October 18, 2007

Tempur-Pedic Reports Third Quarter Earnings


- EPS Up 44% in Third Quarter - Net Sales Up 22% in Third Quarter - Completed Prior $200 Million Share Repurchase Authorization - Announces New $300 Million Share Repurchase Authorization - Company Raises Financial Guidance for 2007

LEXINGTON, Ky., Oct 18, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Tempur-Pedic International Inc. (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, today announced financial results for the third quarter ended September 30, 2007. In addition, the Company increased full year 2007 financial guidance and announced a new share repurchase authorization.

    THIRD QUARTER 2007 FINANCIAL SUMMARY

    *  Earnings per share increased 44% to $0.49 per diluted share in the
       third quarter of 2007 as compared to $0.34 per diluted share in the
       third quarter of 2006.

    *  Net sales rose 22% to $294.1 million in the third quarter of 2007 from
       $240.9 million in the third quarter of 2006. Retail sales increased 27%
       worldwide.

    *  Operating income increased 26% to $67.5 million in the third quarter of
       2007 from $53.7 million in the third quarter of 2006. The increase was
       principally driven by incremental sales as well as modest operating
       expense leverage.

    *  Operating cash flow increased to $55.7 million in the third quarter of
       2007 from $46.6 million in the third quarter of 2006. The increase was
       principally driven by net income growth. In addition, capital
       expenditures were $3.3 million in the third quarter of 2007, $2.3
       million less than in the third quarter of 2006.

    *  The Company achieved net sales and unit growth across all products and
       both geographic segments. Worldwide mattress revenue increased 22%.
       Worldwide mattress unit growth was 17% led by domestic mattress unit
       growth of 22%. Pillow sales rose 15% worldwide driven by unit growth of
       12%. Domestic pillow units were especially strong, up 23%.

For the third quarter of 2007, the Company reported net income of $38.8 million as compared to $28.9 million in the third quarter of 2006. This net income growth of 34% largely resulted from an increase in operating income. Net income results include stock-based compensation expense, which increased 46% to $1.7 million in the third quarter of 2007.

President and Chief Executive Officer H. Thomas Bryant commented, "Tempur-Pedic delivered outstanding results in the third quarter, with growth across all products and geographic segments. While Tempur-Pedic is already the industry leader for profitability, we believe our year to date financial results are consistent with our goal of ultimately becoming the worldwide bedding leader in terms of both sales and profitability. We are pleased with our year to date results and continue to see abundant opportunities to gain bedding market share around the globe.

"In the third quarter, consumers continued to express their preference for our proprietary TEMPUR(R) material as we lead the technology shift away from innersprings. Mattress growth was balanced across our product line with excellent results from our existing product line as well as strong contribution from our recently introduced models. While the last several quarters have been challenging for the mattress industry, our sales team has exceeded our goals for slot growth, account productivity and market share gains.

"We are pleased with our new advertising campaign as it appears to be resonating exceptionally well with our target consumers, especially affluent baby boomers. In fact, the campaign is doing so well that we are in the process of evaluating its use throughout many of our international markets. We anticipate rolling the campaign into Europe in the first quarter.

"Our operations team delivered excellent performance, producing more mattresses than in any other quarter in our history. As previously disclosed, U.S. retail demand exceeded our expectations during the third quarter, which resulted in some product shortages as certain key suppliers were not able to ramp their production as quickly as needed. We addressed this issue through a variety of actions, some of which modestly impacted our gross margins. We are pleased to now be running in a more optimal fashion, having largely eliminated shortages by the end of the quarter."

Current Share Repurchase Authorization Completed and New Authorization Announced

During the third quarter of 2007, the Company purchased 6.6 million shares of its common stock at an average price of $30.48 for a total cost of $200.0 million. During 2007, the Company has purchased 10.4 million shares of its common stock for a total cost of $300.0 million.

The Company announced that the Board of Directors has authorized a new share repurchase program of up to an incremental $300.0 million. Stock repurchases under this program may be made through open market transactions, negotiated purchases, or otherwise, at times and in such amounts as management and a committee of the Board deem appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, financing and regulatory requirements and other market conditions. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. This share repurchase program may be limited, suspended or terminated at any time without prior notice.

Chief Financial Officer Dale Williams stated, "We continue to view share repurchases as an excellent means to return value to shareholders over the long term. During the third quarter we completed the $200 million share repurchase program we announced on July 19, 2007. We currently anticipate substantial cash flow growth over the next several years and so we are pleased with the Board's decision to authorize a new buyback program."

2007 Financial Guidance

Given the Company's strong performance through the first three quarters of 2007 and its continued positive outlook for the year, the Company is increasing 2007 full year financial guidance. The Company currently expects net sales for 2007 to range from $1.105 billion to $1.115 billion, rather than $1.065 billion to $1.085 billion as contemplated by the Company's prior guidance. This updated guidance reflects an increase of 17% to 18% compared to 2006 net sales of $945.0 million. The Company currently expects diluted earnings per share for 2007 to range from $1.74 to $1.76, rather than $1.63 to $1.66 as contemplated by the Company's prior guidance. This updated guidance reflects an increase of 36% to 38% compared to 2006 diluted earnings per share of $1.28. Based on the Company's year to date performance of $1.22 per diluted share, this guidance would imply diluted earnings per share of $0.52 to $0.54 for the fourth quarter of 2007. This guidance reflects year to date performance, incremental earnings resulting from increased sales expectations, shares repurchased through September 30, 2007, and interest on associated borrowings. This guidance does not take into account the anticipated effect of any additional share repurchases.

The Company noted its expectations are based on information available at the time of this release, and are subject to changing conditions, many of which are outside the Company's control.

Conference Call Information

Tempur-Pedic International will host a live conference call with President and Chief Executive Officer H. Thomas Bryant and Chief Financial Officer Dale Williams to discuss financial results today, October 18, 2007 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 888-297-0353. The call is also being webcast and can be accessed on the investor relations section of the Company's website, http://www.tempurpedic.com.

For those who cannot listen to the live broadcast, a telephone replay of the call will be available from October 18, 2007 at 8:00 p.m. Eastern Time through October 25, 2007. To listen to the replay, dial 888-203-1112, participant code 9844895.

Forward-looking Statements

This release contains "forward-looking statements," within the meaning of federal securities laws, which include information concerning one or more of the Company's plans, objectives, goals, strategies, and other information that is not historical information. When used in this release, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including without limitation, statements relating to the Company's goal of becoming the worldwide bedding leader, opportunities to gain bedding market share, the rollout of the Company's new advertising campaign, steps taken to address product shortages and expectations regarding the Company's new share repurchase authorization, cash flow growth over the next several years, and net sales and earnings per share for 2007, are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct.

There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained in this release. Numerous factors, many of which are beyond the Company's control, could cause actual results to differ materially from those expressed as forward-looking statements. These risk factors include general economic and industry conditions and consumer confidence; uncertainties arising from global events; the effects of changes in foreign exchange rates on the Company's reported earnings; consumer acceptance of the Company's products; industry competition; the efficiency and effectiveness of the Company's advertising campaigns and other marketing programs; the Company's ability to increase sales productivity within existing retail accounts and to further penetrate the US retail channel, including the timing of opening or expanding within large retail accounts; the Company's ability to address issues in certain underperforming international markets; the Company's ability to continuously improve its product line, maintain efficient, timely and cost-effective production and delivery of its products, and manage its growth; changes in foreign tax rates: and rising commodity costs. Additional information concerning these and other risks and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including without limitation the Company's annual report on Form 10-K under the headings "Special Note Regarding Forward-Looking Statements" and "Risk Factors." Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statements for any reason, including to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

About the Company

Tempur-Pedic International Inc. (NYSE: TPX) manufactures and distributes mattresses and pillows made from its proprietary TEMPUR(R) pressure-relieving material. It is the worldwide leader in premium sleep, the fastest growing segment of the estimated $13 billion global mattress market. The Company is focused on developing, manufacturing and marketing advanced sleep surfaces that help improve the quality of life for people around the world. The Company's products are currently sold in over 70 countries under the TEMPUR(R) and Tempur-Pedic(R) brand names. World headquarters for Tempur-Pedic International is in Lexington, KY. For more information, visit http://www.tempurpedic.com or call 800-805-3635.



               TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
                      Consolidated Statements of Income
                   (In thousands, except per share amounts)

                      Three Months Ended               Nine Months Ended
                         September 30,                    September 30,
                       2007        2006    Chg %     2007       2006    Chg %

    Net sales       $294,094    $240,917    22%    $817,768   $688,465   19%
    Cost of sales    152,484     124,894            423,930    354,672

    Gross profit     141,610     116,023    22%     393,838    333,793   18%

    Selling and
     marketing
     expenses         48,830      41,827            144,630    127,230
    General and
     administrative
     expenses         23,628      19,235             68,497     55,521
    Research and
     development
     expenses          1,603       1,240              4,278      3,031

    Operating income  67,549      53,721    26%     176,433    148,011   19%

    Other expense, net:
      Interest expense,
       net            (8,261)     (6,728)           (21,394)   (17,402)
      Loss on
       extinguishment
       of debt            --          --               (126)        --
      Other expense, net (33)       (183)              (410)      (142)
        Total other
         expense      (8,294)     (6,911)           (21,930)   (17,544)

    Income before
     income taxes     59,255      46,810    27%     154,503    130,467   18%
    Income tax
     provision        20,437      17,947             52,974     48,599
        Net income   $38,818     $28,863    34%    $101,529    $81,868   24%

    Earnings per share:
      Basic            $0.50       $0.35              $1.25      $0.96
      Diluted          $0.49       $0.34              $1.22      $0.92

    Weighted average
     shares
     outstanding:
      Basic           77,725      82,946             81,522     85,533
      Diluted         79,173      85,681             83,069     88,666



               TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
                         Consolidated Balance Sheets
                   (In thousands, except per share amounts)

                                 September 30,    December 31,
                                     2007            2006           Chg %
    ASSETS

    Current Assets:
      Cash and cash equivalents      $23,580         $15,788
      Accounts receivable, net       165,735         142,059
      Inventories                     82,065          61,736
      Prepaid expenses and other
       current assets                 13,053           8,002
      Income taxes receivable             --             588
      Deferred income taxes            9,566           9,383
    Total Current Assets             293,999         237,556         24%

      Property, plant and
       equipment, net                208,140         215,428
      Goodwill                       198,623         198,207
      Other intangible assets, net    69,014          70,826
      Deferred financing and other
       non-current assets, net         4,044           3,649
    Total Assets                    $773,820        $725,666          7%

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities:
      Accounts payable               $64,880         $51,220
      Accrued expenses and other      74,364          61,050
      Income taxes payable            15,751              --
      Current portion of long-term
       debt                              282          19,497
    Total Current Liabilities        155,277         131,767         18%

      Long-term debt                 555,805         341,635
      Deferred income taxes           34,294          38,536
      Other non-current liabilities      330             380
    Total Liabilities                745,706         512,318         46%

    Stockholders' Equity:
      Common stock, $.01 par value;
       300,000 shares authorized;
       99,215 shares issued as of
       September 30, 2007 and
       December 31, 2006                 992             992
      Additional paid in capital     280,638         264,709
      Retained earnings              207,797         140,608
      Accumulated other
       comprehensive income           11,586           3,992
      Treasury stock, at cost;
       24,110 and 15,993 shares
       as of September 30, 2007
       and December 31, 2006,
       respectively                 (472,899)       (196,953)
    Total Stockholders' Equity        28,114         213,348         (87)%

    Total Liabilities and
     Stockholders' Equity           $773,820        $725,666           7%



               TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
                     Consolidated Statement of Cash Flows
                                (In thousands)

                                           Nine Months Ended
                                              September 30,
                                            2007       2006            Chg %
    CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                          $101,529    $81,868
      Adjustments to reconcile net
       income to net cash provided
       by operating activities:
         Depreciation and amortization      25,326     18,640
         Amortization of deferred
          financing costs                      719      1,479
         Loss on extinguishment of debt        126         --

         Amortization of stock-based
          compensation                       5,081      2,672
         Provision for doubtful accounts     4,541      2,813
         Deferred income taxes              (3,101)    (2,479)
         Foreign currency adjustments          661        243
         Loss on sale of equipment
          and other                            101        207
         Changes in operating assets
          and liabilities:
            Accounts receivable            (22,585)   (23,696)
            Inventories                    (14,228)    18,545
            Prepaid expenses and other
             current assets                 (5,035)       725
            Accounts payable                10,250      5,351
            Accrued expenses and other      10,636      3,986
            Income taxes                    25,864     28,926
              Excess tax benefit from
               stock based compensation    (10,025)    (6,189)
    Net cash provided by operating
     activities                            129,860    133,091           (2%)

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Payments for trademarks and other
       intellectual property                  (636)      (699)
      Purchases of property, plant
       and equipment                        (8,181)   (24,159)
      Acquisition of businesses             (5,756)        --

      Proceeds from sale of equipment          135         83
    Net cash used by investing
     activities                            (14,438)   (24,775)          42%

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from long-term revolving
       credit facility                     347,547    152,000
      Repayments of long-term revolving
       credit facility                    (119,293)   (55,000)
      Repayments of long-term debt         (45,416)   (70,622)
      Proceeds from issuance of
       Series A Industrial Revenue Bonds    15,385         --

      Repayment of Series A Industrial
       Revenue Bonds                       (5,765)    (3,840)
      Proceeds from exercise of
       stock options                         8,078      3,401
      Excess tax benefit from
       stock based compensation             10,025      6,189
      Treasury stock repurchased          (299,998)  (144,000)
      Dividend paid to stockholders        (17,895)        --
      Payments for deferred financing
       costs                                (1,530)      (698)
    Net cash used by financing
     activities                           (108,862)  (112,570)           2%

    NET EFFECT OF EXCHANGE RATE CHANGES
     ON CASH                                 1,232      1,652

    Increase/(Decrease) in cash and
     cash equivalents                        7,792     (2,602)

    CASH AND CASH EQUIVALENTS, beginning
     of period                              15,788     17,855

    CASH AND CASH EQUIVALENTS, end
     of period                             $23,580    $15,253           55%



Summary of Channel Sales

The Company generates sales through four distribution channels: retail, direct, healthcare and third party. The retail channel sells to furniture, specialty and department stores globally. The direct channel sells directly to consumers. The healthcare channel sells to hospitals, nursing homes, healthcare professionals and medical retailers. The third party channel sells to distributors in countries where Tempur-Pedic International does not operate its own distribution company.

The following table highlights net sales information, by channel and by segment, for the third quarter of 2007 compared to 2006:


    ($ in thousands)

                   CONSOLIDATED           DOMESTIC            INTERNATIONAL
                 Three Months Ended   Three Months Ended   Three Months Ended
                  September 30,          September 30,       September 30,
                   2007      2006      2007      2006        2007    2006
    By Sales
     Channel
    Retail       $251,452  $198,659   $177,372  $139,883   $74,080   $58,776
    Direct         18,009    20,608     15,140    18,214     2,869     2,394
    Healthcare     12,384    10,522      4,222     3,099     8,162     7,423
    Third Party    12,249    11,128      3,717     3,250     8,532     7,878
    Total        $294,094  $240,917   $200,451  $164,446    $93,643  $76,471



    Summary of Product Sales
    A summary of net sales by product is reported below:

    ($ in thousands)

                     CONSOLIDATED           DOMESTIC           INTERNATIONAL
                  Three Months Ended   Three Months Ended   Three Months Ended
                      September 30,        September 30,        September 30,
                     2007      2006       2007      2006        2007     2006
    Net Sales
    Mattresses    $207,341  $169,334   $149,221  $122,117     $58,120  $47,217
    Pillows         34,418    29,934     17,960    14,863      16,458   15,071
    Other           52,335    41,649     33,270    27,466      19,065   14,183
    Total         $294,094  $240,917   $200,451  $164,446     $93,643  $76,471

SOURCE Tempur-Pedic International Inc.

http://www.tempurpedic.com

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