January 24, 2008

Tempur-Pedic Reports Fourth Quarter and Full Year Earnings


- Net Sales Up 13% in Fourth Quarter
- Full Year Net Sales Exceed $1.1 Billion

LEXINGTON, Ky., Jan 24, 2008 /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 fourth quarter and year ended December 31, 2007. The Company also announced financial guidance for 2008.

    FOURTH QUARTER 2007 FINANCIAL SUMMARY
    -- Earnings per share (EPS) increased to $0.52 per diluted share in the
       fourth quarter of 2007 as compared to $0.36 per diluted share in the
       fourth quarter of 2006. EPS in the fourth quarter of 2006 was reduced
       by a $10.7 million pre-tax charge to income for a loss on
       extinguishment of debt.

    -- Net sales rose 13% to $289.0 million in the fourth quarter of 2007 from
       $256.6 million in the fourth quarter of 2006. Retail sales increased
       17% worldwide.

    -- The Company achieved net sales growth across all product lines both
       domestically and abroad. Worldwide mattress revenue increased 14%.


    FULL YEAR 2007 FINANCIAL SUMMARY
    -- EPS was $1.74 per diluted share for the full year 2007 as compared to
       $1.28 per diluted share for the full year 2006, an increase of 36%.

    -- Net sales for the full year 2007 totaled $1.107 billion, 17% higher
       than net sales for the full year 2006. Retail channel sales worldwide
       increased 21%.


The Company reported net income of $141.5 million for the full year 2007 as compared to $112.3 million in the full year 2006. Net income results include stock-based compensation expense, which increased 76% to $6.7 million in 2007 as compared to $3.8 million in 2006. In addition, net income results in 2007 reflect a one-time favorable tax rate reduction related to the elimination of certain valuation allowances for net operating loss carry forwards in two foreign tax jurisdictions.

President and Chief Executive Officer H. Thomas Bryant commented, "Tempur- Pedic achieved outstanding results in 2007 and we are pleased that we exceeded the goals we established at the beginning of the year. The company delivered growth across all product lines both domestically and abroad. In the retail channel, we substantially improved account productivity while expanding floor space. We introduced several new products around the world, which have been received very positively. And, most important to our long term objectives, we improved brand awareness, increased market share and expanded capacity by opening the world's largest mattress factory. In addition, we maintained the profitability of the business while absorbing the increased cost of starting up our Albuquerque manufacturing facility.

"In the fourth quarter, despite a slowing macro environment, Tempur-Pedic achieved double digit retail sales growth driven by solid mattress sales growth. Gross profit margin trended to the highest quarterly level of the year, although channel and product mix modestly impacted it relative to our prior expectations.

"We approach 2008 with confidence, yet a degree of caution as a result of the uncertainty in the U.S. economy. Given this uncertainty, we believe it is prudent to plan more conservatively in terms of 2008 sales growth. However, as noted before, we strongly believe the mattress industry is in the early stages of a long-term shift away from innersprings to specialty bedding. In addition, while Tempur-Pedic is already the industry leader for profitability, we remain focused on our goal of ultimately becoming the worldwide bedding leader in terms of both sales and profitability.

"In 2008, our aim is to build on the progress made in 2007. We will continue our efforts to expand market share around the world driven by growing brand awareness. We plan to accomplish this by continuing to implement our advertising campaign in the U.S. and introduce it into international markets. We will also focus on expanding floor space as this is a key driver of market share.

"In addition, we believe expanding product offerings will help Tempur- Pedic continue to substantially outperform the industry. We are planning to unveil several new mattresses and pillows around the world during 2008. For example, next week, we will introduce a new mattress model in the U.S., The AlluraBed by Tempur-Pedic(TM). This model, featuring a very luxurious pillow- top made from our world renowned TEMPUR-HD(TM), will have a suggested retail price point of $3,999 for a queen size mattress.

"From an operational perspective, we have several initiatives underway to continue improving productivity and drive margin gains. These initiatives cross all areas of our company including manufacturing, distribution, and sourcing as well as staying lean in terms of operational expenses. As a result, we anticipate expanding operating leverage will help drive earnings per share growth.

Bryant concluded, "We enter 2008 with a solid operating and financial position. We have a diverse business model and a growing assortment of compelling products. Because our products are sold in over 70 countries, our financial performance is geographically diverse. Our go-to-market strategy of building brand awareness and focusing on premium price points has proven to be a significant competitive advantage. We are focused on long term growth opportunities and will continue to invest in new products, new markets, and research and development. In summary, we are very confident in our long term prospects and look forward to what we expect will be a very successful new year."

Share Repurchase Program

During the fourth quarter of 2007, the Company purchased 0.7 million shares of its common stock for a total cost of $19.9 million. Under its existing share repurchase authorization, the Company has $280.1 million available for repurchase.

2008 Financial Guidance

The Company issued full year 2008 guidance for net sales and earnings per share. It currently expects net sales for 2008 to range from $1.195 billion to $1.250 billion, an increase of 8% to 13% over 2007. It currently expects EPS for 2008 to range from $2.03 to $2.20 per diluted share. This guidance reflects an increase of 17% to 26% compared to 2007 EPS of $1.74 per diluted share. The Company's earnings guidance reflects the Company's traditional practice of incurring heavier marketing expenditures as a percentage of sales in the first quarter of each year. The Company also 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.

This guidance does not take into account the anticipated effect of any additional share repurchases.

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, January 24, 2008 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 877-675-4749. The call is also being webcast and can be accessed on the investor relations section of the Company's website, www.tempurpedic.com.

For those who cannot listen to the live broadcast, a telephone replay of the call will be available from January 24, 2008 at 8:00 p.m. Eastern Time through January 31, 2008. To listen to the replay, dial 888-203-1112, participant code 1191674.

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, its plans to grow brand awareness, roll out the Company's new advertising campaign, expand floor space and introduce new products, initiatives to continue improving productivity and drive margin gains and earnings per share growth, and net sales and earnings per share for 2008, 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, particularly in the retail sector, as well as 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 and expand its product line, maintain efficient, timely and cost-effective production and delivery of its products, and manage its growth; changes in foreign tax rates, including the ability to utilize tax loss carry forwards; 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        Twelve Months Ended
                               December 31,               December 31,
                          2007       2006  Chg%       2007      2006     Chg%

    Net sales          $288,954   $256,580   13%  $1,106,722   $945,045    17%
    Cost of sales       147,966    129,835           571,896    484,507

    Gross profit        140,988    126,745   11%     534,826    460,538    16%

    Selling and
     marketing expenses  48,944     44,557           193,574    171,787
    General and
     administrative
     expenses            22,715     20,197            91,212     75,718
    Research and
     development
     expenses             1,648        697             5,926      3,728

    Operating income     67,681     61,294   10%     244,114    209,305    17%

    Other expense, net:
      Interest expense,
       net               (9,090)    (6,518)          (30,484)   (23,920)
      Loss on
       extinguishment
       of debt                -    (10,722)             (126)   (10,722)
      Other income
       (expense), net      (220)       244              (630)       102
        Total other
         expense         (9,310)   (16,996)          (31,240)   (34,540)

    Income before
     income taxes        58,371     44,298   32%     212,874    174,765    22%
    Income tax
     provision           18,441     13,844            71,415     62,443
      Net income        $39,930    $30,454   31%    $141,459   $112,322    26%

    Earnings per share:
      Basic               $0.53      $0.37             $1.77      $1.32
      Diluted             $0.52      $0.36             $1.74      $1.28

    Weighted average
     shares outstanding:
      Basic              74,815     83,110            79,831     84,922
      Diluted            76,190     85,653            81,256     87,530



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

                                   December 31,      December 31,
                                       2007            2006          Chg%
    ASSETS

    Current Assets:
      Cash and cash equivalents      $33,315          $15,788
      Accounts receivable, net       163,730          142,059
      Inventories                    106,533           61,736
      Prepaid expenses and other
       current assets                 11,133            8,002
      Income taxes receivable              -              588
      Deferred income taxes           11,924            9,383
    Total Current Assets             326,635          237,556         37%

      Property, plant and
       equipment, net                208,370          215,428
      Goodwill                       198,286          198,207
      Other intangible assets, net    68,755           70,826
      Deferred financing costs and
       other non-current assets,
       net                             4,386            3,649
    Total Assets                    $806,432         $725,666         11%

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current Liabilities:
      Accounts payable               $56,206          $51,220
      Accrued expenses and other      66,080           61,050
      Income taxes payable             4,060                -
      Current portion of long-term
       debt                              288           19,497
    Total Current Liabilities        126,634          131,767         (4%)

      Long-term debt                 601,756          341,635
      Deferred income taxes           29,645           38,536
      Other non-current liabilities      259              380
    Total Liabilities                758,294          512,318         48%

    Stockholders' Equity:
      Common stock, $.01 par
       value; 300,000 shares
       authorized; 99,215 shares
       issued as of
       December 31, 2007
       and December 31, 2006             992              992
      Additional paid in capital     283,564          264,709
      Retained earnings              241,812          140,608
      Accumulated other
       comprehensive income           13,550            3,992
      Treasury stock, at cost;
       24,681 and 15,993 shares
       as of December 31, 2007
       and December 31, 2006,
       respectively                 (491,780)        (196,953)

    Total Stockholders' Equity        48,138          213,348        (77%)

    Total Liabilities and
     Stockholders' Equity           $806,432         $725,666         11%



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

                                        Twelve Months Ended
                                           December 31,
                                      2007             2006       Chg %
    CASH FLOWS FROM OPERATING
     ACTIVITIES:
      Net income                     $141,459         $112,322
      Adjustments to reconcile net
       income to net cash provided
       by operating activities:
        Depreciation and amortization  33,414           24,828
        Amortization of deferred
         financing costs                  903            1,868
        Loss on extinguishment of debt    126           10,722
        Amortization of stock-based
         compensation                   6,728            3,848
        Provision for doubtful accounts 5,997            3,464
        Deferred income taxes          (8,961)          (3,828)
        Foreign currency adjustments      423               40
        Loss on sale of equipment and
         other                            324              488
        Changes in operating assets
         and liabilities:
          Accounts receivable         (20,536)         (27,608)
          Inventories                 (38,216)          21,284
          Prepaid expenses and other
           current assets              (3,226)           3,327
          Accounts payable              1,861           12,253
          Accrued expenses and other    3,532            4,066
          Income taxes                 13,606            6,434
            Excess tax benefit
             from stock based
             compensation             (11,073)          (7,693)
    Net cash provided by operating
     activities                       126,361          165,815        (24%)

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Payments for trademarks and
       other intellectual property     (1,057)            (936)
      Purchases of property, plant
       and equipment                  (16,149)         (37,211)
      Acquisition of businesses        (5,805)              --
      Proceeds from sale of equipment     140              286
    Net cash used by investing
     activities                       (22,871)         (37,861)        40%

    CASH FLOWS FROM FINANCING
     ACTIVITIES:
      Proceeds from long-term
       revolving credit facility      420,547          277,772
      Repayments of long-term
       revolving credit facility     (146,293)         (92,500)
      Repayments of long-term debt    (45,488)         (73,329)
      Proceeds from issuance of
       Series A Industrial Revenue
       Bonds                           15,380               --
      Repayment of Series A Industrial
       Revenue Bonds                   (5,760)          (5,760)
      Repayments of Senior
       Subordinated Notes                  --          (97,500)
      Redemption premium on Senior
       Subordinated Notes                  --           (7,620)
      Excess tax benefit from stock
       based compensation              11,073            7,693
      Common stock issued, including
       reissuances of Treasury
       stock                            8,175            4,045
      Treasury stock purchased       (319,884)        (144,000)
      Dividend paid to stockholders   (23,811)              --
      Payments for deferred
       financing costs                 (1,581)          (1,277)
    Net cash used by financing
     activities                       (87,642)        (132,476)        34%

    NET EFFECT OF EXCHANGE RATE
     CHANGES ON CASH                    1,679            2,455

    Increase/(Decrease) in cash
     and cash equivalents              17,527           (2,067)

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

    CASH AND CASH EQUIVALENTS,
     end of year                      $33,315          $15,788        111%




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 fourth quarter of 2007 compared to 2006:

    ($ in thousands)

                       CONSOLIDATED          DOMESTIC         INTERNATIONAL
                    Three Months Ended  Three Months Ended  Three Months Ended
                       December 31,          December 31,        December 31,
                     2007       2006      2007       2006      2007      2006
    By Sales
     Channel
    Retail       $238,556   $204,334   $153,498   $135,169   $85,058   $69,165
    Direct         18,996     22,530     16,084     19,418     2,912     3,112
    Healthcare     15,434     13,376      4,897      3,522    10,537     9,854
    Third Party    15,968     16,340      4,295      5,045    11,673    11,295
    Total        $288,954   $256,580   $178,774   $163,154  $110,180   $93,426



    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
                   2007       2006       2007       2006      2007     2006
    Net Sales
    Mattresses   $196,614   $172,782   $129,054   $115,822   $67,560   $56,960
    Pillows        41,020     38,872     19,987     19,471    21,033    19,401
    Other          51,320     44,926     29,733     27,861    21,587    17,065
    Total        $288,954   $256,580   $178,774   $163,154  $110,180   $93,426



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

    ($ in thousands)

                   CONSOLIDATED          DOMESTIC             INTERNATIONAL
               Twelve Months Ended   Twelve Months Ended   Twelve Months Ended
                   December 31,          December 31,          December 31,
                  2007      2006       2007       2006      2007      2006
    By Sales
     Channel
    Retail       $919,913   $759,792   $625,904   $517,917  $294,009  $241,875
    Direct         79,748     85,482     68,865     75,239    10,883    10,243
    Healthcare     50,846     45,205     15,725     12,610    35,121    32,595
    Third Party    56,215     54,566     14,855     16,015    41,360    38,551
    Total      $1,106,722   $945,045   $725,349   $621,781  $381,373  $323,264



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

    ($ in thousands)
                      CONSOLIDATED          DOMESTIC          INTERNATIONAL
                 Twelve Months Ended  Twelve Months Ended  Twelve Months Ended
                     December 31,          December 31,        December 31,
                   2007       2006       2007       2006      2007     2006
    Net Sales
    Mattresses    768,530    651,901   $535,706   $455,666  $232,824  $196,235
    Pillows       142,114    126,335     68,342     60,111    73,772    66,224
    Other         196,078    166,809    121,301    106,004    74,777    60,805
    Total       1,106,722   $945,045   $725,349   $621,781  $381,373  $323,264


SOURCE Tempur-Pedic International Inc.

http://www.tempurpedic.com/

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