January 26, 2010

Tempur-Pedic Reports Fourth Quarter and Full Year Earnings


-- Reports Fourth Quarter EPS of $0.38 -- Company Announces $100 Million Share Repurchase Program

LEXINGTON, Ky., Jan 26, 2010 /PRNewswire 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, 2009. The Company also announced a $100 million share repurchase program and confirmed its financial guidance for 2010.

FOURTH QUARTER FINANCIAL SUMMARY

  • Earnings per share (EPS) were $0.38 per diluted share in the fourth quarter of 2009 as compared to adjusted EPS of $0.17 per diluted share in the fourth quarter of 2008. GAAP EPS in the fourth quarter of 2008 was $0.01, and reflects the $11.6 million tax provision related to the Company's repatriation of foreign earnings. The Company reported net income of $29.1 million for the fourth quarter of 2009 as compared to adjusted net income of $12.7 million in the fourth quarter of 2008. GAAP net income in the fourth quarter of 2008 was $1.1 million. For additional information regarding adjusted EPS and adjusted net income (which are non-GAAP measures), please refer to the reconciliation and other information included in the attached schedule.
  • Net sales increased 29% to $244.8 million in the fourth quarter of 2009 from $189.1 million in the fourth quarter of 2008. On a constant currency basis, net sales increased 24%. Net sales in the domestic segment increased 40%, while international segment net sales increased 15%. On a constant currency basis, international segment net sales increased 3%.
  • Mattress sales increased 26% globally. Mattress sales increased 34% in the domestic segment and 12% in the international segment. On a constant currency basis, international mattress sales were essentially unchanged. Pillow sales increased 23% globally. Pillow sales increased 39% domestically and 13% internationally. On a constant currency basis, international pillow sales increased 1%.
  • Gross profit margin was 48.5% as compared to 43.0% in the fourth quarter of 2008. The gross profit margin increased as a result of improved efficiencies in manufacturing, lower commodity costs, fixed cost leverage related to higher production volumes and improved pricing, partially offset by geographic mix and new product introductions.
  • Operating profit margin was 19.3% as compared to 13.4% in the fourth quarter of 2008.
  • The Company generated $14.6 million of operating cash flow in the fourth quarter of 2009.
  • During the quarter, the Company reduced Total debt by $17.5 million to $297.5 million. As of December 31, 2009, the Company's ratio of Funded debt to EBITDA was 1.68 times, well within the covenant in its credit facility, which requires that this ratio not exceed 3.00 times. For additional information about EBITDA and Funded debt (which are non-GAAP measures) please refer to the reconciliation and other information included in the attached schedule.

FULL YEAR 2009 FINANCIAL SUMMARY

  • Earnings per share (EPS) were $1.12 per diluted share for the full year 2009 as compared to adjusted EPS of $0.94 per diluted share for the full year 2008. GAAP EPS was $0.79 for the full year 2008, and includes the $11.6 million tax provision related to the repatriation of foreign earnings.
  • Net sales declined 10% to $831.2 million for the full year 2009 from $927.8 million for the full year 2008. On a constant currency basis, net sales declined 9%. Net sales in the domestic segment declined 8%, while international segment net sales declined 14%. On a constant currency basis, international segment net sales declined 11%.
  • Gross profit margin was 47.4% for the full year 2009 as compared to 43.2% for the full year 2008. The gross profit margin increased as a result of improved efficiencies in manufacturing, lower commodity costs, and improved pricing, partially offset by fixed cost de-leverage related to lower production volumes.
  • Operating profit margin was 17.4% as compared to 14.4% for the full year 2008.
  • For the full year 2009, the Company lowered Total debt by $121.9 million to $297.5 million.

Chief Executive Officer Mark Sarvary commented, "Our fourth quarter and full year results reflect a gradual improvement in the macro environment together with success from sales and marketing initiatives. Our recent product introductions and our new advertising campaign combined with continued productivity improvements should allow us to build on this performance in 2010."

Chief Financial Officer Dale Williams commented, "With respect to the authorization of a new share repurchase program, we note that during 2009 we substantially reduced both our total debt and leverage ratio. We view share repurchases as an excellent means to return value to stockholders over the long term."

Share Repurchase Program

The Board of Directors authorized the repurchase of up to $100 million of shares of the Company's common stock. 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 replaces the Company's prior share repurchase authorization, and may be limited, suspended or terminated at any time without prior notice.

Financial Guidance

The Company confirmed its full year 2010 guidance for net sales and earnings per share. It currently expects net sales for 2010 to range from $950 million to $970 million. It currently expects EPS for 2010 to range from $1.40 to $1.50 per diluted share. 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. The Company noted its EPS guidance does not assume any benefit from a potential reduction in shares outstanding related to its share repurchase program.

Conference Call Information

Tempur-Pedic International will host a live conference call to discuss financial results today, January 26, 2010 at 5:00 p.m. Eastern Time. The dial-in number for the conference call is 888-293-6960. The dial-in number for international callers is 719-325-2289. The call is also being webcast and can be accessed on the investor relations section of the Company's website, http://www.tempurpedic.com. After the conference call, a webcast replay will remain available on the investor relations section of the Company's website for 30 days.

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. These forward-looking statements include, without limitation, statements relating to the Company's expectations for building on its 2009 performance in 2010, and for net sales and earnings per share for 2010. All forward looking statements 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, financial and industry conditions, particularly in the retail sector, as well as consumer confidence and the availability of consumer financing; 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 Company's domestic 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 and specialty sleep. 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 80 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 common share amounts)



                            Three Months
                                Ended
                            December 31,
                            ------------
                                  2009            2008      Chg %
                                  ----            ----      -----
    Net sales                 $244,794        $189,121         29%
    Cost of sales              125,953         107,752
                               -------         -------

    Gross profit               118,841          81,369         46%

    Selling and
     marketing
     expenses                   45,105          34,444
    General,
     administrative
     and other
     expenses                   26,510          21,604
                                ------          ------

    Operating income            47,226          25,321         87%

    Other expense,
     net:
        Interest expense,
         net                    (3,990)         (5,493)
        Other income
         (expense), net             37            (324)
                                   ---            ----
            Total other
             expense            (3,953)         (5,817)

    Income before
     income taxes               43,273          19,504        122%
    Income tax
     provision                  14,159          18,449
                                ------          ------
            Net income         $29,114          $1,055      2,660%
                               =======          ======

    Earnings per
     common share:
        Basic                    $0.39           $0.01
                                 =====           =====
        Diluted                  $0.38           $0.01
                                 =====           =====
    Weighted average
     common shares
     outstanding:
        Basic                   75,029          74,833
                                ======          ======
        Diluted                 77,028          74,920
                                ======          ======



                             Twelve Months
                                 Ended
                             December 31,
                             ------------
                                   2009                2008       Chg %
                                   ----                ----       -----
    Net sales                  $831,156            $927,818        (10%)
    Cost of sales               437,414             526,861
                                -------             -------

    Gross profit                393,742             400,957         (2%)

    Selling and
     marketing
     expenses                   153,440             172,350
    General,
     administrative
     and other
     expenses                    95,357              94,743
                                 ------              ------

    Operating income            144,945             133,864           8%

    Other expense,
     net:
        Interest expense,
         net                    (17,349)            (25,123)
        Other income
         (expense), net             441              (1,319)
                                    ---              ------
            Total other
             expense            (16,908)            (26,442)

    Income before
     income taxes               128,037             107,422          19%
    Income tax
     provision                   43,044              48,554
                                 ------              ------
            Net income          $84,993             $58,868          44%
                                =======             =======

    Earnings per
     common share:
        Basic                     $1.13               $0.79
                                  =====               =====
        Diluted                   $1.12               $0.79
                                  =====               =====
    Weighted average
     common shares
     outstanding:
        Basic                    74,934              74,737
                                 ======              ======
        Diluted                  76,048              74,909
                                 ======              ======


    TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
               Consolidated Balance Sheets
                      (In thousands)



                                         December           December
                                             31,                  31,
                                                 2009                 2008
                                                 ----                 ----
    ASSETS

    Current Assets:
         Cash and cash equivalents         $14,042              $15,385
         Accounts receivable, net          105,576               99,811
         Inventories                        57,686               60,497
         Prepaid expenses and other
          current assets                    11,268                9,233
         Deferred income taxes              20,411               11,888
                                            ------               ------
    Total Current Assets                   208,983              196,814

         Property, plant and
          equipment, net                   172,497              185,843
         Goodwill                          193,391              192,569
         Other intangible assets,
          net                               64,717               66,823
         Other non-current assets            3,791                4,482
                                             -----                -----
    Total Assets                          $643,379             $646,531
                                          ========             ========

    LIABILITIES AND
     STOCKHOLDERS' EQUITY

    Current Liabilities:
         Accounts payable                  $47,761              $41,355
         Accrued expenses and other
          current liabilities               81,452               65,316
         Income taxes payable                7,312                7,783
                                             -----                -----
    Total Current Liabilities              136,525              114,454

         Long-term debt                    297,470              419,341
         Deferred income taxes              29,865               28,371
         Other non-current
          liabilities                        7,226               11,922
                                             -----               ------
    Total Liabilities                      471,086              574,088

    Stockholders' Equity:
        Common stock, $.01 par
         value; 300,000 shares
         authorized; 99,215 shares
         issued as of December 31,
         2009 and 2008,
         respectively                        992            992
       Additional paid in capital          298,842              291,018
       Retained earnings                   365,727              281,422
       Accumulated other
        comprehensive loss                  (8,004)             (12,590)
       Treasury stock at cost;
        24,103 and 24,382 shares
        as of December 31, 2009
        and 2008, respectively            (485,264)            (488,399)
                                          --------             --------
    Total Stockholders' Equity             172,293               72,443
                                           -------               ------

    Total Liabilities and
     Stockholders' Equity                 $643,379             $646,531
                                          ========             ========



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



                                                 Twelve Months
                                                     Ended
                                                 December 31,
                                                 ------------
                                                2009               2008
                                                ----               ----
    CASH FLOWS FROM OPERATING
     ACTIVITIES:
       Net income                            $84,993            $58,868
       Adjustments to reconcile
        net income to net cash
        provided by operating
        activities:
              Depreciation and
               amortization                   31,424             32,756
              Amortization of stock-
               based compensation              8,789              8,041
              Amortization of deferred
               financing costs                   692              1,060
              Bad debt expense                 5,936              8,110
              Deferred income taxes           (9,810)             2,423
              Foreign currency
               adjustments                      (115)            (1,183)
              Loss on sale of equipment
               and other                         564                666
              Changes in operating
               assets and liabilities:
                 Accounts receivable         (10,542)            51,231
                 Inventories                   3,738             45,758
                 Prepaid expenses and other
                  current assets              (1,884)             1,695
                 Accounts payable              7,808            (15,676)
                 Accrued expenses and other   14,044                535
                 Income taxes payable           (651)             4,110
                                                ----              -----
    Net cash provided by
     operating activities                    134,986            198,394

    CASH FLOWS FROM INVESTING
     ACTIVITIES:
       Purchases of property,
        plant and equipment                  (14,303)           (10,494)
       Acquisition of business,
        net of cash acquired                       -             (1,529)
       Proceeds from escrow
        settlement                                 -              7,141
       Other                                       -               (486)
                                                 ---               ----
    Net cash used by investing
     activities                              (14,303)            (5,368)

    CASH FLOWS FROM FINANCING
     ACTIVITIES:
       Proceeds from long-term
        revolving credit facility            109,333            127,383
       Repayments of long-term
        revolving credit facility           (230,036)          (251,536)
       Repayments of long-term
        debt                                       -             (1,359)
       Repayment of Series A
        Industrial Revenue Bonds                   -            (57,785)
       Proceeds from issuance of
        common stock                           1,623                695
       Excess tax benefit from
        stock based compensation                 359                399
       Dividend paid to
        stockholders                               -            (17,933)
       Other                                       -                (14)
                                                 ---                ---
    Net cash used by financing
     activities                             (118,721)          (200,150)

    NET EFFECT OF EXCHANGE
     RATE CHANGES ON CASH AND
     CASH EQUIVALENTS                         (3,305)           (10,806)
                                              ------            -------

    Decrease in cash and cash
     equivalents                              (1,343)           (17,930)

    CASH AND CASH EQUIVALENTS,
     beginning of period                      15,385             33,315
                                              ------             ------

    CASH AND CASH EQUIVALENTS,
     end of period                           $14,042            $15,385
                                             =======            =======



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 2009 compared to 2008:



    (In thousands)

                            CONSOLIDATED                      DOMESTIC
                            ------------                      --------
                         Three Months Ended              Three Months Ended
                             December 31,                   December 31,
                             ------------                   ------------
                            2009           2008           2009           2008
                            ----           ----           ----           ----
    Retail              $205,184       $157,652       $130,808        $93,332
    Direct                16,719         10,098         14,777          8,496
    Healthcare            10,047         10,638          2,840          3,226
    Third Party           12,844         10,733          3,444          3,342
                          ------         ------          -----          -----
    Total               $244,794       $189,121       $151,869       $108,396
                        ========       ========       ========       ========



                           INTERNATIONAL
                           -------------
                        Three Months Ended
                           December 31,
                           ------------
                           2009          2008
                           ----          ----
    Retail              $74,376       $64,320
    Direct                1,942         1,602
    Healthcare            7,207         7,412
    Third Party           9,400         7,391
                          -----         -----
    Total               $92,925       $80,725
                        =======       =======


Summary of Product Sales

A summary of net sales by product is reported below:



    (In thousands)

                           CONSOLIDATED                     DOMESTIC
                           ------------                     --------
                        Three Months Ended             Three Months Ended
                           December 31,                   December 31,
                           ------------                   ------------
                          2009           2008           2009           2008
                          ----           ----           ----           ----
    Mattresses        $156,665       $124,755       $101,792        $75,695
    Pillows             32,079         25,990         14,724         10,591
    Other               56,050         38,376         35,353         22,110
                        ------         ------         ------         ------
    Total             $244,794       $189,121       $151,869       $108,396
                      ========       ========       ========       ========



                          INTERNATIONAL
                          -------------
                       Three Months Ended
                          December 31,
                          ------------
                          2009          2008
                          ----          ----
    Mattresses         $54,873       $49,060
    Pillows             17,355        15,399
    Other               20,697        16,266
                        ------        ------
    Total              $92,925       $80,725
                       =======       =======



                   TEMPUR-PEDIC INTERNATIONAL INC. AND SUBSIDIARIES
          Reconciliation of Adjusted Net income, Adjusted Earnings per share,
                  EBITDA to Net Income and Funded debt to Total debt
                                   Non-GAAP Measures
                    (In thousands, except per common share amounts)


The Company provides information regarding Adjusted Net income, Adjusted Earnings per share, EBITDA and Funded debt which are not recognized terms under GAAP (Generally Accepted Accounting Principles) and do not purport to be alternatives to Net income as a measure of operating performance or Total debt. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies. A reconciliation of Adjusted Net income, Adjusted Earnings per share and EBITDA to the Company's Net income and Earnings per share and a reconciliation of Funded debt to Total debt are provided below. Management believes that the use of these non-GAAP financial measures provides investors with additional useful information with respect to the impact of the repatriation of foreign earnings. Management also believes that the use of EBITDA and Funded debt provides investors with useful information with respect to the terms of the Company's credit facility.

Reconciliation of Adjusted Net income to Net income

The following table sets forth the reconciliation of the Company's reported Net income for the twelve months ended December 31, 2008 to the calculation of Adjusted Net income for the three and twelve months ended December 31, 2008:




                              Three Months Ended  Twelve Months Ended
                               December 31, 2008    December 31, 2008
                               -----------------    -----------------

    GAAP Net income                        $1,055              $58,868
    Plus:
    Tax provision related to               11,631               11,631
      repatriation of foreign
       earnings                            ------               ------
    Adjusted Net income                   $12,686              $70,499
                                          =======              =======
    GAAP Earnings per share,
     diluted                                $0.01                $0.79
    Tax provision related to                 0.16                 0.15
      repatriation of foreign
       earnings                              ----                 ----
    Adjusted Earnings per
     share, diluted                         $0.17                $0.94
                                            =====                =====



Reconciliation of EBITDA to Net income

The following table sets forth the reconciliation of the Company's reported Net income to the calculation of EBITDA for the twelve months ended December 31, 2009:




                                         Twelve Months Ended
                                         -------------------
                                           December 31, 2009
                                           -----------------

    GAAP Net income                                   $84,993
    Plus:
       Interest expense                                17,349
       Income taxes                                    43,044
       Depreciation & amortization                     40,213


    EBITDA                                           $185,599
                                                     ========



Reconciliation of Funded debt to Total debt

The following table sets forth the reconciliation of the Company's reported Total debt to the calculation of Funded debt as of December 31, 2009:




                                         As of
                                   December 31, 2009
                                   -----------------

    GAAP basis Total debt                   $297,470
    Plus:
       Letters of credit
        outstanding                           14,048
                                              ------
    Funded debt                             $311,518
                                            ========



Calculation of Funded debt to EBITDA




                                         As of
                                   December 31, 2009
                                   -----------------


    Funded debt                             $311,518
    EBITDA                                   185,599
                                             -------
                                          1.68 times
                                          ==========




SOURCE Tempur-Pedic International Inc.

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