today’s exclusive Consumer Buying Trends Survey, department store shoppers tend to be: – Loyal to the department store – Slightly older – Wealthier u Baby Boomers (ages 44 - 60) comprise 49% of department sto
Slide 40: TPNA Consumer-Centric Growth Model
Demographic/Psychographic Sleep and Well-Being Product Communications Distribution Medical TPNA Consumer-Centric Growth Model
Slide 41: Tempur-Pedic's Core Equity
Tempur-Pedic’s Core Equity u At the heart of Tempur-Pedic brand equity is our Medical heritage u Repositioning ourselves as a leading well-being brand requires our medical attributes to be nurtured u Therefore, continuing to build our medical business is a strategic priority
Slide 42: Selected Medical Relationships
Selected Medical Relationships u GE imaging pads u OSI surgical table pads u Patterson dental chairs/surfaces u ROHO wheelchair cushions u Siemens operating room surfaces
Slide 43: Hill-Rom Relationship
Hill-Rom Relationship u Links Tempur-Pedic with the #1 medical support surface provider u Highlights comfort as a clinical issue u Reinforces Tempur-Pedic’s unique and compelling brand equities u Critical foundation for positioning Tempur-Pedic as a leading well-being brand
Slide 44: Domestic Snapshot
Welcome to Tempur-Pedic. Welcome to Bed. Domestic Snapshot u The Market Opportunity for Tempur-Pedic is significant – Our Share Position within both mattress and pillow categories is expanding – Brand Awareness is at an all-time high (and still growing) – Consumer Satisfaction and referrals are worl
Slide 45: David Montgomery, President, International Operations
David Montgomery Executive Vice President & President, International Operations
Slide 46: Market Overview
Market Overview u International wholesale mattress market size estimated to be >$6 billion u Started in Sweden in 1991 - medical focus u Emphasis shifts to retail in late 1990s u Since 2003 consistent brand image u 24.5% 5 year net sales CAGR u Now present in over 70 markets/countries worldwide from
Slide 47: Global Presence
• 17 subsidiaries / 58 third party distributors • Effective Sept. 2007, converted Australia from Third Party to Subsidiary • Global management structure International Subsidiary International Third Party Domestic Subsidiary Domestic Third Party Global Presence
Slide 48: Operating Model
Operating Model u ~500 personnel throughout international operations u Furniture & bedding, department stores, medical, third party distribution u Manages local sales, marketing, distribution and finance u Brand marketing and product development centrally managed u Operational and financial efficien
Slide 49: Third Party Distribution
Third Party Distribution u Seeding strategy for entry to less developed markets u Pillow often the introduction TEMPUR brand u Capitalizes on global presence u Strict control over use of brand and trademarks u Opportunity to convert to subsidiary
Slide 50: Market Opportunities
Market Opportunities u Retail is the growth driver u Organic growth in existing subsidiary and third party markets u Increase brand awareness globally (new global brand style) u New product introductions/selective price increases u Low and growing market share across the globe u Leverage global agre
Slide 51: Market Dynamics
Market Dynamics u Dominant local competitors with nearly no global reach u No two markets are the same u Retailers locally focused u Premium category size varies - TPX driving growth
Slide 52: Japan Hotel Partner Program
Japan Hotel Partner Program u Tokyu hotels advertise TEMPUR pillows u Higher rate for TEMPUR rooms u Hospitality program in Japan includes > 2,500 sleep surfaces and >33,000 pillows
Slide 53: In Store - Consistent Brand Image
UK Sweden Germany China Dubai In Store - Consistent Brand Image
Slide 54: Market hungry for new products
Market hungry for new products…. significant opportunity New Products
Slide 55: International Historical Net Sales
u Increasing brand awareness and market share u Significant established account growth u Selectively adding new doors and distributors u New products u Emerging markets 1. For a discussion of the Company’s performance for the second quarter of 2007, please refer to the Company’s earnings release inc
Slide 56: International Doors
w Third Party Conversion to Subsidiary w Target: 5,500 - 6,500 Doors w +28% Door Growth at Midpoint of Target w Significant growth in slots per store International Doors
Slide 57: International Operations
International Operations u Only truly global bedding brand u Management structure in place to leverage opportunities u Product development to suit local needs u Growth opportunities across the globe
Slide 58: Matt Clift, EVP Global Operations
Matt Clift Executive Vice President, Global Operations
Slide 59: Mission - Global Operations
w Lead the industry in product - Quality and customer satisfaction - Technology development - Product innovation w Competitiveness in Operating Excellence - Delivery performance - Cost - Cash management - Data availability and analysis Mission - Global Operations
Slide 60: Research and Development
w Consumer-driven design, features, functionality SymphonyPillow Scandinavian Bed Supreme RhapsodyPillow SymphonyBed BellaSonnaBed Refreshed ClassicBed RhapsodyBed GrandBed Research and Development
Slide 61: Research and Development
w State-of-the-art R&D testing facilities in the US & Europe Research and Development
Slide 62: Manufacturing Facilities
Denmark (500K sq ft) Duffield, VA (500K sq ft) Albuquerque, NM (800K sq ft) 1. Albuquerque facility is in the process of ISO certification Manufacturing Facilities u Global, vertically integrated manufacturer u State of the art, highly automated, ISO-certified plants u > $200 million invested u Goal
Slide 63: Cost Management
Labor w Productivity Supply Chain Costs w Transportation w Warehousing Overhead w Leverage of existing infrastructure w Capital expenditures on decline Other Materials/Packaging w Global sourcing w Engineering Raw Materials w Yield Improvements w Scale efficiency w Global sourcing Cost Management
Slide 64: Mission - Global Operations
w Lead the industry in product - Quality and customer satisfaction - Technology development - Product innovation w Competitiveness in Operating Excellence - Delivery performance - Cost - Cash management - Data availability and analysis Mission - Global Operations
Slide 65: Dale Williams, CFO
Dale Williams Executive Vice President & Chief Financial Officer
Slide 66: Worldwide Mattress Net Sales
1. For a discussion of the Company’s performance, please refer to the Company’s 10Q filing for 2Q07 and the Company’s prior 10K filings. ($ in millions) ($ in millions) Worldwide Mattress Net Sales u 41% 5 year CAGR u Growing brand awareness u Excellent profit for retailers u Targeted new stores u N
Slide 67: Worldwide Net Sales
($ in millions) ($ in millions) 1. For a discussion of the Company’s performance, please refer to the Company’s 10Q filing for 2Q07 and the Company’s prior 10K filings. Worldwide Net Sales u 34% 5 year CAGR u Revenue growth led by mattresses u Strong growth both Domestically and Internationally u 17
Slide 68: Gross Margin
1. For a discussion of the Company’s performance, please refer to the Company’s 10Q filing for 2Q07 and the Company’s prior 10K filings. Gross Margin u Channel mix shift has driven gross margin pressure u Albuquerque start-up primary margin pressure in 2007 u 2007 is expected to be the trough year f
Slide 69: Operating Income & Margins
($ in millions) 1. For a discussion of the Company’s performance, please refer to the Company’s 10Q filing for 2Q07 and the Company’s prior 10K filings. Operating Income & Margins u Operating leverage offsetting most of the prior Gross Margin erosion u Operating Margin will improve with Gross Margin
Slide 70: Capital Expenditures & Cash Flow
($ in millions) 1. For a discussion of the Company’s performance, please refer to the Company’s 10Q filing for 2Q07 and the Company’s prior 10K filings. Capital Expenditures Capital Expenditures & Cash Flow u Recently completed major capital investments u Free cash flow opportunities u Cash cycle op
Slide 71: Returning Value to Shareholders
u $300M of authorizations in ’07 with $208M spent through 8/03/07 u Purchased 24% of outstanding shares since initial share repurchase authorization in 2005 u Average share price $16.88 u Earlier in the quarter, established a 10b5-1 plan to continue repurchase activity 1. 2007 Dividend calculated as
Slide 72: Long Term Goals
Long Term Goals u Double-digit annual revenue growth – $2B+ by 2012 u Gross Margins expand to 50%+ u Operating Margins expand to 25%+ u Continue to return value to shareholders – 2005 to 2007: $520M of share repurchase authorizations + ~$25M of dividends
Slide 73: Question & Answer Session
Question & Answer Session
Tempur Pedic International — Investor Day (September 2007) on 6ix