It s made for Sleep. It s a Sealy.

Transcription

1 TM It s made for Sleep. It s a Sealy.

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 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. 2

3 Investment Highlights 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 3

4 World s Largest Bedding Manufacturer... Top U.S. Market Share 1 Industry Leader 25.0% % of Total Wholesale Industry Sales 20.0% 15.0% 10.0% 5.0% 0.0% 20.9% 13.3% 12.7% Sealy Simmons Serta 6.6% Tempur- Pedic 5.6% Spring Air #1 U.S. market share for two decades with ~ $1.5 billion in total world wide net revenues Approximately 60% larger than nearest competitor 2 #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. 4

5 With the Broadest Product Portfolio Industry Leader Sealy Brands Price Point >$1,999 $1,000-$1,999 $1,999 $500-$999 $999 <$500 Segment Ultra Luxury Luxury Mid-Tier Budget 2005 Market Size $0.4B $1.6B $2.4B $2.0B Unit Growth % 6.9% (0.6)% 1.0% Source: International Sleep Products Association (ISPA) (1) Represents Compounded Annual Growth Rate (CAGR). 5

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 6

7 Strong and Steady U.S. Industry Growth Favorable Industry Dynamics Recession Recession Recession Wholesale Industry Sales ($ Bn) $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $1.3 $ CAGR 6.4% $3.0 $ CAGR 7.6% $ $ $ ~ Housing Starts (Bn) GDP ($ trillions) $ YoY Growth 5% (2%) 16% 7% 6% 7% 9% 8% 2% 0% 3% 8% 8% 9% 5% 5% 8% 11% 9% 5% (0%) 4% 8% 12% 10% Wholesale Industry Sales ($ Bn) GDP ($ trillions)¹ Housing Starts (Bn)² 6.5% U.S. Bedding Industry CAGR over 25 years Source: ISPA; Management estimate for 2005 ¹ Source: Bureau of Economic Analysis. ² Source: National Association of Home Builders. 7

8 Sustained Profitable Growth Compelling Growth Opportunity Drivers of Growth Sources of Growth Most Recognized Brand Leverage Capabilities Worldwide Domestic Innerspring Focus on Key Market Segments Specialty Bedding Premier Position with Key Retailers International Leverage Sales Force Strength 8

9 Product Innovation Key to Ongoing Growth Growth Opportunity: Product Innovation Consumer Marketing Priorities Pipeline prioritization Consumer and product research Marketing reorganization to drive product development and speed to market Drive New Product Development Process Structured and crossfunctional teams Mandate for breakthroughs in bedding systems Increased focus R&D and engineering resources Enhanced human capital Launched Planned S&F Collection Launch Posturepedic FR Launch TrueForm and SpringFree Line Expansions RightTouch AirBed Test Sealy Brand & Basset FR Launch TrueForm Pillowtop Ongoing Product Innovations 9

10 Domestic Innerspring ~75% of Sealy s Revenues Domestic Innerspring Opportunity 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 125 th and Stearns & Foster 160 th Anniversary beds Proprietary technologies and designs 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

11 Specialty Bedding Opportunity Growth Opportunity: Specialty Bedding Specialty Bedding Strategy 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 11

12 Specialty Bedding Opportunity Growth Opportunity: Specialty Bedding 2005 U.S. Market Shares % of Total Specialty Bedding Wholesale Industry Sales 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $1.3B Other 39% Select Comfort 25 % Tempur- Pedic 32% Sealy 4% Opportunity to grow share in fast growing market segment: Segment growing quickly: - +30% in % estimated through 3Q2006 Sealy growing faster: % in % estimated through 3Q2006 Source: ISPA; Management; specialty bedding includes adjustable beds 12

13 International Business Profitable and Growing Growth Opportunity: International Solid platform to capitalize on large and growing world bedding market opportunity - #1 in Canada with significant scale, growing share and highly profitable operations Total International System Sales¹ CAGR $600 $500 $400 $ % $ % - Upside potential in Europe; low cost beachhead in fragmented market $300 $ Stable and growing cash flow stream from licensees - Strong growth platform in key developing markets $200 $100 $0 $148.0 $92.1 $ % International License Revenue Net International Sales Source: Management reports (1) Total International System Sales includes grossed up licensing revenue. 13

14 North American Leadership Structure Experienced and Committed Management Team North America -- An Integrated Market Plant Component plant 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 14

15 Financial Summary 15

16 Strong Cash Flow Generation Strong Cash Flow Generation Strong EBITDA 1 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 Adjusted EBITDA 1 -Capex Adjusted EBITDA- Capex $250 $200 $150 $100 $50 $0 $177 $204 $ % 13.5% 13.9% % 16.0% 12.0% 8.0% 4.0% 0.0% % of Sales Capex as % of Sales 1.1% 1.7% 2.0% 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, 16

17 Operating Efficiency Improvements Operating Improvement Opportunities Labor Productivity / Scrap Improvement Lean Manufacturing % Change 120% 100% 80% 60% 40% Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 (18%) (44%) - $43 million of cost reduction delivered since fiscal Labor productivity and scrap improvement - 29% reduction in worker compensation claim values in fiscal 2005 vs. fiscal 2004 Assembly Plants Labor Hours/Piece Produced Scrap Lbs/Piece Produced Continuous Improvement Programs - Value engineering of new product designs - Optimize logistics and working capital management Opportunity to drive margin expansion Source: Management estimates for domestic business only Note: Graph indexed to 2004 values. 17

18 Financial Update Through 3Q2006 ($ in millions) YTD 2005 YTD 2006 Net Sales $1,105 $1, % Gross Margin 44.5% 44.7% 20 bp Adjusted EBITDA 1 $183 $ % Annual Long-Term Targets: Sales growth in the mid-to-high single digit Margin expansion average of basis points EBITDA growth of 10% EPS growth in the mid teens 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, 18

19 Investment Highlights 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 19

20 TM It s made for Sleep. It s a Sealy.