View
217
Download
4
Category
Preview:
Citation preview
“It’s made for Sleep. It’s a Sealy. ”TM
2
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the safe harbor provisions of the Securities Litigation Reform Act of 1995. Terms such as "expect," "believe," "continue," and "grow," as well as similar comments, are forward-looking in nature. Although the Company believes its growth plans are based upon reasonable assumptions, it can give no assurances that such expectations can be attained. Factors that could cause actual results to differ materially from the Company's expectations include: general business and economic conditions, competitive factors, raw materials purchasing, and fluctuations in demand. Please refer to the Company's Securities and Exchange Commission filings for further information.
3
Investment Highlights
3
Industry Leader
Favorable Industry Dynamics
Premier Position with Retailers
Well-Positioned Internationally
Operating Improvement Opportunities
Strong Cash Flow Generation
Experienced and Committed
Management Team
Compelling
Growth
Opportunity
4
Industry Leader
World’s Largest Bedding Manufacturer ...
#1 U.S. market share for two decades with ~ $1.5 billion in total world wide net revenuesApproximately 60% larger than nearest competitor2
#1 market share in Canada#1 selling domestic bedding brand for over 25 years
(1) Source: Furniture Today. Sealy market share includes domestic licensee revenue. (2) Based on management estimates for 2005 and public filings.
Top 5 2005 U.S. Market Share1
20.9%
13.3% 12.7%
6.6%5.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
% o
f To
tal W
ho
lesa
le In
du
stry
Sal
es
Sealy Simmons Serta Tempur-Pedic
SpringAir
5
…With the Broadest Product Portfolio
Source: International Sleep Products Association (ISPA)(1) Represents Compounded Annual Growth Rate (CAGR).
Sealy BrandsSealy Brands
Price PointPrice Point <$500<$500$1,000$1,000--$1,999$1,999 $500$500--$999$999>$1,999>$1,999
SegmentSegment BudgetBudgetLuxuryLuxury MidMid--TierTierUltra LuxuryUltra Luxury
2005 Market Size2005 Market Size $2.0B$2.0B$1.6B$1.6B $2.4B$2.4B$0.4B$0.4B
2000 2000 –– 20052005Unit GrowthUnit Growth11 1.0%1.0%6.9%6.9% (0.6)%(0.6)%16.7%16.7%
Industry Leader
6
Bedding Industry Dynamics & Growth Drivers
Favorable Industry Dynamics
Strong and Steady Industry Growth
Shift to Luxury Bedding
Favorable Retailer Economics
Brand-Driven Industry
Limited Exposure to Mass Merchants
Limited Exposure to Imports
7
Ho
usin
g S
tarts (Bn
)
$2.1
$3.0
$4.0
$6.4
$5.2
$5.8
$1.3
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Wh
ole
sale
In
du
stry
Sal
es (
$ B
n)
GD
P ($ trillio
ns)
’92-’00 CAGR 7.6%
Strong and Steady U.S. Industry Growth
Recession
’83-’89 CAGR 6.4%
6.5% U.S. Bedding Industry CAGR over 25 years
Source: ISPA; Management estimate for 2005¹ Source: Bureau of Economic Analysis. ² Source: National Association of Home Builders.
Favorable Industry Dynamics
YoYGrowth
10%12%8%4%(0%)5%9%11%8%5%5%9%8%8%3%0%2%8%9%7%6%7%16%(2%)5%
RecessionRecession
2.0
6.0
10.0
14.0
1.00
1.50
2.00
2.50
Wholesale Industry Sales ($ Bn) GDP ($ trillions)¹ Housing Starts (Bn)²
~~
8
Sustained Profitable Growth
Compelling Growth Opportunity
Most Recognized Brand
Focus on Key Market Segments
Premier Position with Key Retailers
Leverage Sales Force Strength
Leverage Capabilities Worldwide
DomesticInnerspring
Specialty Bedding
International
Drivers of Growth Sources of Growth
9
Product Innovation Key to Ongoing Growth
Structured and cross-functional teams
Mandate for breakthroughs in bedding systems
Increased focus R&D and engineering resources
Enhanced human capital
New Product Development Process
Pipeline prioritization
Consumer and product research
Marketing reorganization to drive product development and speed to market
Consumer Marketing Priorities
Launched
S&F Collection
Launch
PosturepedicFR Launch
TrueForm and
SpringFreeLine
Expansions
Planned
Growth Opportunity: Product Innovation
Drive
Sealy Brand
& Basset FR Launch
RightTouchAirBed
Test
TrueFormPillowtop
OngoingProduct
Innovations
10
Consistent innerspring growth- 6.5% industry CAGR over 25 year period
- ~70% of industry sales are replacement purchases
Strong brand recognition in brand-driven business- Comprehensive product range across all price points
- Optimizes position with key retailers
Well-positioned in high-end >$1,000 market segment- Portfolio of high quality hybrid products
Brand extension opportunities- Success of Sealy 125th and Stearns & Foster 160th Anniversary beds
Proprietary technologies and designs
Domestic Innerspring Opportunity
Growth Opportunity: Domestic Innerspring
Sealy has completed the rollout of approximately 75% of the product line to comply with new Fire Retardant
requirements which go into effect in July 2007
Domestic Innerspring –~75% of Sealy’s Revenues
11
Specialty Bedding Opportunity
Leverage brand strength, sales force, innovation capabilities and proprietary manufacturing processes
Provide a portfolio of specialty products
Latex
- Stearns & Foster and Bassett latex
- Posturepedic SpringFree latex
Memory Foam
- 8”, 9” and 11” Posturepedic TrueForm
- 11” pillowtop
Air
- RightTouch in test market
Specialty Bedding Strategy
Growth Opportunity: Specialty Bedding
12
Specialty Bedding Opportunity
Source: ISPA; Management; specialty bedding includes adjustable beds
Growth Opportunity: Specialty Bedding
2005 U.S. Market Shares
% o
f T
ota
l Sp
ecia
lty
Bed
din
g W
ho
lesa
le In
du
stry
Sal
es$1.3B
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Other39%
PedicTempur-
32%
ComfortSelect
25 %
Sealy 4%
Opportunity to grow share in fast growing market segment:
• Segment growing quickly:- +30% in 2005- +20% estimated through
3Q2006
• Sealy growing faster:- +130% in 2005- + 100% estimated through
3Q2006
13
International Business –Profitable and Growing
Solid platform to capitalize on large and growing world bedding market opportunity
- #1 in Canada with significant scale, growing share and highly profitable operations
- Upside potential in Europe; low cost “beachhead” in fragmented market
- Stable and growing cash flow stream from licensees
- Strong growth platform in key developing markets
Source: Management reports(1) Total International System Sales includes grossed up licensing revenue.
Total International System Sales¹ CAGR ’99-’05
13.8%
5.1%
23.2%
Growth Opportunity: International
$92.1
$321.8
$240.1
$148.0
$199.6
$521.4
$0
$100
$200
$300
$400
$500
$600
1999 2005
International License RevenueNet International Sales
14
North American markets had sales of $1.4 billion in fiscal 2005
This new structure will allow Sealy to better leverage:- product development
capabilities and lean manufacturing initiatives
-growing consumer demand, partner with Sealy’s retail customers, and deepen supplier relationships
Led by Larry Rogers and Mike Hofmann
North American Leadership Structure
North America -- An Integrated Market
Experienced and Committed Management Team
Plant
Component plant
15
Financial Summary
16
Strong Cash Flow Generation
Adjusted EBITDA1-Capex
$145
$177 $204
13.5% 13.9%12.2%
$0
$50
$100
$150
$200
$250
2003 2004 2005
Ad
just
ed E
BIT
DA
-C
apex
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
% o
f Sales
Strong EBITDA1 margins and growth rates
Low capital intensity business
Minimal inventory requirements from just-in-time manufacturing
Effective working capital management through reduced accounts receivable (A/R) and optimized accounts payable (A/P) days
Low capital expenditure requirements
Capex as % of Sales 1.1% 1.7% 2.0%
Strong Cash Flow Generation
1 Adjusted EBITDA is defined as net income plus interest, taxes, depreciation and amortization, further adjusted to exclude unusual items and other adjustments permitted in calculating covenant compliance in the senior secured credit facilities,
17
Lean Manufacturing
- $43 million of cost reduction delivered since fiscal 2004
- Labor productivity and scrap improvement
- 29% reduction in worker compensation claim values in fiscal 2005 vs. fiscal 2004
40%
60%
80%
100%
120%Ju
n-0
4
Jul-
04
Au
g-0
4
Sep
-04
Oct
-04
No
v-04
Dec
-04
Jan
-05
Feb
-05
Mar
-05
Ap
r-05
May
-05
Jun
-05
Jul-
05
Au
g-0
5
Sep
-05
Oct
-05
No
v-05
% C
han
ge
Assembly Plants Labor Hours/Piece ProducedScrap Lbs/Piece Produced
Operating Efficiency Improvements
Source: Management estimates for domestic business onlyNote: Graph indexed to 2004 values.
Continuous Improvement Programs
- Value engineering of new product designs
- Optimize logistics and working capital management
(18%)
(44%)
Labor Productivity / Scrap Improvement
Operating Improvement Opportunities
Opportunity to drive margin expansion
18
Financial Update Through 3Q2006
$190
44.7%
$1,188
YTD 2006
3.8%$183Adjusted EBITDA1
20 bp44.5%Gross Margin
7.5%$1,105Net Sales
YTD 2005($ in millions)
1 Adjusted EBITDA is defined as net income plus interest, taxes, depreciation and amortization, further adjusted to exclude unusual items and other adjustments permitted in calculating covenant compliance in the senior secured credit facilities,
Annual Long-Term Targets:• Sales growth in the mid-to-high single digit • Margin expansion average of 20-50 basis points• EBITDA growth of 10%• EPS growth in the mid teens
19
Investment Highlights
19
Industry Leader
Favorable Industry Dynamics
Premier Position with Retailers
Well-Positioned Internationally
Operating Improvement Opportunities
Strong Cash Flow Generation
Experienced and Committed
Management Team
Compelling
Growth
Opportunity
“It’s made for Sleep. It’s a Sealy. ”TM
Recommended