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Company Profile of Tempur-Pedic

Discuss Company Profile of Tempur-Pedic within the Company Profiles & News !! forums, part of the Mirror View - Ebooks Links & Miscellenous Reading Material category; Tempur-Pedic International, Inc. (NYSE: TPX) is a manufacturer and distributor of mattresses and pillows made from viscoelastic memory foam. The ...



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Company Profile of Tempur-Pedic
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Pratik Kukreja
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Company Profile of Tempur-Pedic - May 13th, 2011

Tempur-Pedic International, Inc. (NYSE: TPX) is a manufacturer and distributor of mattresses and pillows made from viscoelastic memory foam. The company's headquarters is located in Lexington, Kentucky.
Tempur-Pedic Inc. is the Lexington, Kentucky-based subsidiary of Tempur World, makers of products using a viscoelastic foam material (the original named Temper Foam) developed in the 1960s by NASA's Ames Research Center and refined by Swedish researchers. TEMPUR is Tempur-Pedic's version of Temper Foam, a breathable material that is able to distribute pressure or body weight over an entire surface, making it ideal for use in mattresses. The Tempur-Pedic Swedish Mattress is considered the first breakthrough in mattress design since the introduction of the innerspring mattress in 1925. Unlike its innerspring cousins, however, a TEMPUR mattress never has to be flipped or rotated. Because the material conforms to the body the mattresses have proven to be useful in preventing bed sores on bed-bound individuals. A subsidiary, Tempur-Medical, exploits this market, offering a complete program to prevent bed sores. In addition to mattresses, Tempur-Pedic also sells bed pillows, back support pillows, office chairs, recliners, and even bicycle seat covers, padded shoulder straps, and pet beds.

Tempur-Pedic International Inc., incorporated in September 2002, is a manufacturer, marketer and distributor of mattresses and pillows, which it sells in approximately 80 countries under the TEMPUR and Tempur-Pedic brands. The Company has two segments: North America and International. The North American operating segment consists of two United States manufacturing facilities and its North American distribution subsidiaries. The International segment consists of its manufacturing facility in Denmark, whose customers include all of its distribution subsidiaries and third party distributors outside the North American operating segment. It sells its mattresses and pillows through four distribution channels: Retail (furniture and bedding, specialty and department stores); Direct (direct response and Internet); Healthcare (hospitals, nursing homes, healthcare professionals and medical retailers); and Third party distributors in countries where it does not sell directly through its own subsidiaries.
The Company’s mattresses represented 66.6% of its Net sales during the year ended December 31, 2010. Its mattresses consist of TEMPUR material. It also offers several mattress models, some of which are covered by one or more patents and/or patent applications. It also introduced new mattress models, launch new products and updated existing mattress products in North America and internationally.
The Company’s pillow offerings include a variety of styles. These represented 11.8% of Net sales during 2010. Its pillows provide plush and pressure-relieving comfort as the temperature sensitive material molds to the body.
Other Products
The Company’s other products represented 21.6% of the net sales during 2010. This category includes foundations used to support its mattress products, adjustable beds and many other types of offerings including a variety of cushions and other comfort products.

In 1996 Tempur-Pedic organized its medical business into a separate subsidiary, Tempur-Medical Inc. Attempting to sell to nursing homes and hospitals one at a time, however, Tempur-Medical faced stiff competition from companies that sold cheap replacement mattresses in bulk. The unit fine-tuned its approach, focusing on the problem of bed sores, an increasing subject of litigation, and over the next few years developed the Tempur-Medical Ultimate Skin Management Program. Rather than simply selling mattresses to a nursing home, the company offered a comprehensive program, charging on a per-year resident basis. In addition to supplies, including a Tempur-Pedic mattress, the program provided insurance, covering the first $250,000 of a judgment or settlement over bedsore litigation. Tempur-Medical pitched the Ultimate Skin Management Program to the large nursing home chains, and also targeted Florida and other states that were seeing a high level of bedsore suits. In fact, it was estimated that in 2002 approximately 60 percent of lawsuits filed against Florida nursing homes involved bedsores. As Tempur-Medical was able to demonstrate that it could lower the incidence of bedsores to 1 percent or less, its mattresses and prevention program became very attractive to institutional cus- tomers. To help it sell its system, Tempur-Medical turned to advocacy groups such as AARP for help, and also made efforts to convince insurers to offer discounts to nursing homes that adopted the program. Moreover, it lobbied Washington to provide bonuses to nursing homes that were able to achieve an incidence rate of bedsores less than 2 percent. Tempur-Pedic controlled just 3 percent of the national market for hospital and nursing home mattresses in 2002, but management projected that within three years it would command a 25 percent share.
In 1999 Tempur-Pedic, Fagerdala's Dan Foam subsidiary, and eight other distributors around the world were merged under a holding company called Tempur World, majority owned by Fagerdala. Trussell controlled a minority stake and was named CEO of Tempur World, essentially run out of the Kentucky offices of Tempur-Pedic, which he continued to head. No matter how the business was organized, Tempur-Pedic continued to grow revenues at a steady clip. The company also added a number of new products, including the use of the foam in office chairs and recliners. To aid in marketing Tempur-Pedic created a "Space Cabin" for consumers to experience at furniture shows. They lay on a Tempur-Pedic mattress in a dark room and then took a ten-minute simulated space flight. In effect, the potential customer was induced to lie on the mattress for ten minutes, far longer than they were likely to do in a showroom. When the space cabin was then used by retailers, they experienced a sharp spike in mattress sales. Tempur-Pedic also was proving quite adept at generating publicity. Aside from its successful television direct sales efforts, the company received a great deal of free publicity. It was especially successful in 2002 when it was able to include a gift certificate for a free mattress in the goodie basket given to the presenters at the Academy Awards.
After ten years Tempur-Pedic posted average yearly sales increases of 49 percent, with sales reaching the $150 million range in 2002. Also in that year the parent company was sold to two private equity firms after Fagerdala decided it needed to divest the business and gain liquidity. A limited auction was conducted and the two bidders, TA Associates and Friedman Fleischer & Lowe, ultimately decided to combine their efforts, resulting in a $350 million leveraged buyout. TA Associates, a growth capital firm founded in 1968, had become aware of Tempur-Pedic a year earlier when an associate saw one of the company's mattresses at a friend's house. He contacted Trussell about TA Associates' interest in investing in the business, but nothing came of that initial contact. Trussell was retained as CEO of Tempur World and no major changes in the business were anticipated, although TA Associates hoped to bring some of its experience to bear in taking Tempur-Pedic and Tempur World to the next level. The equity firm was also well versed in the ways of taking companies public, a possibility that the new owners would not rule out for Tempur World in the future.
Principal Subsidiaries: Temper Medical Inc.
Principal Competitors: Advanced Comfort; Contour-Pedic Sleep Inc.

Beta: 1.91
Market Cap (Mil.): $4,384.22
Shares Outstanding (Mil.): 68.45
Annual Dividend: --
Yield (%): --
TPX Industry Sector
P/E (TTM): 26.41 14.92 21.07
EPS (TTM): 76.21 -- --
ROI: 30.84 13.84 1.78
ROE: 133.00 16.36 2.74

Wholly Owned Subsidiary of Tempur World Inc.
Incorporated: 1992
Sales: $150 million (2001 est.)
NAIC: 337910 Mattress Manufacturing

Key Dates:
1991: The Tempur-Pedic mattress is introduced in Sweden by Fagerdala World Foams.
1992: Tempur-Pedic Inc. is formed in Lexington, Kentucky, to distribute Fagerdala product lines in North America.
1996: Tempur-Medical Inc. subsidiary is formed.
1999: Tempur-Pedic becomes part of a new holding company, Tempur World Inc.
2002: Tempur World is acquired by two equity firms.

Name Age Since Current Position
P. Andrews McLane 63 2002 Independent Chairman of the Board
Mark Sarvary 51 2008 President, Chief Executive Officer, Director
Robert Trussell 59 2006 Independent Vice Chairman of the Board
Dale Williams 48 2003 Chief Financial Officer, Executive Vice President
Lou Jones 60 2009 Executive Vice President, General Counsel, Secretary
David Montgomery 50 2003 Executive Vice President, President - International Operations
Matthew Clift 51 2004 Executive Vice President - Global Operations
Richard Anderson 51 2006 Executive Vice President and President, North America
Brad Patrick 46 2010 Chief Human Resources Officer, Executive Vice President
Bhaskar Rao 45 2010 Chief Accounting Officer, Senior Vice President - Strategic Planning Corporate Development
Christopher Masto 43 2002 Independent Director
Francis Doyle 62 2003 Independent Director
Nancy Koehn 51 2004 Independent Director
Paul Judge 61 2004 Independent Director
Peter Hoffman 62 2006 Independent Director
John Heil 58 2008 Independent Director
Evelyn Dilsaver 55 2009 Independent Director

1713 Jaggie Fox Way
Lexington, Kentucky 40511

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